U.S. Tax Treatment of Australian Superannuation

U.S. Tax Treatment of Australian Superannuation

US Tax Treatment of Australian Superannuation Funds

US Tax Treatment of Australian Superannuation Funds: The Australian Superannuation Fund is a very common form of Foreign Pension held by many U.S. Persons. Even though U.S. and Australia have entered into a Bilateral Double Tax Treaty, the treaty is silent as to the Superannuation. The Super most resembles a pension plan, but does have some aspects similar to U.S. Social Security. When it comes to the tax and reporting requirements of the Superannuation, there are several moving parts working simultaneously.

This includes:

We have a much more detailed and comprehensive summary available on the tax treatment Australian Superannuation.

Here is a summary of 5 important tips to keep in mind when considering the tax and reporting of the Super on a U.S. tax return:

Pre-Tax Contributions to Australian Superannuation are Taxable

Even though there is a Treaty between the U.S. and Australia, it does not specifically exempt pre-tax contributions for U.S. tax return purposes.

Most treaties do not exempt foreign pension contributions from U.S. Tax.

One example of a tax treaty that does offer that exemption (in some situations) is the U.S.-U.K. tax Treaty.

Superannuation Growth is (Probably) Not Taxable

Foreign Pensions are taxed in accordance with 401/402 and 501.

While there is no specific guidance on how the growth is taxed, the Super is a pension, and the tax treaty refers to pension annuities being “paid,” in reference to being “taxed.”

Since the pension is not paid during the growth phase, the position that the growth is not taxable is not a frivolous position. 

*This is subject to HCE (Highly Compensated Employee) and 402 (Availability) rules.

Distributions are Taxed in the Country of Residence

Generally, distributions from the Super are taxable in the country of residence.

Super is FBAR & FATCA Reportable

While the Superannuation is a form of foreign pension, it is technically the type of account that would be reportable on the FBAR & FATCA Form 8938.

Forms 3520/3520(A) & Rev Proc. 2020-17

There is much debate on whether the Superannuation is reported on Form 3520 and 3520-A, especially in light of the new Rev. Proc. 2020-17. Reporting may also be impacted by whether the super is a SMSF (Self-Managed Superannuation Fund).

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