# US Streamlined Tax Return to become compliant as an Australian resident



## emizzle

Hi,

My name is Eric Mastro and I'm an American expat living in Australia for the past (nearly) 6 six years. I am currently a permanent resident and I have not filed my taxes since 2008 and I'd like to become compliant. I recently discovered that the IRS is allowing for some leniency and is offering a streamlined approach to make becoming compliant for people like myself much easier. I don't have anything special - no bank accounts over $10k, a small super (might be over $10k, but will have to check), and no investments/real-estate/businesses/interest-earning bank accounts in the US. My taxable income in Australia (including super) remains under the threshold for Foreign Income Exclusion for 2013 + 3 previous tax years.

I have a couple of questions of questions that would make a world of difference if you could answer:

1. Should we include employer-contributed superannuation contributions as part of our gross taxable income?

2. In filing for the streamlined process, we are required to fill out a questionnaire and one of the questions is: "Do you have a retirement account located in your country of residence?". The question goes on to ask: "a. If yes, are earnings from the retirement account non-taxable in the 
U.S. under current treaty provisions?".

As I understand it, there is a taxable and non-taxable (to Australia) component of super when we reach retirement age, however I'm unsure of whether this is reciprocated in the US or not. Therefore, I'm not entirely sure how to answer this question. Do I need to fill out FBARs for my super if it over US$10,000?

Thank you so much for you help in advance!!! It's much much appreciated!!


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## Bevdeforges

In your situation, I'd tend to consider "quiet disclosure" - just file the forms for the last three years and wait to see if you get any reaction. But you have to do what helps you sleep at night.

1. I wouldn't - but I don't really know much about the Australian superannuation system, so perhaps we can find someone else living in Australia to shed a bit more light on this.

2. It's not fun reading, but get a copy of the US-Australian tax treaty and see what it says. United States Income Tax Treaties - A to Z There should be an article that discusses taxation of retirement pensions and who gets to tax what.

And just be aware that the $10,000 threshold for filing FBARs applies to the cumulative total of all your non-US accounts, not to the individual account balances. 
Cheers,
Bev


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## BBCWatcher

Bev, what did you have in mind? It sure seems like superannuation contributions from an employer would be treated as earned income and reported as such.


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## emizzle

Thanks for the input! That's exactly what I was wondering. Superannuation is like a pension - we are not allowed to touch until retirement and it's not considered part of our gross income here.


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## BBCWatcher

Understood, but from a U.S. tax point of view I can't think of why it _wouldn't_ be considered earned income. Though maybe Bev has an idea.

Taking a guess in advance, no, these are not Social Security payroll taxes. Australia has individual private retirement accounts (superannuation) to which employers and employees compulsorily contribute, roughly analogous to a U.S. Roth 401(k) with employer match. They are purely individual, not social insurance. Absent a treaty provision, those employer contributions would be part of U.S. reportable wages, salaries, tips, etc., I would have to imagine. They'd be no different from a U.S. tax point of view than if your employer added money to a certificate of deposit (CD) in your name that matures when you reach retirement age.

Singapore has something similar for its permanent residents and citizens called CPF. As far as I know employer contributions to a CPF account would be U.S. taxable also.


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## Bevdeforges

BBCWatcher said:


> Bev, what did you have in mind? It sure seems like superannuation contributions from an employer would be treated as earned income and reported as such.


I literally know nothing about the Aussie superannuation contracts - but if it's something like a 401K plan, it could depend on whether or not the person had "rights" to the balance in the account and a statement of what the account "earns" each year, or if it was like certain pension arrangements here in France, where there is a fixed contribution made each year, but the employee has no "account balance" and no report of how the investments in the fund are doing. At retirement, whatever is in the account is converted to an annuity - and all the employee knows is that they have $X a month in pension. I suspect the tax treatment of those two different types of pension arrangements could be quite different - though I have not gone all that far into it.

It could be worth having a read through of the actual tax treaty, because something there are mentions in there of specific types of pensions like this. No promises, but it pays to check. (I found quite a few very interesting "features" of the Franco-American treaty on a recent read-through.)
Cheers,
Bev


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## BBCWatcher

My understanding is that Australian superannuation accounts are much more like the former. Said another way, they're individual, defined contribution accounts, not European-style social insurance/defined benefit plans. Foreigners are even able to withdraw their funds pre-retirement when they leave Australia. So, absent a treaty provision that says otherwise, employer contributions would be treated as earned income for U.S. tax purposes, and gains would typically be subject to PFIC/QEF rules annually. PFIC/QEF complications could be avoided by directing the superannuation funds into U.S. tax-appropriate investments. If allowed by the superannuation rules, that would include direct holdings of publicly traded bank and insurance stocks (equities) and direct bond holdings, as examples.

Please feel free to check me on all this, but that's my understanding. Singapore's CPF and SRS accounts have similar character and would be treated the same, to pick a couple other examples.


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## emizzle

Wow thanks guys so much for the thought and attention!! Assuming I would report my superannuation as earned income, would this mean that I would also have to submit FBARs for my superannuation account (assuming it is greater than $10k)?


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## BBCWatcher

Yes, but please note that the $10K threshold is a single threshold that applies to the total, at any moment in time, across all your foreign accounts. For example, if you have a $5K superannuation account and a $6K Australian savings account then you'd have to file a FBAR because the total $11K, and that's over the (single) threshold.


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