IRS Case May Clarify Taxation of Superannuation In The United States – a case that is currently being heard in the United States between the US Internal Revenue Service (IRS) and an Australian expat may provide more clarity on the topic of the taxation of superannuation in the United States.

According to US Tax Court documents filed on the 17th of September, the Australian expat has been in dispute with the IRS over the alleged underpayment of taxes from income he received due to his role with an Australian companies US subsidiary.

In the documents filed it appears that the IRS is looking to include the expats Australian superannuation into the case, which if substantiated, will likely increase his assessed deficiencies if he is not able to substantiate claims that there should be no taxation of superannuation in the United States as it is a form of privatised social security.

The topic of the taxation of superannuation in the United States is a often discussed subject by both Australian expats and professional advisers as there is very little guidance from previous case law and the current Australia-US tax treaty does not go into enough detail.

Where the problem arises is that the United States does not maintain a privatised retirement scheme like Australian superannuation and as such it is very different to what the interpretation of social security is in the United States.

A percentage of tax preparers have been claiming to the IRS that Australian superannuation is classified as a privatised social security and as such should be exempt from US taxes however if the IRS is successful in its claim that Australian superannuation is not a foreign social security then it is going to impact a lot of Australian expats in the US who have previously relied upon the same claim.

We shall continue to monitor the case and provide further updates as they come to hand and thank you to SMSF adviser for reporting this and to bringing this to our attention.



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