US Citizens – Has
Your Financial Advisor Ever Asked If You Are A US Citizen?
Contributed by Norbert Cornell - Contact Norbert at email@example.com or 61 2 99568008 or 61 437381288
The reason for the question is that US citizens do not escape
the tax jurisdiction of the USA when they no longer reside
in the United States or even if they have never resided in
the US.The law also applies to former US citizens if the
principal purpose for renouncing their US citizenship was
The Australia US Convention only excludes social security
payments,government pensions,alimony and child support payments
paid to US citizens who are residents of Australia from the
US tax net.
A US citizen earning worldwide income greater than the filing
threshold will be required to lodge a US Federal Income Tax
Return with the IRS each year.In addition they may be required
to lodge an additional return to the Treasury of the US State
in which they either receive income sourced in that State
or are still considered residents in that State.
Although most US citizens residing overseas who have minimal
US sourced income will have nil or minimal tax to pay,it
is still recommended that they file US returns.Why?The IRS
can disallow the exemption which excludes non US employment
income from US taxable income is concessional if they discover
you owe US income taxes and have not filed the appropriate
returns.Also, the filing of a US income tax return starts
the clock with respect to the Statute of Limitations which
can limit the periods the IRS will be able to audit prior
The more important issue especially for those who have resided
outside the US for a long period is that they and their advisers
assume the Australian tax treatment of any income and capital
gains is the same as in the US.(examples of normal everyday
transactions where the differences can result in a material
US tax impact are sale of the Australian home,receipt of
discretionary trust distributions,receipt of deceased estate
benefits from relatives,the receipt of tax free pensions
or lump sums from their Australian superannuation funds.
The IRS have also indicated that the earnings of self managed
superannuation of US citizens may require reporting to the
IRS even prior to distribution of members.
You should be seeking advice on what US taxation issues
may arise from your current financial and estate arrangements
as well as the US tax treatment of any future financial,tax
or estate planning strategies.