# Advised to renounce citizenship by lawyer and accountant



## JungleJim

We immigrated to Australia from the U.S. nearly 30 years ago and have been farming and expanding our operations to quite a size now. We filed our U.S. taxes streamlined many years ago when we first found out we had to and the month the program started, and have filed ever since.

We found ourselves confounded that we were paying taxes here and started to also pay taxes in the U.S. So, we have used a U.S. lawyer and U.S. accountant the last two years and they have now advised us to relinquish our U.S. citizenship “as the most reasonable and cost effective approach” to the inequities of the dual taxation from the U.S.

The problems: The U.S. does not recognise our Australian Superannuation (SMSF) and taxes us on the income each year that the super fund makes, adding $60k to our income on our U.S. tax return , even though it already has been taxed going into the fund and is now tax free here. It doesn’t make sense (to me) to pay taxes on money earned and taxed here and now earnings are taxed again in U.S. just because it is in a self-managed super fund instead of an “approved IRS fund”. The accountant calls it “leakage”, but I feel it is robbery.

Then, when we do retire in a few years, the IRS will tax us again on what we take out in income or a lump sum from our superannuation, even though it is tax free here in Australia, having paid tax going in. I will also be taxed in the U.S. on the gains in our fund I’m now being told.

Additionally, when we do sell our farms when we retire, we are entitled to a 50% capital gain reduction here in Australia being over 60 years old. The U.S. will want to tax that at a higher rate and we will owe huge sums in tax, for something that is irrelevant to any U.S. concern in my opinion. We built our operations from nothing here; forgo wages and worked hard here… not in the U.S.

We are urged to do it immediately before going over the $2 million each person valuation which triggers the exit tax.

I am astounded that the U.S. tax system cannot accommodate a law abiding citizen who pays their taxes overseas and tailors their tax situation to the country they live in and then have to deal with the greed and basic injustice of taxing again income that has already been taxed.

I didn’t want to go down this path, with one child and his family in the U.S. and the other working on the farms here, but I’m wondering if this advice isn’t the only solution left in an unfair situation.

I don’t know what the forum can offer, but I am reaching out for some common sense…
:confused2:


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## Bevdeforges

Unfortunately, "common sense" and taxation don't really belong together in the same sentence these days. I think, however, you could make a good case for not declaring withdrawals from your superannuation as income to the US, given that you are paying tax on the money going into the fund AND on the annual income earned on the fund. That makes it more like a regular bank account - if you keep paying tax on the interest as it's earned, then you take it out as capital since the income tax has already been paid.

Though your advisors have a point. Easier to renounce now before you hit the threshold for the expatriation tax. Your decision should have no impact on your child in the US, nor on the other one. They either are or are not US citizens on their own merit at this point. 

There are currently a couple of committees in Congress "looking into" the international tax situation. You might want to send an account of your situation to them, to see if it might spark some interest in making changes to the law and/or the taxation system. https://americansabroad.org/

And for anyone else who may want to make comments, here are the e-mail addresses along with ACAs advise on making comments:


> ACA encourages individuals to submit their comments on tax reform to both the Individual Income tax working group at: [email protected] and, the International Tax working group at: [email protected]
> 
> ACA recommends that you keep you submissions to a minimum - one page, not longer than two. The submissions must be filed by April 15th 2015. Requirements for submission can be found here: The United States Senate Committee on Finance: Newsroom - Chairman's News


Cheers,
Bev


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## JungleJim

Thanks for your comments Bev, much appreciated. I am the type of person who will put in my 2 cents with a submission to the Senate Finance Committee, with as much as I can fit in 2 pages.

I have forwarded your comment on superannuation money in and taxed here - money out and not reported in the U.S. ("like a bank account") in reference my SMSF. But, my intuition is that using a registered tax attorney and CPA, they won't be able to offer a solution that is as creative an interpretation. But, here's hoping that is a valid filing position :fingerscrossed:


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## BBCWatcher

Expanding on what Bev said about your superannuation fund, each time you pay U.S. income tax you're (I assume) resetting the cost basis.

Let me see if I can illustrate the point. Suppose you earn $10 from work and put that $10 into the account. If you're taking the U.S. Foreign Earned Income Exclusion then that $10, if below the Exclusion limit (most probably), is completely U.S. tax free. If you're taking the U.S. Foreign Tax Credit on that $10 then you receive credit for any Australian income tax you pay on that $10, and that credit partially or fully offsets your U.S. income tax. If it more than fully offsets your U.S. income tax, you can bank the excess credit and use it on the same category of income up to 10 years into the future. So that $10 in earnings from work, in the year you earn it, is quite well protected from U.S. tax, even if Australia isn't taxing it (thanks to the FEIE and FTC). Yes, farm work counts as earned income.

OK, so you've now deposited $10 into your superannuation account. Even though it's probably U.S. tax free, that's your original cost basis -- you have no gain yet, and no gain no tax. Let's suppose your superannuation fund is one of those awful, nasty PFICs, per the IRS's definition -- that you put your funds into an Australian stock mutual fund instead of, say, direct holdings of individual government or corporate bonds, or direct holdings of shares of bank or insurance company stocks. (Those latter things aren't PFICs.) But OK, you're into PFICs -- no problem. At the end of the year that $10 has grown to $11. Your "mark to market" capital gain is $1 ($11 minus $10). You'd then pay U.S. income tax on that $1 of gain. However, you've got a U.S. personal exemption and standard deduction, presumably, that shields the first $10K (or thereabouts, perhaps more) in income of all types, beyond your FEIE. So if it's only $1, and you haven't already consumed that ~$10K, no tax. (Since you have ~$60K in annual gains, you'd pay capital gains on about $50K, actually, after your typical personal exemption/standard deduction -- or very roughly $10K in tax. Married spouses filing jointly get a bigger exemption/deduction, jointly.)

OK, fast forward to the next year. Your account has now grown to $12. Your cost basis was reset to $11. You have another $1 gain, and that's what you pay U.S. tax on, subject to subtracting out your overall exemption/deduction. You keep doing this....

....Fast forward to, say, the year 2030. You now sell your mutual fund. Do you pay tax on, say, $25 -- the sales price of that mutual fund? No! Your cost basis by that point is $24, because the cost basis has been reset every year as you've paid along. You only pay tax on the final year of gains (or partial year). Oddly enough, this isn't necessarily a bad thing. While the tax hasn't been deferred to 2030, true, you have been able to spread the tax out into little buckets, one per year, when you get to subtract your personal exemption and standard (or itemized) deductions, so each year you get to pull out some of that $60K. Moreover, because you've spread out the gains they may have been taxed in lower tax brackets.

Granted, it's not fun paying even $1 U.S. tax on that account and its gains while Australia is being more kind, but it's important to understand what tax you are paying, at what rates, and how it actually works. A few dollars is better than more dollars, of course.

Also, about that farm.... I assume the U.S. will provide at least a $250K capital gains exemption per spouse, assuming the farm is also your home ("principle residence" in IRS parlance). And that's capital gains _after_ all allowable costs. (You've probably poured lots of money into your farm.) It's rather unusual, actually, for a farm sale to show U.S. taxable capital gains when all is tallied up. However, if Australia assesses capital gains tax on the full gain, without an exemption, then even with a 50% tax reduction you're going to need an even bigger, more unusual gain before U.S. tax kicks in. That's because the Australian tax will become a Foreign Tax Credit on your U.S. tax return, from gain dollar one. So the Australian tax paid on the first $250K net gain per spouse can credit against any U.S. tax owed on gains above -- plus Australian tax above is also creditable, of course.

Let's use an example to illustrate the point. Let's suppose you sell your farm and the net capital gain is $1 million. We'll assume Australia and the U.S. have the same view on the gain and how to treat costs. We'll assume you have a $500K U.S. exemption (Married Filing Jointly, each spouse owning 50% of the farm). So your Australian taxable gain is $1M, and your U.S. taxable gain is $500K. Finally, we'll assume a reduced Australian capital gains tax rate of 12% and a U.S. rate of 20%. (I have no idea what the rates are, but as a rough guess, that'll work.)

First you pay Australia: $120K (12% of $1M). Then you _calculate_ the U.S. tax owed: $100K (20% of $500K). You take the Australian tax you paid and treat it as a U.S. Foreign Tax Credit. In this example that FTC completely offsets your U.S. tax, plus you get to bank $20K in excess Foreign Tax Credit. OK, let's suppose you owe $10K of U.S. tax on the capital gains (for that year) in your PFIC-laden superannuation fund. So you spend $10K of that $20K excess Foreign Tax Credit and wipe out your U.S. tax for that year on your superannuation fund, also per usual resetting your cost basis. Then, finally, you've got $10K left. You take that remaining $10K in excess FTC and use it to offset the previous year's or next year's superannuation capital gain, wiping out that U.S. tax (or getting a U.S. tax refund).

That's how it works. Really not bad, eh?

Take a look at IRS Publications 225 and 523 when you get a chance. The future farm sale is probably not nearly as grim as you might think.

OK, a few more points, in no particular order:

1. You said you have family in the United States, and that's an immediate "yellow flag" that ought to give pause to the idea of renunciation. U.S. citizens enjoy guaranteed entry for unlimited stays in the United States. Non-citizens, and particularly renunciants (in a reasonable future forecast, especially), don't. If there's a family emergency -- medical issue or whatever -- citizenship is really handy.

2. If you are a "covered expatriate" when you renounce then U.S. estate tax flips to a U.S. inheritance tax, and a harsh one, if you're leaving assets to any U.S. citizens or U.S. residents. Again, you mentioned family in the U.S. You really don't want them to get whacked if/when they inherit your estate or a portion of it, if you can avoid it. Renunciation, of course, is avoidable.

3. You may not be subject to the U.S. Expatriation Tax no matter what your net worth if you were born an Australian citizen and you have lived in Australia for at least 10 of the past 15 years. If you qualify for that Expatriation Tax exemption, great, but I can't immediately remember if you are or are not deemed a "covered expatriate" and thus would subject your U.S. heirs to onerous inheritance tax, if applicable.

4. Given that you're apparently "marking to market" a substantial fraction of your assets (superannuation fund), and given that there's a $680K capital gains exemption when the Expatriation Tax is calculated, you're likely to be able to sail way, way past a $2 million net worth and still not owe any Expatriation Tax even if it does apply. So I doubt there's any rush here. You need both a $2M net worth and net gains on all your assets above $680K in order to owe Expatriation Tax.

5. If you're a mixed nationality household -- one spouse a U.S. citizen, the other not -- then there are some potentially interesting ways you can play both sides of the tax rules. I'll just leave that idea hanging for now.


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## JungleJim

Quite the post BBC - wow!

Really good stuff to know and that will take some complicated math to keep track on the Superannuation angle.

Yes, we have poured nearly every year's profits, back into the farms and only take a very small draw for ourselves. The company earnings are taxed at 30% here and the rest reinvested. Unfortunately the U.S. doesn't appreciate 'franked dividends' and we can't get our franked dividends out of the company or we would pay more U.S. tax... 

Every angle that works in Australia to get funds back out of the company, the U.S. wants to tax us so earnings just sit there until I buy another block of dirt and plant more avocado trees on it. Forced expansion because of my aversion to paying double taxes in two countries. If I try and redeem my shares, which is a non-taxable event in Australia, it is a taxable event in the U.S.. It is a ***** trying to comply with two countries tax laws that often treat things differently.

Your Other points: 
a) Yes, we don't want to renounce with family in the U.S. - not a happy choice, which is why I sent the the U.S. Senate Finance Committee working group my submission as to why this is all a bit unfair. Thanks Bev for the tip... it helps to get this off my chest.

b) We will ensure we are not a "covered expatriate" either by divesture of assets to family or keeping to the maximum $2million.

c) We are both U.S. citizens from birth, who came to Australia 30 years ago to raise our children in a better environment than what I was exposed to as a police officer for 10 years in the U.S.

d) That is quite interesting about the net worth and net gains aspect... going to have to do some figuring and reading.

e) Not mixed - answered above.

To quote from my Senate submission a small snippet:

"How can anyone comply with two opposing taxation systems that tax events and incomes differently? How can the U.S. decide what mandatory retirement system meets their approval? How come the U.S. doesn’t tax people only if the income occurs within its borders as every other country does? Is this fair? Does this meet the pub test and really make sense? I submit that taxation applied to a person already meeting another countries full tax compliance is unjust and unfair, especially since income and residence is fully independent of U.S. domain."

I will sleep on your answers and do some more research. Thanks very much for your great feedback!

Cheers... ...Jim


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## Nononymous

Just throwing a simple idea out there - what would happen if you stopped playing along - ceased filing returns and sending cheques to the US? You, and presumably most of your assets, are in Australia?


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## BBCWatcher

....Though, expanding on Nonymous's point, still filing FinCEN 114s (since those can be independently prosecuted, and you plan to be in the U.S. physically at some point)?

It's an option, though not necessarily one I'd recommend. Probate would certainly end up more complicated with U.S. heirs.


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## BBCWatcher

I'm not thoroughly familiar with Australian taxation, so feel free to correct me if I'm wrong in what I'm about to describe, but I think I'm right. 



JungleJim said:


> Every angle that works in Australia to get funds back out of the company, the U.S. wants to tax us so earnings just sit there....


OK, let's back up a bit here. It's important to understand what's really going on before panicking. 

Here's the headline: the greatest amount of income tax you can ever pay on any particular dollar of income is the higher of the U.S. or the Australian rate. Period. You can _never_ pay more than that -- it's mathematically (and tax treaty) impossible. So that's the absolute worst you can do.

Now, let's do at least a bit better. 

You say that if you pull funds out of the company (the farm, I presume) then the U.S. taxes those earnings. Let's assume that's true.

But Australia will tax those funds, too! Funds that aren't pulled out simply increase the market value of the company. Money isn't free (unfortunately), and it has value whether in or out. When the company is sold, Australia collects capital gains tax, as you mentioned. The less you've pulled out, the greater the market value of the company, the greater the future gains (and compounded!), the greater the Australian tax. (Yes, OK, with a half rate, but as far as I can tell Australia ordinarily taxes capital gains at ordinary progressive income tax rates. Australia's ordinary income tax rates are a touch higher than U.S. ordinary income tax rates, from the looks of it. Half of ordinary Australian rates brings those rates down to...U.S. capital gains tax rates! They look really, really close, at least. It _sounds_ like a wonderful tax break in Australia, and in Australian terms it probably is, but the U.S. is already down into that range of capital gains tax rates, for all capital gains, not only the Australian-favored ones.)

Given that, here's what I'd recommend, at least as an operating principle. Go ahead and pull out some funds and pay some U.S. tax. But do it _moderately_, within the lower U.S. tax brackets. That'll bleed out some of the future capital gains value of the business.

Then, when you sell the farm, you've now lowered its market value and reduced its gains. You now get that benefit back in the form of a reduction in your Australian capital gains tax. And, if you've done it well, and since Australia has tax brackets, too, you've pulled the capital gains down into the lower Australian tax brackets. The Australian rate will still be just about the same as the U.S. rate from the looks of it, even with the half rate on the Australian side, and the U.S. will probably grant a $500K household exemption if it's your primary residence, plus lots of allowable costs when you calculate the net gains. So, no (or precious little) U.S. capital gains tax owed at that point.

Make sense? You're going to pay somebody, eventually. All you're doing right now in not withdrawing funds from the business is boosting the future capital gains (compounded) that Australia will tax, and in its highest brackets. What you _probably_ should be doing is effectively _spreading_ those gains across several years and into lower tax brackets. The U.S. gets its cut pre-sale, and Australia then gets much less post-sale.

OK, it's perhaps a _little_ more complicated, but that's the basic idea, I think. Net net, I don't think this is the end of the world at all.


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## BBCWatcher

To expand just slightly more on this point, the funds that you pulled out of the company don't disappear. Yes, you'll pay a bit of U.S. tax on them. But then you redeploy those funds, or enjoy them, take your pick. If you redeploy those funds you'll be redeploying them presumably to something with greater growth potential than avocados -- or at least you won't be restricted only to avocados or other crops. You might even redeploy those funds into something U.S. tax-advantaged, assuming Australia respects that via the treaty. (It might.)

A lot of people mistakenly think the objective is to avoid all tax as long as possible, much like avoiding ebola. Not actually, not always. Otherwise nobody would ever do a rollover of a Traditional IRA or Traditional 401(k) into a Roth IRA -- and that's a good analogy, because that rollover involves paying tax today in the expectation, with high probability, of avoiding a great deal more tax in the future. In this case, in your case, your instinct to avoid tax may not actually make financial sense -- or at least not _as much_ financial sense as you think -- especially if the tax brackets work similarly to what I described. While you're in a low (or at least lower) tax bracket, that's probably a _good_ time to pay the tax.

Again, I'm certainly not familiar with the intricacies of Australian taxation. I'm just describing general principles that may or may not apply to varying degrees in your situation. But hopefully I came up with a useful idea or two.


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## maz57

I think your lawyer and accountant are giving you very good advice. For a one time cost of US$4700.00 (2350x2) renounce and you can live the rest of your lives unfettered. (I am assuming that somewhere along the line you both took on Australian citizenship.) It sounds as if your US tax affairs are up to date so you can certify 5 years of tax compliance on Form 8854 and finish off things neatly and completely without much complication. Do it now before your net worth grows even more. 

Its the US government and it's insane tax system that has put you in such an impossible position. Do you really want to live out the rest of your days having to always look over your shoulder to see what crazy law they pass next? Wouldn't you rather be left alone to manage your business interests without having to deal with the broken tax system of a foreign country?

Yes, it is sad and unfortunate but I guarantee that it will be a great relief to finally get it done. In a year or two there will be nothing left but the bitterness which will also fade with time. Let the kids worry about themselves; they can move back to Australia and inherit with no problems. As far as being banned from travel to the US, it is theoretically possible but highly unlikely. You will be allowed to enter under the same conditions as any other ordinary Australian citizen once you have shed US citizenship.

While it is true they may pass punitive laws regarding visiting ex-citizens, they may also pass ever more restrictive tax laws that make leaving the US tax system even more difficult than it is presently. You can only make decisions based on the present situation; no one can predict the future. The US will eventually have to give up it's citizenship based tax system, but it is unlikely to happen in our lifetimes. Meanwhile the US expat tax situation is likely to get worse before it gets better. For some reason the US hates it's expats; personally I'm not one to stick around where I'm clearly not wanted. Do it soon; I guarantee you will feel a great sense of relief. I did.


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## BBCWatcher

maz57 said:


> While it is true they may pass punitive laws regarding visiting ex-citizens, they may also pass ever more restrictive tax laws that make leaving the US tax system even more difficult than it is presently. You can only make decisions based on the present situation; no one can predict the future.


You just did predict the future!

If access to U.S. territory has value to someone, then it's entirely reasonable to consider that value and what its loss would mean. We can predict with 100% confidence that U.S. citizens (the ones without outstanding arrest warrants ) will always be able to enter and stay in the United States as long as they wish. We can also predict there is a material _risk_ renunciants will not have that ability. "Infamous" renunciants, e.g. Roger Ver, already do not, so this is not an abstract or trivial risk.

U.S. territorial access and its possible loss is simply part of the overall calculus, and people have different assessments and tolerances for risk that they must personally consider. As a reasonable analogy, if you're divorcing, one must be prepared for at least the possibility you'll never see your kids again.

I think it's really unhelpful to tell somebody how _they_ should assess risk. There is a risk -- we should be upfront and honest about that -- and then each person can decide if that's a risk worth taking in their personal circumstances.

I also think one must understand the _actual_ financial picture. It seems silly to renounce citizenship to avoid taxes if you don't actually avoid taxes -- or, worse, end up paying more in taxes, which is possible and which would suck.



> Meanwhile the US expat tax situation is likely to get worse before it gets better.


Gosh, for not making predictions you're making lots of predictions. 

There's not actually strong evidence to support your prediction, though. In the last major U.S. tax reform the tax code got quite a bit better for U.S. citizens living overseas. As a specific example, the FEIE has become much more generous. I went and looked up the long history of the FEIE, and it's nicely fat and juicy now compared to what it was in the past -- so much so that Senator Chuck Grassley has been persistently upset about it.  As another example, U.S. tax treaties have become more numerous and more generous in an ongoing trend. As yet another example, the new "backdoor IRA" provision, introduced in 2009, is _particularly_ helpful to U.S. citizens overseas.

But those are only facts. Do they really matter?


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## Bevdeforges

OTOH, I think maz57 has a point. At this time, if you can afford to pay the fee to renounce, and you have no, or very little exposure in the US (i.e. bank accounts, IRAs or other brokerage accounts), then renouncing is definitely something you should be looking into.

The chances of your being denied entry (as a rather anonymous case of renunciation) are fairly slim unless you make yourself notorious about it. You would have to evaluate how often you actually travel to the US these days, and how vital it is for you to continue to visit there. Also how able are the kids in the US to come visit you in Oz? I'd look into the issue of their inheritance, but I suspect it's something you could arrange in a satisfactory manner.

If you have investments or account back in the US, you have to evaluate whether or not you're willing to take the 30% tax on income on the accounts (which includes your US SS benefits if you are qualified for them). 

You're the only one who can make the decision whether or not it's worth it, taking all the risks and the rewards into account.
Cheers,
Bev


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## maz57

BBCWatcher said:


> You just did predict the future!
> 
> Gosh, for not making predictions you're making lots of predictions.
> 
> There's not actually strong evidence to support your prediction, though. In the last major U.S. tax reform the tax code got quite a bit better for U.S. citizens living overseas. As a specific example, the FEIE has become much more generous. I went and looked up the long history of the FEIE, and it's nicely fat and juicy now compared to what it was in the past -- so much so that Senator Chuck Grassley has been persistently upset about it.  As another example, U.S. tax treaties have become more numerous and more generous in an ongoing trend. As yet another example, the new "backdoor IRA" provision, introduced in 2009, is _particularly_ helpful to U.S. citizens overseas.
> 
> But those are only facts. Do they really matter?


Ha, when I typed that I was thinking of you, BBC! I used the word "may" just to qualify the statement. It was speculation about what might happen, not prediction. As far as what the future holds for expat filers, I disagree with your assessment totally; the trend is not expats' friend. Things have gotten considerably worse for expats the last half dozen years or so, not better. That jerk Grassley routinely comes up with a proposal to eliminate the FEIE. So far he has failed but that doesn't mean he won't succeed next year.

I just thought the OP should hear from the perspective one who has already freed himself from US expat tax insanity. None of us here know the details of the OP's financial situation; presumably his lawyer and accountant do. They have given their advice and I agree with them. Why prolong the agony?

You think US CBT is hunky-dory and justified. I don't. The OP will have to make up his own mind and act accordingly. Believe me when I say that if you don't actually live in the US, it is way easier if you are not a US citizen. The few advantages that keeping US citizenship offers for permanent expats are more than nullified by the US CBT tax system.


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## JungleJim

Nononymous said:


> Just throwing a simple idea out there - what would happen if you stopped playing along - ceased filing returns and sending cheques to the US? You, and presumably most of your assets, are in Australia?


I have always presumed, we are 'too big' to disappear and they have my company returns, personal returns, and TDF's (or whatever the current version is called), on file for many years and have seen us grow. Yes, we only have assets in Australia and are Australian citizens, but I assume Australia would bend over backwards to help the U.S. in any tax matter expecting the same from the U.S.


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## JungleJim

BBCWatcher said:


> You're going to pay somebody, eventually. All you're doing right now in not withdrawing funds from the business is boosting the future capital gains (compounded) that Australia will tax, and in its highest brackets. What you _probably_ should be doing is effectively _spreading_ those gains across several years and into lower tax brackets. The U.S. gets its cut pre-sale, and Australia then gets much less post-sale.


My objection is that the U.S. gets ANY "cut" of my Australian capital gains or interest income or superannuation income, just because they don't recognise the concessions available to us here. Complying with and tailoring tax strategy to fit two countries tax policies makes it nearly impossible to effectively minimise tax.


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## JungleJim

BBCWatcher said:


> A lot of people mistakenly think the objective is to avoid all tax as long as possible, much like avoiding ebola. Not actually, not always.


Fair enough... which is why our companies pay the 30% tax straight up. I could take a fully franked dividend from the company and as long as it is not to high, it would be tax free here, because it is already taxed at 30%. As long as I don't go into the next bracket of 42% or 49%, then that income is tax free. The U.S. doesn't see it that way and don't recognise franked dividends. So, I cannot take advantage of a common earning that is available to every other Australian because of my U.S. citizenship.

Our companies are fully owned by us, so we pay 30% tax with no personal deductions and still pay tax on our wages normally. So we aren't avoiding tax in Australia per se, just trying to avoid extra U.S. tax, AMT tax and other taxes which are not applied to us in Australia.


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## JungleJim

maz57 said:


> I think your lawyer and accountant are giving you very good advice. For a one time cost of US$4700.00 (2350x2) renounce and you can live the rest of your lives unfettered. (I am assuming that somewhere along the line you both took on Australian citizenship.) It sounds as if your US tax affairs are up to date so you can certify 5 years of tax compliance on Form 8854 and finish off things neatly and completely without much complication. Do it now before your net worth grows even more.
> 
> Its the US government and it's insane tax system that has put you in such an impossible position. Do you really want to live out the rest of your days having to always look over your shoulder to see what crazy law they pass next? Wouldn't you rather be left alone to manage your business interests without having to deal with the broken tax system of a foreign country?
> 
> Yes, it is sad and unfortunate but I guarantee that it will be a great relief to finally get it done. In a year or two there will be nothing left but the bitterness which will also fade with time. Let the kids worry about themselves; they can move back to Australia and inherit with no problems. As far as being banned from travel to the US, it is theoretically possible but highly unlikely. You will be allowed to enter under the same conditions as any other ordinary Australian citizen once you have shed US citizenship.
> 
> While it is true they may pass punitive laws regarding visiting ex-citizens, they may also pass ever more restrictive tax laws that make leaving the US tax system even more difficult than it is presently. You can only make decisions based on the present situation; no one can predict the future. The US will eventually have to give up it's citizenship based tax system, but it is unlikely to happen in our lifetimes. Meanwhile the US expat tax situation is likely to get worse before it gets better. For some reason the US hates it's expats; personally I'm not one to stick around where I'm clearly not wanted. Do it soon; I guarantee you will feel a great sense of relief. I did.


It is hard to think that common sense would not finally come to those in government that they would change this system of taxing those whose every existence is tied to another country, and that they would REALLY intend to force people to expatriate. But, you make a compelling case... it is just such a shame and distortion of intent.


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## JungleJim

Bevdeforges said:


> OTOH, I think maz57 has a point. At this time, if you can afford to pay the fee to renounce, and you have no, or very little exposure in the US (i.e. bank accounts, IRAs or other brokerage accounts), then renouncing is definitely something you should be looking into.
> 
> The chances of your being denied entry (as a rather anonymous case of renunciation) are fairly slim unless you make yourself notorious about it. You would have to evaluate how often you actually travel to the US these days, and how vital it is for you to continue to visit there. Also how able are the kids in the US to come visit you in Oz? I'd look into the issue of their inheritance, but I suspect it's something you could arrange in a satisfactory manner.
> 
> If you have investments or account back in the US, you have to evaluate whether or not you're willing to take the 30% tax on income on the accounts (which includes your US SS benefits if you are qualified for them).
> 
> You're the only one who can make the decision whether or not it's worth it, taking all the risks and the rewards into account.
> Cheers,
> Bev


Thanks again Bev - sound logic.
We do worry about travel through or to the U.S., but as you say, it is rare that they curtail this. 

We have no investments in the U.S. and I don't think Social Security paid in 30 years ago will offer anything for me.

As for inheritance, in reference to my kids, that will be a problem. I am limited to just over $5 million I can gift them in a lifetime (under U.S. tax law - no limit here), so that should be plenty to put me under the $2 to $2.5million expatriation threshold to stay under the radar. But they will have to worry about that inheritance and capital gains tax when the farms are sold, or when I do pass on, unless they have pre-gifted to their children.

Yes, on paper it looks logical... just an emotional hurdle for someone like me, who volunteered during the closing days of the Vietnam war and was a police officer for 9+ years. You always want to do the 'right thing'....

Cheers... ...Jim


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## BBCWatcher

JungleJim said:


> We have no investments in the U.S. and I don't think Social Security paid in 30 years ago will offer anything for me.


It will, in fact, as long as you made non-trivial contributions to the U.S. system within any two calendar years. If both of you met that requirement, great, both will receive benefits. If only one of you did, the other spouse will qualify for a spousal benefit.

Australia and the U.S. have a social security treaty, so the "within any two calendar years" threshold is enough to qualify on the U.S. side for some level of retirement benefits provided you inform the U.S. Social Security Administration that you made Australian contributions. They'll then qualify you for U.S. benefits on that basis. Yes, you also qualify for Australian benefits based on your Australian contributions, of course.

Renunciation may affect the taxability of that U.S. Social Security retirement benefit. There is also a _risk_ benefits may be shut off entirely for renunciants at some point. Congress recently passed, and the President signed, legislation to shut off Social Security benefits for war criminals. Renunciants are not held in _much_ higher regard. 



> As for inheritance, in reference to my kids, that will be a problem. I am limited to just over $5 million I can gift them in a lifetime....


No, that's not quite right.

In 2015 (the amounts increase each year for inflation), you can give every child -- every random person, in fact -- gifts of $14,000 without reducing your estate tax exemption. In 2016, you can do it again (at the 2016 limit). Then every year thereafter. If you pay somebody's medical bills, if they live in your household and you feed and shelter them, or if you pay their educational expenses those are not generally considered gifts (three notable examples). You can give more than $14,000, but _only then_ do you start to dig into your $5.43 million (2015) estate tax exemption.

There is an unlimited estate exemption between U.S. citizen spouses. (Remember what I wrote above about mixed citizenship households? They're "interesting" and perhaps useful. I'll leave that idea dangling again, but let's just say that there are actually four renunciation-related options, not only two: nobody renounces, both renounce, one renounces, the other renounces. Each is different in its likely tax impacts.)

For certain renunciants it flips: any U.S. person _receiving_ an estate from a "covered expatriate" pays an _inheritance_ tax, starting from dollar one as I understand it (no $5.43 million exemption). Note that having a net worth of $2 million is not the only way to become a "covered expatriate." It's only of about three ways, any of which trigger that provision. And note that's fair market value net worth (cost basis zero), not unrealized total net gains. "Franked dividends" (?), $60K annual superannuation profits.... You certainly _seem_ on the surface like $2M is a milestone you passed a while ago. (Congratulations. )

Here's something to think about: If paying the U.S. one dollar reduces your Australian tax bill one dollar, is that end result a problem? You can decide whether it is or not. The _logical_ way to approach this is to consider renouncing U.S. citizenship if you can materially, reliably reduce your and/or your heirs' overall future tax bill (hopefully after doing a very careful calculation, with a risk assessment incorporated), and you do not value sufficiently (with another risk assessment incorporated) the benefits of U.S. citizenship you would lose (or could lose). That is, if risk-adjusted/net present value-adjusted calculation A is greater than risk-adjusted/net present value-adjusted benefits B.

Sorry, I don't get as emotional as Maz57 about this. And I think Maz57 is emotional about this (sorry, Maz57), so that's where we part. Many people are, and I get that. And that's OK for them, but it's not OK, in my view, when trying to provide advice. Our emotions are ours alone, and they're unique. So take a deep breath and start with the facts, as best you can, keeping in mind that money certainly isn't everything.

Now, turning to _my_ feelings for a moment, since that's only fair, I used to get bothered about money, about counting every dollar and getting offended when somebody wanted to take some. I've since mellowed a bit. Money has some degree of importance to me, of course, but it's not the most important thing in my life. As I've reported previously, I live overseas and pay a non-trivial amount of U.S. tax on non-U.S. source income, as about 6% of Americans living overseas do. (You may also be one of them.) I have that motivation to renounce, a motivation most Americans living overseas _don't_ in fact have. However, my risk-adjusted/net present value-adjusted calculation A is not greater than my risk-adjusted/net present value-adjusted calculation B, not presently. So, I remain a U.S. citizen, and I pay some U.S. tax on non-U.S. source income, by eyes-wide-open choice. Do I get _offended_ or emotional about this? No, not really. It's just money (not my or my family's health and safety, as examples), and I'm getting positive value for money. I don't get offended about the "high" price of Apple iPhones either: I either buy one or I don't, depending on whether it has enough value to me. Yet some people _emotionally_ get offended about Apple's pricing, really. I don't understand that, and it's certainly not the basis for providing advice to somebody else on whether they should buy an iPhone or not (or at least how to go about deciding whether to buy one or not), but there you go, as a rough analogy.


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## JungleJim

Again, thanks BBCWatcher.

I have just not quite reached that point, where I can feel it is O.K. to pay extra tax to the U.S. when already paying more here. I still feel it is a fundamental flaw.

I realise you are in Singapore which is very low tax rates and understand many Aussies use off shore holdings in Singapore to cut their Australian tax. We are happy to pay into the Aussie system what is due. You are happy to pay extra to the U.S. because you are in a country with lower taxes than the U.S. 

This has evolved into a philosophy discussion, and maybe that's fine. I'll do some more risk assessments and bounce it off the U.S. Lawyer again... maybe a shinning light will illuminate the path best taken.

Thanks again for your efforts to help. ...Jim


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## BBCWatcher

JungleJim said:


> I have just not quite reached that point, where I can feel it is O.K. to pay extra tax to the U.S. when already paying more here. I still feel it is a fundamental flaw.


Well, we might differ then, perhaps both in personal experience and political philosophy, to a degree anyway. So I'll briefly elaborate since you opened the door....

_As it happens_, the U.S. government (and my fellow taxpayers) were very kind to me many years ago, and also kind to my antecedents. (And we're all products of our parents and grandparents, too. There are intergenerational aspects that are fair to consider.) I would not be nearly as successful as I am without that early history, and without my parents' histories. It's just implausible -- my ego isn't that large. I know the U.S. government was also kind to you and to your spouse, at least to some degree. I assume you spent the years prior to ~30 years ago in the United States. I also assume that if you tallied up what government lavished on you -- education, roads and bridges, policing and courts, regulation of clean air/water/food, plowing and sweeping the streets, child services, etc., etc., plus interest -- the taxes you personally paid up to the point before your move to Australia didn't fully compensate for those benefits. Children don't generally pay taxes, in particular. And then there's U.S. Social Security in the future. The actuarial value of what you're going to collect will far exceed what you contributed, no doubt. (Social Security is designed that way, rightly so.)

Tax systems and civil society don't actually work unless, at some point, most people are paying more -- maybe much more -- than they received and receive. In fact, many people can never hope to repay the benefits they received. My go-to example is orphans with Down Syndrome. Somebody has got to shoulder the cost of their support. I really don't want to live in a world where they aren't supported, even for purely (or mostly) selfish reasons. I could have a son or daughter facing such challenges. There's way too much human suffering in the world (including the U.S, including Australia, including Singapore) as it is.

For better or worse, you and I are, frankly, products of the United States. The U.S. has generally lower tax rates than, say, Australia. It can do that _in part_ because its tax system has a slightly different skew than Australia's, and part of that skew is that about 6% of us living overseas owe a bit of U.S. tax on non-U.S. source income. (In my case, very roughly -- it's a bit hard to calculate -- 5%. That is, if you look across all my non-U.S. source income, my net effective U.S. tax rate on that income is probably about 5%. Singapore, of course, takes a bigger cut.) I may be mistaken, but as I recall the current head of HSBC is an Australian, but he "resides" in Hong Kong. So he doesn't pay much, if any, Australian tax except on his Australian source income (if any). Is that "fair"? Well, he's presumably a product of Australia. The Australian government lavished services on him in his youth and probably a bit after that, and (in personal financial terms) he's been wildly successful. Should Australia and her taxpayers be able to collect _a modest share_ of their investment in him, much as a venture capitalist would? I think that's a _reasonable_ view to take, a reasonable operating _principle_ for a civil society. Whether the Australian government actually does or not is up to the (democratically elected) Australian government and her citizens.



> I realise you are in Singapore which is very low tax rates and understand many Aussies use off shore holdings in Singapore to cut their Australian tax.


Or Hong Kong, like that HSBC guy (if my recollection is correct).



> We are happy to pay into the Aussie system what is due. You are happy to pay extra to the U.S. because you are in a country with lower taxes than the U.S.


No, that's not it. I must pay more to the United States than you do, on average per dollar, precisely because Singapore's average tax rate is lower than Australia's. To the extent Australia's average tax rate is higher, and it is, you pay less to the United States (per average dollar of income).

Again, you can _never_ pay more than the higher of the Australian or the U.S. rate on any/every dollar of income. Same here in Singapore. But I more often (and in a higher amount) pay U.S. tax because Singapore's rate is lower....

....Unless you qualify for a _particularly_ generous set of Australian tax breaks, in Australian terms, and not such generous U.S. tax breaks. Singapore tends to be "as advertised": fairly low tax rates (including zero on personal capital gains, interest, and dividends, would you believe -- not how I'd do it if I were Prime Minister for a day), but fewer breaks on those rates, especially for non-citizens. (Though it's fairly hard to get a tax break on zero, isn't it? Not impossible, though. The U.S. tax code has negative tax rates in certain spots.)

All that said, while I recognize that the U.S. tax system is, in my view, entirely _defensible_ in its operating principles and overall construction (though probably not in every detail -- no tax system could withstand that level of scrutiny) -- a venture capitalist-style tax system actually does make a heck of a lot of sense for civil societies -- that doesn't mean I send dollars to the IRS just for the sake of it! I'm not making voluntary contributions above my tax bill to the U.S. Treasury to reduce the U.S. national debt. I'm not that philanthropic.  For better or worse, I'm the opposite of jingoistic. Periodically I reconsider that A v. B calculus I described, and that's a future-looking calculation. I don't actually factor into that calculation the past, including the U.S. government's (and U.S. state and local governments') past generosities. That'd be nice and maybe improve my chances with St. Peter, I suppose, but I don't. But I can't lie about the facts, and the facts are U.S. civil society mattered to my/our development and success in life. How much we can quibble about, but it mattered. In an alternate reality, had I grown up in Australia, Australia's investment in me would have mattered.

Now, that's different _in degree_ for Americans born overseas who have never lived in the United States, even in youth. My child for example, so far. Though there is still a _degree_, because children are products of their parent(s). My child has and will have advantages in life from me, and I from the United States' investments me (or Australia's had I grown up there -- it's the same principle). Let's just be candid about that. (Sorry, I'm not a big fan of libertarian delusions on this point. I can't make that philosophic leap with that crowd.) The same basic principles explain why the estate tax exists, in practically every developed country. U.S. citizenship does not transmit past that first overseas generation, so the intergenerational assessment is certainly not unlimited. Nobody has a U.S. responsibility, even one to renounce, because their great grandfather spent two weeks in the U.S. on vacation -- there is a _reasonable_ minimum degree of intergenerational association required. That one overseas generation limitation (and also the U.S. minimum residence requirement for the American parent) seems about right to me (as a defensible principle). Of course every American, born in the U.S. or not, has the right to "check out" and renounce if he/she wishes, and I defend that important right every chance I get. There's even an Expatriate Tax exemption pretty well targeted at even highly successful Americans born overseas (the 10 in 15 rule I described above).

OK, that's probably more than you wanted to know, but since you asked, there you go.


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## BBCWatcher

Ack, I left out a couple points I wanted to make:

1. Please do not misinterpret my view that a mild citizenship-based tax (CBT) system (e.g. United States, Hungary) is _reasonable_ to mean that I think a residence-based tax (RBT) system is _unreasonable_. I didn't write that, and I (probably) don't hold that view. (I haven't though much about it.)

2. In an alternate reality, the United States and Australia could have identical tax codes and revenue sharing. When somebody moves from the U.S. to Australia, there'd be zero tax impact. But since Australia didn't pay for that transplant American's personal development and education (for example), Australia would rebate some of its tax revenue from that transplant to the United States. And vice versa for moves in the other direction. That'd be another _reasonable_ way to organize a civil society and its tax code. It's what already exists when moving from, say, Delaware to Arizona, or from Oregon to Arkansas. (And that's one of the important reasons the United States has been so successful: fiscal union.)

But we don't live in that world, not yet anyway. (The European Union is perhaps headed in that direction, fitfully.) So the United States (though its democratic processes) has decided that, subject to lots of exemptions/deductions/credits, and subject to full credit for foreign income taxes, and subject to tax treaty generosities with many countries above that, the U.S. might collect a bit of revenue on non-U.S. source income from its citizens living overseas. From about 6% of them, as it turns out, you and I among them.

In principle I think I'd be in favor of such a "super tax treaty," enhancing the U.S.-Australia tax treaty in that direction. That is, as long as the tax codes are at least roughly similar (which they seem to be), if you move between treaty countries you'd file a tax return and financial reports only in your country of residence. The countries' governments would then exchange shares of tax revenues depending primarily on the number of transplants. For those of you who are politically engaged, that'd be another possible avenue to explore, to lobby for a more expansive tax treaty.


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## Nononymous

JungleJim said:


> I have always presumed, we are 'too big' to disappear and they have my company returns, personal returns, and TDF's (or whatever the current version is called), on file for many years and have seen us grow. Yes, we only have assets in Australia and are Australian citizens, but I assume Australia would bend over backwards to help the U.S. in any tax matter expecting the same from the U.S.


You might be pleasantly surprised on both counts. Certainly on the second point, assistance with collection, it might not be the case at all. Look into this a bit deeper. In our case, the Canadian government has made it very clear that it will not cooperate with any US collection against its own citizens, which makes it next to impossible for the US to touch assets in Canada.


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## maz57

BBCWatcher said:


> Sorry, I don't get as emotional as Maz57 about this. And I think Maz57 is emotional about this (sorry, Maz57), so that's where we part. Many people are, and I get that. And that's OK for them, but it's not OK, in my view, when trying to provide advice. Our emotions are ours alone, and they're unique. So take a deep breath and start with the facts, as best you can, keeping in mind that money certainly isn't everything.
> 
> Now, turning to _my_ feelings for a moment, since that's only fair, I used to get bothered about money, about counting every dollar and getting offended when somebody wanted to take some. I've since mellowed a bit. Money has some degree of importance to me, of course, but it's not the most important thing in my life. As I've reported previously, I live overseas and pay a non-trivial amount of U.S. tax on non-U.S. source income, as about 6% of Americans living overseas do. (You may also be one of them.) I have that motivation to renounce, a motivation most Americans living overseas _don't_ in fact have. However, my risk-adjusted/net present value-adjusted calculation A is not greater than my risk-adjusted/net present value-adjusted calculation B, not presently. So, I remain a U.S. citizen, and I pay some U.S. tax on non-U.S. source income, by eyes-wide-open choice. Do I get _offended_ or emotional about this? No, not really. It's just money (not my or my family's health and safety, as examples), and I'm getting positive value for money. I don't get offended about the "high" price of Apple iPhones either: I either buy one or I don't, depending on whether it has enough value to me. Yet some people _emotionally_ get offended about Apple's pricing, really. I don't understand that, and it's certainly not the basis for providing advice to somebody else on whether they should buy an iPhone or not (or at least how to go about deciding whether to buy one or not), but there you go, as a rough analogy.


Boy, I take the afternoon off and look what happens! OK, I'll admit that I may take this US tax thing a little bit too seriously. Even though I've voted with my feet and am no longer a US citizen, I still stop by to comment on this forum because I think there is a chance that my perspective may be of some use to those who are trying to come to terms with this presently. 

I agree with BBC; money isn't everything and this isn't all about the money. In fact, (apparently unlike BBC), I never owed much US tax back when I still filed US returns. For me the decision to ditch US citizenship hinged on 2 main factors: 

(1) Simplifying my tax filing obligations. Why go through the lifelong hassle of filing an extra tax return with a (now for me) foreign country that I would never live in again?

(2) US financial life control. What is the US government trying to do here? I'm a Canadian citizen living in Canada for God's sake. Trying to juggle the conflicting requirements of 2 different tax codes was an impossible task. If the IRS didn't have its propensity for punishing anything and everything "foreign" I might well have chosen to remain a US citizen and continue to file a minimal US return every year. But with the exception of one type of Canadian account, every other Canadian financial choice I had created a US tax filing nightmare (not to mention eliminating any Canadian tax advantage). I just got sick and tired of it.

Of course, with FATCA there may well be other good reasons to not be a US citizen; it will be a few years before that all plays out.

P.S. Being a good Canadian I have a Blackberry; a better phone for a quarter of the price. I couldn't care less what an Iphone costs.

But the phone analogy doesn't quite hold because buying a phone is a choice one makes, i.e. one opts-in. Citizenship, at least the first or original one, is not a choice but generally stems from being born in a certain country or being born to a citizen of that country. In order to not be a citizen one must opt-out. Big difference. (Although I suppose one could "shop the world" for the best deal on a second citizenship.) 

But here we are, posters on a forum, discussing what we think the OP should do or not do. My "advice" is to give greater weight to what your paid advisers are saying rather than anonymous posters on a public forum.


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## JungleJim

maz57 said:


> Boy, I take the afternoon off and look what happens! OK, I'll admit that I may take this US tax thing a little bit too seriously.
> 
> (2)... Trying to juggle the conflicting requirements of 2 different tax codes was an impossible task. If the IRS didn't have its propensity for punishing anything and everything "foreign" I might well have chosen to remain a US citizen and continue to file a minimal US return every year. ...


Thanks Maz57! My point precisely. I cannot juggle two sets of rules and make any strategic decision because the U.S. tax code has different rules to Australia. There is a bit of arrogance and ignorance in Congress and Senate that says if it isn't our way, its wrong. Ignoring there are many ways to tax citizens and other countries must have it wrong - so penalise anything that doesn't match the U.S. way. :confused2:


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## JungleJim

BBCWatcher said:


> ...
> In principle I think I'd be in favor of such a "super tax treaty," enhancing the U.S.-Australia tax treaty in that direction. That is, as long as the tax codes are at least roughly similar (which they seem to be), if you move between treaty countries you'd file a tax return and financial reports only in your country of residence. The countries' governments would then exchange shares of tax revenues depending primarily on the number of transplants. For those of you who are politically engaged, that'd be another possible avenue to explore, to lobby for a more expansive tax treaty.


I appreciate all the thoughts and effort spent in your posts and although I have followed and posted in this forum for years, I certainly am clearer now on your opinions and why your inclined to lean a certain way.

The "super tax treaty" is not really necessary. Just tax people AND companies where they earn their income and where they REALLY reside. No more shifting profits, no more taxing people who live and earn overseas. It's what all these economic summits keep saying the governments should do, but the U.S. balks at because the darlings of Wall Street might be impacted and have to pay REAL taxes.

And finally, once again, I am happy to pay reasonable taxes - even the higher rate here in Australia than Singapore or the U.S. Money isn't everything certainly for myself either and in farming I can have many years of no profits, before finally getting that payday crop. I just want to hang onto my small fair share, pay my taxes, and look for the next one.

Cheers... ...Jim


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## BBCWatcher

JungleJim said:


> The "super tax treaty" is not really necessary.


I've really described a tax _revenue_ sharing treaty. It's necessary if you don't want U.S. tax and financial filing obligations but do want to maintain U.S. citizenship, because the U.S. simply isn't going to abolish its mild CBT regime.

Governments already have tax revenue sharing treaties in other contexts. For example, Australia and the EU have a medical care treaty. They exchange revenues between Australian Medicare and the EU countries' systems. If you're, say, a resident of Spain enrolled in the Spanish public medical system and visit Australia, you get some medical coverage in Australia (and vice versa). The governments exchange revenues based on the care their respective residents consume in each country. There's medical care and expense coordination, in other words. So there's precedent.

_Clearly_ governments provide services that have lifecycle dimensions. (I really don't understand how people can ignore this.) Children don't generally pay taxes, but civil society lavishes resources on children, notably. (Thank goodness!) If all young adults permanently emigrate, RBT couldn't actually function. There'd be no tax base. There have been occasions in history when something very much like that happened. You (and I) are presumably in our peak income earning years, precisely when income taxes would be most heavily paid to support the services we most heavily consumed as children and younger adults, plus the rest of civil society. Taxes that, under an RBT system, wouldn't get paid _where we consumed_ and where the public investments in us were made. Australia (and Singapore) didn't make us: America did.

Of course you're not "escaping" to Australia to cut your tax bill. I don't believe that for a minute. But that's all the more reason why a tax revenue sharing treaty with Australia should relatively easy to conclude. The net tax revenue flow would be quite small because the number of Australians in the U.S. versus the number of Americans in Australia would be relatively balanced, another reason why such a treaty should be relatively easy. In effect Australia would assume your tax and financial filing obligations to the United States. That'd work!

I'm just being practical. I'm recommending possible solutions that have a decent chance of happening, are politically supportable, and are consistent with the quite _reasonable_ views that mild CBT and strict RBT advocates have. I really don't think "howling at the moon" against mild CBT is going to get anywhere. Bilateral tax revenue sharing treaties would be a more viable solution.

Another would be the "deep suspended animation" idea I came up with for U.S. citizenship renunciation. That is, you'd follow exactly the same path as today if you want to renounce (including the Expatriation Tax if applicable). You'd be barred from U.S. entry from that point -- that bit of ambiguity would be cleared up. But, if you change your mind, you could pay another $2350, file every missing year of tax returns and financial disclosures, pay the back tax owed (if any) plus interest (based on the expatriation reset cost basis if applicable), and (once the IRS approves), your U.S. citizenship is restored. The IRS then has the standard statute of limitations period. If you lied and hid income, your citizenship restoration is voided, permanently. Some people seem to want to "check out" from U.S. obligations but don't like the idea it's completely irrevocable. Well, if my modest proposal were adopted it wouldn't be completely irrevocable. I think my modest proposal is politically achievable.


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## JungleJim

BBCWatcher said:


> I've really described a tax _revenue_ sharing treaty. I think my modest proposal is politically achievable.


You should make a few submissions to the Senate Finance Committee since they are asking how they can streamline and make things fairer. Get your ideas on paper by the 15th of April when submissions close!


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## BBCWatcher

Got any Senate Finance Committee contact information? I haven't seen a solicitation for comments.


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## JungleJim

BBCWatcher said:


> Got any Senate Finance Committee contact information? I haven't seen a solicitation for comments.


Courtesy of Bev...

"ACA encourages individuals to submit their comments on tax reform to both the Individual Income tax working group at: [email protected] and, the International Tax working group at: [email protected]

ACA recommends that you keep you submissions to a minimum - one page, not longer than two. The submissions must be filed by April 15th 2015. Requirements for submission can be found here: The United States Senate Committee on Finance: Newsroom - Chairman's News" http://www.finance.senate.gov/newsroom/chairman/release/?id=3bcf1fcf-9dd8-47d4-9202-21a0870cd8d6

I already sent my case submission in... ...Jim


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## Bevdeforges

Originally found it on the ACA website - but they give the following link, which is, I guess "the official" one:
The United States Senate Committee on Finance: Newsroom - Chairman's News
Cheers,
Bev


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## JungleJim

BBCWatcher said:


> OK, what's the scenario when you pay more income tax than the higher of the U.S. or foreign rate on a particular dollar of income?


There are many scenarios: As mentioned previously, I am in Australia, Australian Citizen and unfortunately still a U.S. citizen from birth. I have a company which pays 30% tax in Australia. Then posts dividends. Those dividends are considered pre-taxed by Australia Tax Office. I pay myself $35,000 "Fully Franked Dividend" in Australia. No Australia tax is due, because I fall under the tax threshold of the next tax bracket. The U.S. taxes that as income, because they don't recognise franked dividends. I have to pay tax to U.S. that isn't any of their right to.... 

Additionally, I pay tax to the U.S. on my superannuation account profits. The U.S. does not recognise ANY Australian retirement plan, and my SMSF earns $60,000 per year on $800,000 in assets. My SMSF pays 15% tax, which is the rate the Australian government has set that retirement funds pay tax at. THEN, the U.S. taxes me again, because a) I can't deduct the taxes paid, it is paid by my fund b) The fund profits are counted against me personally as if I made the money each year, so U.S. taxes are due and payable. 

Thirdly, My pension is coming up shortly. U.S. doesn't recognise any Australian pension plan, and that money is not 'earned', so I can't claim "Earned Income credit". It is tax free in Australia, because it was taxed when it was put in, and the gains made over the years were taxed. SO, again I pay tax to the U.S.

I can go on, and on with Capital Gains differences which cause tax to be paid in U.S. and many others... Examples galore. And all seem to apply to me


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## JakDac

*kim (Australian Ambassador to US) may help tell him*

From around the globe please email Kim ( Ambassador to US from Australia) and fill him in on the worries we have and thank him for his concern

Kim.BeazleyATdfat.gov.au

Thanks for raising this issue with me. 

As flagged in my earlier email, I have made some enquiries within the Australian Government and can confirm that we are aware of the problem you outline (which stems from a mismatch between the Australian and US taxation treatment of Australian individuals' superannuation entitlements). You are also correct that a solution will require renegotiation of the Australia/US tax treaty to specifically address the problem (by inserting provisions similar to those in more recent tax treaties that the US has with some other countries). 

In July last year the Australian Treasury invited public submissions on the countries with which Australia should seek to negotiate new or updated tax treaties, as well as the key outcomes Australia should seek in such negotiations. This issue was raised by a number of stakeholders. The Government has noted it and will seek to address it when the Australia/US tax treaty is next reviewed. 

That said, tax treaties are generally not renegotiated on a single issue basis and often take considerable time to negotiate because of the need to work through all the issues of importance to both countries. In addition to the renegotiation process itself, changes to tax treaties require legislative change. This also adds time to the process and makes it subject to other legislative priorities. 

Best Wishes
Kim

___________________________________

Any way we the affected can help expedite a solution ?

Honestly the current situation has effected many people by negatively affecting marriages, financial positions, and health

You did not let us down I thank you for your involvement and pray for a solution


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## JakDac

Kim regarding the long wait etc re fixing situation can you bring up to the US that this has been happening since the early nineties 

In 1992, the Keating Labor government introduced a compulsory "Superannuation Guarantee" TWENTY THREE YEARS 

Thanks again for your efforts


KIM MAY HELP LET HIM KNOW


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## JungleJim

Such a long time ago I came to the forum with this problem with taxation in the US on top of my tax in Australia. The NIIT got me for $600k paid to the IRS when I sold my orchards, and that was the straw that broke the spirit of remaining a US Citizen. I paid millions in Australian taxes on the sale of my farms and the US comes along, hand out with some obscure tax and taxes me above and beyond the 46% Australian tax we faced. Again - we have been here since 1984 and our asset base built from $300k to millions, all earned and built in Australia. Not fair to comply with one countries laws and then have another with their hand out.

SO, I have renounced with my original statement of why we left the US in the 80's:
"*Renouncing US Citizenship at US Consulate*
_My primary reason for renouncing US Citizenship is; I have no civic attachment to the US after being in Australia since 1984. Our children are earning a living here, now in their mid-40’s and most of the grand-kids are now leaving high school and half of them were born and raised here. We have no assets in the US and have earned and paid our own way here in Australia. After years of being a Police Officer in the US, much of what I saw then are still some of the reasons we left the US in the early 80’s for better prospects in Australia are still problems which remain to this day. My birth family was directly affected by no universal health care and the drug problems in America, and I saw firsthand issues with racism, poverty, protectionist and irresponsible politics to name just a few. We saw opportunity in Australia to have more for our family and have truly called Australia home for decades. I see no merit in US citizenship, for myself."_

So, thanks to "Trumps friends and family tax changes" to inheritance laws when he came to power with an increase to $11.5mil you can 'gift' without paying the 40% inheritance/gift tax, I gave away my assets and renounced so I am not a 'covered expatriate'. I had to do it now or face the changes back to the normal levels 3 times lower once the old laws are restored when Trump leaves office and the new Congress and Senate come in with a return to the old rules should they choose. They will be looking for whatever changes can be made to pay for Covid and someone in another country looks like easy game for some additional new tax law changes that will snare more unsuspecting. 

Now, before those laws change, my wife has gifted back to me our assets so she can exit within the $2million 'covered' and taxed if over limit. All legal - covered off with lawyers on both sides, and a BIG relief to stop filing 270 page tax returns in the US and waiting for the next tax to pop up.

Thanks to Bevdeforges and the rest for hearing me out over the years. Cheers...


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## Nononymous

Well played. You got out without owing the US so much as a dime. I'm sure it cost you a bit for the lawyers though.

For the benefit of others, two points:

It's not necessary to make a statement when renouncing. Though in this case, given the sums involved, perhaps wise to have it on record that your motives were personal and political and had _nothing_ to do with US taxes. But it's not required.

This all could have been avoided if you had simply stopped filing after moving to Australia. You have no US assets and it doesn't sound like you'd be relying on Social Security in retirement (though you'd probably still receive it even if completely non-compliant). However, hindsight is 20-20.


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## JungleJim

Nononymous said:


> Well played. You got out without owing the US so much as a dime. I'm sure it cost you a bit for the lawyers though.
> 
> For the benefit of others, two points:
> 
> It's not necessary to make a statement when renouncing. Though in this case, given the sums involved, perhaps wise to have it on record that your motives were personal and political and had _nothing_ to do with US taxes. But it's not required.
> 
> This all could have been avoided if you had simply stopped filing after moving to Australia. You have no US assets and it doesn't sound like you'd be relying on Social Security in retirement (though you'd probably still receive it even if completely non-compliant). However, hindsight is 20-20.


Correct. The expense was lawyers and accountants mainly in both countries to make SURE we complied. Sold all the properties, mainly to avoid name transfers which trigger stamp duty of hundreds of thousands of dollars for each property, but as it turns out BEST time to sell anyway because of COVID impact on that income. Wound down 6 companies to nothing, and cashed out of everything except the house. Unlimited gifting to US spouse and just under the limit of $11.5mil to non-US spouse when reciprocating the cash transfer under current law makes it all possible. Now, we start again without having all future US grabs hanging over our head. 
And, I just noticed, Biden's position is to lower that $11.5mil gift tax threshold to $3.5mil (which is the usual pre-Trump), and to raise the GILTI tax to double the old level for us 'foreign' expats that obviously are just living overseas because we are guilty of some kind of avoidance.


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