Australia Specific

The glossary terms below are based on the 2017 Australia Tax Return for Individuals

Terms covered:

Australian Tax Glossary

Salary or Wages

Gross Salary - Report the total amount of the annual Gross Salary in  Income > Wages > Income Outside of the U.S. section of our Tax Questionnaire. 

Employer lump sum payments

Lump sum payments you received from your employer for unused annual leave should be reported in the Tax Questionnaire under  Income > Wages > Income Outside of the U.S. section. 

Employer Termination Payments

Gratuities, Severance Pay, etc. should be reported in the Tax Questionnaire under the  Income > Wages > Income Outside of the U.S. section.

Australian annuities and superannuation income streams

Please enter all pension contributions by employer, including both the SG portion and any other contributions.

In the Tax Questionnaire, please navigate to  Income > Wages > Income Outside of the U.S.  section, answer Yes to Did your employer contribute to your pension plan?, then provide us the details of the contribution. We will then figure out how it should be reported to the IRS.

Total Tax Withheld

Total Tax Withheld

Income Tax - Amount of foreign income tax paid or withheld. Can be utilized as a foreign tax credit to offset U.S. tax liability. Report tax imposed on the particular income type in  Taxes & Deductions > Taxes Paid section of the Tax Questionnaire (TQ).

Dividends

Dividend paid. Report your Dividend Income in the Tax Questionnaire under  Income > Passive Income > Dividends tab (select Non-US Dividends).

Partnerships and Trusts

Income from a trust and income/loss from a partnership should be reported in the Tax Questionnaire under the   Income > Corporation & Trust > Trust tab.

Personal Services Income or Attributed Personal Services Income

A sole proprietorship - unincorporated business run by a single person. Personal services income income received as a sole proprietor. Attributed Personal Services income is what you paid to others for providing services to you. Report it on the  Gross Income from Self-employment question of the Income > Self-employment tab. 

Capital Gains

Capital Gains and losses can be reported under the Income > Home Sale tab of our Tax Questionnaire, question Foreign tax paid on capital gains from property sale.

Australian Businesses and Investments

Opening a local business in Australia as a US citizen

Of course, before opening a local business in Australia, you must have the right to live and work in Australia. You will need to apply for the appropriate visa via the Skill Select website. What’s more, you must decide on your business structure and register your business with the Australian tax authorities.

What types of local business structures are there in Australia, and what would be the US filing requirement?

Sole Trader

As a Sole Trader, you are self-employed. If your, Sole Trader Business exceeds A$75,000, you will be required to register your Sole Trader business for Goods and Services Tax (GST).

You will need to report your self-employment to the IRS via form Schedule C.

Company

Like the Sole Trader business, the company is a common business structure amongst expats in Australia. However, the company offers better protection than the sole trader business structure, as the company is a formal and legal entity separate from its owners or shareholders. The company’s shareholders’ are only liable for losses up to the amount of their share of ownership in the company. You will be required to report the company to the IRS via Form 5471.

Partnership

A partnership is an association of people or entities running a business together, but not as a company. You will be required to report the partnership to the IRS via Form 8865.

Social Security and Pensions

Australian employees are not taxed for United States social security. Because of the Australia - US tax treaty (called a Totalization Agreement), self-employed expats in Australia can decide which system - either US social security or the Australian system - they would rather contribute to. For the majority of Australian residents, participation in government-sponsored retirement plans is limited to superannuation described below.

Australia has a three-pillar pension system. The first pillar (Public Pensions), is comprised of a tax-financed Age Pension (state pension), which provides basic benefits (similar to social security) for men and women (age 65 and above). In addition to the Age Pension, the government established the Future Fund which is financed by budget surpluses and the privatization of Telstra (telecommunications firm). The Future Fund was created to satisfy unfunded public sector superannuation liabilities. The second pillar (Occupational Pensions) is a superannuation fund system financed by compulsory contributions from all employees between age 17 and 70. Although this defined contribution system requires a minimum contribution to a superannuation fund, employees may make voluntary contributions.  

The third pillar (Personal Pensions) consists of retirement savings accounts (RSAs), which operate under the same tax rules as superannuation accounts. RSAs are low-cost pension schemes offered by deposit-taking institutions or life insurance companies.

Australia Financial Accounts

Which types of Australian financial accounts the U.S. individual must report on FBAR / FATCA?

  • Individual bank accounts such as savings accounts, checking accounts, and time deposits.
  • Superannuation (we will determine during tax preparation.)
  • Brokerage accounts, commodity futures or options accounts,
  • Insurance policies and annuity contracts with a cash value (i.e. such as a whole life insurance policy).
  • Business accounts where U.S person has a greater than 50 percent interest in the entity

Which types of Australian financial assets are not required to be reported on FBAR / FATCA?

  • Real Estate Holding,
  • Precious metals held directly,
  • Collectibles,
  • Financial Account held at a US branch of a foreign financial institution.
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