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U.S. Tax Treatment of Australian Superannuation

The Organization for Economic Cooperation and Development (OECD) estimates than more than 100,000 Australian citizens are living and working in the U.S. Those Australian nationals almost certainly have some sort of Superannuation Fund, which is a state-mandated occupational pension scheme in Australia. The problem is that nearly every accounting firm in the U.S. is treating Australian Superannuation as a taxable foreign grantor trust. This presents a serious issue since the funds within Superannuation Funds are completely inaccessible until retirement, disability, or death. For an Australian national living in the U.S., this would result in immediate U.S. taxation on all gains within the fund. Because of the lack of liquidity, an Australian national will be taxed on gains they did not truly experience. The problem is that there are differing views as to what Australian superannuation actually is. Is it a private pension? Is it a foreign grantor trust? Or is it a novel form of privatized social security? The correct answer could mean the difference between a client being burdened with U.S. tax on unrealized gains and a client being able to lawfully exclude gain and even future distributions from the superannuation fund from their U.S. tax return.

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John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., LLC, a US-based law firm specializing exclusively in international taxation with offices in Washington DC, Miami, Orlando and Dallas with partner firms in over 130 countries around the world.

John A. Castro, U.S. Tax Treatment of Australian Superannuation, 2 Nev. L.J. Forum 91 (2018).

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