Taxation of Superannuation in the US

[itchyfeet]

I am contemplating one final work gig in the US, but am becoming increasingly concerned that the tax situation might make it not worthwhile.

In particular I am concerned because I have read that gains made in a year inside a superannuation account in Australia will be treated as assessable income by the IRS.

Contributions to Super are also taxed as income, and rolling over super between accounts is also assessable income for the IRS...

As my marginal tax rate would be towards the higher end I am worried that I’ll be paying 40%+ on super earnings versus 15% less imputation credits if an Australian tax resident. As DW won’t be working (much) tax on my investments is a key factor in my decision whether to take the job.

If anyone has dealt with US taxation of super, when the super stash is large (just pre FIRE) please share your experience. Please clarify my understanding of the law. Please advise of any advice you might have received on this topic.

Many Thanks

[jeroly]

I am not a tax advisor, but my reading of the literature I reviewed indicates that taxation of earnings in AU superannuation accounts is an issue for US citizens that hold them, not for Australian expats working in the US.

There doesn't seem to be any way around US taxation of amounts contributed by the employer into your superannuation fund. Perhaps there's a mechanism to deduct this from your Australian tax bill so as to avoid double taxation.

It's worth discussing these questions with an accountant who's familiar with expat taxation issues.

[itchyfeet]

In addition to my concerns re: Superannuation I now also have concerns re capital gains tax.

In Australia capital gains are concessionally taxed, but I understand capital gains on my ETFs like VAS will be taxed at my ,argonauts tax rate. At a minimum I fear that this would mean that when I finish my stint in the US I will trigger a CGT event that will mean I pay ~40% CGT on all assets in my stash including Superannuation assets.

It’s really starting to look like going to the US for a couple of years is not a viable option....

[MrThatsDifferent]

Google us taxes in Australia and talk to a couple people. There’s different thinking. H&R Block treat super as income. Others may not. There isn’t a right answer because the US can’t figure out super as there is nothing like it in the US really.

[SAR]

The suggestion to talk to an accountant on the subject matter is clearly the best advice.

I've lived in the U.S. for about 17 years now, and I'm thinking of FIRE within the next 2-3 years and return to Oz (will depend on the exchange rate and how much I've managed to cobble away).

My guess is that Australia and the U.S. will have a reciprocal agreement on taxation of these accounts. So if you have already paid taxes either putting money in, or taking it out under the rules of the country the money is in, then I suspect you won't get double taxed.

For me the worry is the other way round . . . I have tax advantage U.S. retirement accounts where no tax is paid for deposits (and in fact, the income used is tax free), and then you pay taxes when you make withdrawls in the future (ideally under a much lower tax rate). It would be a bugger if the ATO gets me on those.