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SUPERANNUATION TAXATION IN THE US

Is Superannuation taxed in the US?

Australian Superannuation, much like so many other things in the US tax code, are in the gray area. That gives us the opportunity to use the ambiguity to our advantage.

Generally speaking, Superannuation are divided into two categories: 
(1) Foreign grantor trust
A foreign grantor trust arises when more than 50% of the contributions to the fund were made by the individual. And if so, a portion attributable to the after-tax contributions would be reported on Form 3520 as a grantor trust. The earnings inside the funds would be taxed concurrently. Self-managed super funds are usually considered grantor trusts.
(2) Employees trust
If employer contributions are greater than 50%, the employer is the owner of the entire trust and the plan is considered a non-qualified employee’s trust.
In that case, it must be then determined whether the participant is highly compensated under IRC 410(B). If the participant is not highly compensated, then fund earnings are not subject to tax until distribution under IRC 402(b)(2). For highly compensated employees, the increase in the value of the plan is included as taxable income annually.
Section 414(q) defines highly compensated employees as one who:
(A) was a 5-percent owner at any time during the year or the preceding year, or
(B)for the preceding year--
(i) had compensation from the employer in excess of $80,000, and
(ii) if the employer elects the application of this clause for such preceding year, was in the top-paid group of employees for such preceding year.
The Secretary shall adjust the $80,000 amount under subparagraph (B) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter ending September 30, 1996.

Depending on the type of your superannuation, beside income tax reporting, you might have other reporting requirements such as Foreign Grantor Trust (Form 3520-A), Foreign Trust Beneficiary Return (3520), Foreign Bank Account Report (FBAR) and Statement of Specified Foreign Financial Assets (8938).

Is the distribution from Superannuation Taxable in the US?

Upon distribution, the funds are taxable in the U.S. to the extent that the distributions exceed basis.
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  • Home
  • Services
    • Personal >
      • International Tax >
        • Moving to the US
        • Australia >
          • SuperAnnuation
          • Informational Returns
          • Australian Rental Income Tax In The US
        • UK >
          • Informational Returns
          • British Rental Income Tax In The US
        • CANADA >
          • Informational Returns
          • Canadian Rental Income Tax In The US
          • CCP / OAS
          • How Can Canadian Save Tax While Working In The US
        • Other Countries
        • Exit Tax: Covered and Non-Covered Expatriates
      • Federal and State Tax >
        • Opportunity Zone
        • Section 83(b) Election
        • Zero Tax On Long-Term Capital Gain and Dividend
        • Sexual Harassment Settlement Taxation
        • Combining Code Section 121 and 1031
        • Gambling
        • IRS Scam
        • Real Estate Safe Harbor
        • Gift Tax Exclusion
        • Withdraw cash From C Corp
        • R&D Credit
        • After Filing the Return
        • Home Office
        • PPP-Paid Expenses
        • Special Charitable Deduction
    • Business >
      • New Business Entity Formation >
        • Different Types Of Business Entity
      • Payroll and Sales Tax
      • Virtual CFO >
        • 6 Ways to Drive Sales from your marketing
        • Fraud Prevention
    • FBAR >
      • FBAR New Penalties
    • ITIN Application
    • IRS Representation
    • Installment Agreement >
      • Fresh Start
  • Insight
  • Tax Center
    • Where is My Refund
    • Due Dates
    • 2023 Tax Rates >
      • Tax Rates - 2022 >
        • Tax Rates - 2021 >
          • Tax Rate - 2020 >
            • Tax Rates - 2019 >
              • Tax Rates - 2018
  • About
  • Contact
  • Make A Payment