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Why Saving Tax is All about Marginal Tax Rates (Almost)

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Why Saving Tax is All about Marginal Tax Rates (Almost)

Saving tax is all about marginal tax rates – almost. When you split, defer, offset, offshore or hide income to save tax – whether this is actually worth the effort depends on marginal tax rates.

2024 Tax Brackets

If you are an Australian tax resident, your 2025 marginal tax rate comes from these five brackets, until there is another change:

  • 0% for your first AUD 18,200
  • 16% for AUD 18,201 to AUD 45,000
  • 30% for AUD 45,001 to AUD 135,000
  • 37% for AUD 135,001 to AUD 190,000
  • 45% from AUD 190,001

Marginal Tax Rate

Your marginal tax rate is the tax rate of the highest tax bracket you hit. Any additional income will be taxed at this marginal tax rate until you hit a new bracket.
You only ever have one marginal tax rate. ONE. Not more and not less. And it is always one of these five – 0%, 16%, 30%, 37% or 45%. Unless tax rates change, of course.
Everybody with an Australian tax file number has a marginal tax rate. Even if you have no income, you have a marginal tax rate. It just happens to be nil if your income is nil.

Income v Marginal Tax Rate

Reducing your income reduces your tax debt. But it doesn’t necessarily reduce your marginal tax rate. Why?
Because marginal tax rates move in jumps from bracket to bracket. So if your income changes within a tax bracket, there is no change to your marginal tax rate.
Let’s say your actual income is AUD 300,000 and now you move AUD 110,000 to your adult children via a discretionary trust. You save tax but your marginal tax rate doesn’t change.
But if your income drops further below AUD 190,000, then your marginal tax rate does change since you now hit a different tax bracket.

Tax Strategy

Why is saving tax all about marginal tax rates (almost)? The answer is about tax arbitrage. The gap between different marginal tax rates.
There are nine ways to save tax and all nine have something to do with marginal tax rates. Not always 100% exclusively, but marginal tax rates are there in all of them.

Summary

So this is why saving tax is all about marginal tax rates (almost). The higher your marginal tax rate, the more you benefit from moving income to lower marginal tax rates and expenses and losses to higher marginal tax rates.

Makes sense? Reach out when you are ready to pay less tax.

PSI, PSE and PSB – Get This Right and Pay Less Tax

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PSI, PSE and PSB – Get This Right and Pay Less Tax

If your business provides a service, PSI, PSE and PSB are the three most important acronyms for you to pay less tax. In short: If you earn PSI through a PSE that qualifies as a PSB, you pay less tax.

PSI

If you mainly get paid for your efforts and skills, then you earn Personal Services Income aka PSI. Mainly means more than 50%.
But if 50% or more of your income is for other things, for example, the machines you use, then you don’t have PSI from that income source. It is an all-or-nothing approach.

PSE

If your PSI income is paid to another entity, for example, a company or trust, that entity is a PSE, a Personal Services Entity. Any entity that is not an individual and receives PSI is a PSE.

The question is whether this PSE qualifies as a Personal Services Business (PSB). If it does, you will pay less tax.

PSB

PSI is taxed like employment income (unless you qualify as a PSB).

You can’t do much with employment income. You can’t defer or split it. You can’t offset it against losses or claim all the deductions a real business could. 

But as a PSB you can do all that. You get treated like any other real business. So you want to be a PSB, because a PSB means less tax.

Makes sense? Reach out if you need help.

Pass a PSB Test To Pay Less Tax

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Pass a PSB Test To Pay Less Tax

If your business provides a service and you want to pay less tax, you have three ways to do that.

1- You pass the 50% PSI Test. The 50% PSI Test looks at whether you even have PSI. Great if you don’t. Then you can stop right here.
2 – You pass one of the four PSB tests and qualify as a PSB.
3 – You ask the ATO for a PSB Determination if you fail the last two PSB tests because you didn’t make it over the 80% hurdle
So let’s look at the 4 PSB Tests.

PSB Tests

To qualify as a PSB you need to pass one of the four PSB Tests.

PSB Test no. 1: 75% Results Test

Do you produce a result using your tools at your own risk for at least 75% of your work?
You need to tick a – Result, b – Tools, c – Risk and d – 75% to pass this test. If you do, you qualify as a PSB and can stop right here.
80% Threshold
To pass one of the remaining three tests, you must earn less than 80% of your revenue from your largest client. If your largest client pays you 80% or more, the law will treat you like an employee. So no PSB.

PSB Test no. 2: Unrelated Clients

To pass you must advertise your services to the public and get at least two unrelated clients as a result of that. This ‘as a direct result’ is important. There must be a causal link.

PSB Test no. 3: Employees

To pass you must have at least one employee who does at least 20% of the principal work – measured by market value. Clerical and administrative work doesn’t count.

PSB Test no. 4: Business Premises 

To pass, you must work out of business premises that are separate from your home and you have exclusive use. So shared workspaces or home offices don’t count.

PSB Determination

If you fail the employees and business premises test because you went over the 80%, then you can ask the ATO to be nice and give you a PSB determination so you can still qualify as a PSB.

Pay Less Tax

Pass one of these four PSB tests or get a PSB Determination to qualify as a PSB and pay a lot less tax.

If you get stuck, please tell us what the problem is.

Child Maintenance Trusts

Child Maintenance Trusts Save Tax

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Child maintenance trusts save tax but at what costs?

Child Maintenance Trusts

There are two reasons why child maintenance trusts are not that popular, even though they can save you a lot of tax.

Save Tax

Let’s say you pay $40k in child support for two children per year. If you earn more than $180k per year, this means that you need to earn $80k each year to pay $40k in tax and $40k in child support.

A child maintenance trust let’s you scrap those $40k in tax. So then you just pay the $40k in child support and no tax. And your two children don’t pay any tax either if this is their only income. So zero tax all the way through.

Sounds good, right? But …this tax saving comes at a huge cost. You lose two things:

1 – Loss of Capital

Let’s assume a 5% return. For the trust to earn $40k a year, you need to hand over $0.8m. These $0.8m are gone. Unlikely that you ever see that money again. They will go to your children at vesting. So you end up paying child support plus the $0.8m.

2 – Loss of Leverage

If you are the payer, you have one draw card to secure regular access to your children – apart from going to court: Regular payments.

By handing over all of the money in one go, you lose that leverage.

If you are denied access to your children, you could – in theory – retaliate by not paying out trust distributions, but then you don’t just have the other parent chasing you, You also have the ATO to deal with.

Trade Off

Despite all this, a child maintenance trust might work for you if you are certain that access to your children won’t be an issue.

You can trade a child maintenance trust against lower ongoing payments. So you negotiate lower child support payments and in return pay a certain amount into a child maintenance trust.

Summary

Child maintenance trusts are not that popular because you lose capital and leverage. But they might still work for you if you can reduce ongoing payments accordingly.

 

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Reduce Child Support Payments

Working From Home Expenses

Tax When You Buy Overseas Shares

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Tax When You Buy Overseas Shares

Tax When You Buy Overseas Shares

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How to avoid additional tax when you buy overseas shares?

Tax When You Buy Overseas Shares

You can join a global trading platform and within seconds you own a share of Apple, Google or Tesla. But what are the tax implications?

If you get this wrong, you will end up with a lot more tax to pay, also called withholding tax leakage.

So let’s say that you buy $1m worth of Tesla shares – either as an individual, trust or company – and that they pay you a $100,000 dividend. Just dreaming.

So let’s start with you having bought the shares as an individual

Individual

You are entitled to $100,000 of dividends. This is your income.

But the dividends are subject to a withholding tax of 15%, so you receive $85,000 in your Australian bank account.

In your individual tax return you include income of $100,000. At the top marginal tax rate of 45% your tax liability is $45,000.

But you already paid $15,000 withholding tax. And so you receive an offset for this money. Meaning you don’t have to pay it again.

And so you pay $30,000 in Australian tax. With the withholding tax you paid this gives you an effective tax rate of 45%.

Trust

If you bought the shares through your family trust, the same applies. If the trust distributes the $85,000 to you, you recognise the $100,000 as income plus a foreign income tax offset (‘FITO’) of $15,000.

As before your tax liability at the top marginal tax rate is $45,000. Less the FITO you pay $30,000 in top up tax in Australia, giving you a 45% effective tax rate.

Company

As before, the $85,000 arrive in your company’s bank account. The company recognises income of $100,000 and so has a tax liability of $25,000 at a company tax rate of 25%.

But the company receives a FITO for the withholding tax, and so the company only pays $10,000 in top up tax and still has $75,000 in the bank

And so all is well. Until the company wants to distribute the $75,000 to you. Now you run into issues.

Because you only get a franking credit for the Australian tax your company paid, but not for the withholding tax.

And so the dividend of $75,000 only arrives with a franking credit of $10,000, not $25,000.

So you recognise income of $85,000. At a marginal tax rate of 45%, the tax liability is $38,250. But you have a $10,000 franking credit, so you only pay $28,250. So in total you paid $15,000 withholding tax plus $10,000 corporate tax plus $28,250 individual tax = $53,250, giving you an effective tax rate of 54.25%.

So when you buy overseas shares through a company, you pay almost 10% more tax on overseas dividends than if you had received those as an individual or through a family trust.

Does this make sense? Please give me a call if you get stuck.

 

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Tax When You Expand Overseas

Car Tax Deduction

Paying Employee Accommodation

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

Tax When You Expand Overseas

Tax When You Expand Overseas

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What happens to your tax when you expand overseas?

Tax When You Expand Overseas

There are two things you need to look out for around tax when you expand overseas. And these are GST and income tax. 

GST

When you sell things overseas, these sales are usually GST-free in Australia.

However, the other country might charge GST on your products. And they charge this GST in one of three ways:

1 – If you sell via a platform like Shopify or Amazon, the platform will charge the overseas GST.

2 – If your product exceeds a certain value, the other country will hold your shipment until your customer pays the overseas GST. 

3 – And if total sales in that country exceed a certain threshold, your Australian or overseas company – depending on who makes the sales – is required to register for GST, charge overseas GST and lodge overseas GST returns. 

So that’s GST in a nutshell. Of course, the devil is in the detail, but this is roughly how it works in most countries.

Income Tax

In Australia you are taxed on your worldwide income, assuming you are a tax resident of Australia. 

But to what extent any overseas profit is taxed in Australia or overseas, depends on what you are doing overseas. So you face one of four scenarios.

1 – You have no presence in the other country – no staff, no stock, no office, no warehouse, no company or other entity, nothing. And so you pay no income tax over there. Everything is taxed in Australia.

2 – You have an entity over there that will pay that country’s tax just like anybody else. When you now distribute these profits back to your Australian entity, there is no further tax. So your business only pays tax once on these profits. 

3 – You have no entity over there but a presence – be it staff, inventory, wharehouse, office or something else. And so you have a so-called permanent establishment. And this permanent establishment lodges tax returns and pays tax over there just like a real entity. Any profits sent back to Australia come with a credit for any tax paid overseas, so your business only pays tax once.

4 – You have an entity over there but are able to argue that this entity is an Australian tax resident and has no permanent establishment in the other country. It used to be that you only need central management and control in Australia for this to work. But now you also need your core operations in Australia. And that makes scenario 4 beyond the point now and infeasible.

Double Taxation

Why would you even be interested in scenario 4 if it was still feasible? Because scenario 2 and 3 have one big drawback if you operate through an Australian company – double taxation.

When you distribute the overseas profits to you as the sole shareholder, there is no franking credit attached to the extent the Australian company didn’t pay Australian income tax.

The foreign income tax paid doesn’t give you franking credits. And so you pay tax again on the overseas profit at your marginal tax rates. If …..

Ways To Avoid Double Taxation

If there is an overseas profit. And if you actually distribute those overseas profits to the individual shareholder.

The Australian entity can on-charge any expenses it incurred for the overseas entity (plus margin) in form of management fees. That might already reduce the overseas profit to nil or at least significantly reduce it. But make sure you can justify these charges. The overseas tax collection agency might look at your transfer pricing.

And you don’t have to distribute the overseas profits anyway. If you want to keep some profits in the Australian entity to fund further expansion, you keep the overseas profits and pay the Australian profits out and hence no double taxation either.

Permanent Establishment

Whether you have a permanent establishment (‘PE’) in the other country is not always easy to tell. There is a lot of grey. But here are a few clear indicators.

Using a 3PL service doesn’t create a PE, but using your own warehouse does.

Having independent contractors doesn’t create a PE, but having dependent contractors or staff does.

Using a shared office from time to time while you travel doesn’t create a PE, but having a permanent office does.

The rest depends on the double tax agreement between Australia and the other country and a few other things.

Summary

So when you want to expand overseas, look at GST and income tax. And give me a call if you get stuck.

 

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Jobkeeper 2.1

How to Book a Company Car in Xero

Paying Employee Accommodation

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

How to Book a Company Car in Xero

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How to book a company car in Xero? Here is how you do it.

Book a company car in Xero

To book a company car in Xero is complex – there are a lot of moving parts. You have the split between principal and interest. Then depreciation or the instant asset write off. GST. The car limit. FBT. And last but not least a potential Div 7A issue. That is a lot. But let’s go through it step by step.

Acquisition

Let’s use an example. On 14 April 2020 you bought a car for $80,000 – a so-called ‘luxury car’ – and the dealer invoice says the following:

NetGSTGross
Vehicle Price69,698.476,969.84776,668.32
Transfer Fee34.00034.00
LCT (Luxury Car Tax)342.680342.68
Stamp Duty2,955.0002,955.00
73,030.156,969.8580,000.00
Less Deposit(2,000.00)
Less Finance Liability(78,000.00)
Due0.00

You book this purchase in Xero in 9 simple steps.

Step 1 – Raise a Bill 

You start with raising a bill if the car is financed. If you pay for the car, you have a choice – bill or money spent.

DR Fixed Asset 1GST on Expenses69,698.47
DR Fixed Asset 1GST Free Expenses34.00
DR Fixed Asset 1GST Free Expenses342.68
DR Fixed Asset 1GST Free Expenses2,955.00
DR GSTSystem generated6,969.85
CR Car Finance LiabilitySystem generated – BAS Excluded(80,000)

So the car shows up in your balance sheet with $73,030.15.

Step 2 – Reconcile Loan Repayments 

Every time there is a loan repayment, you need to split the payment between principal and interest as listed in the finance documents.

DR Car Finance LiabilityBAS Excluded1,000
DR Interest ExpenseBAS Excluded1,00
CR BankSystem Generated(1,100)

If you paid for the car outright, then you can skip this step. There is no liability to repay.

Step 3 – Determine Car Limit Excess

If the purchase price of your car is below the car limit in the year of purchase, you can skip this step. If it isn’t, you claimed too much GST in Step 1. So now you adjust this.

The car limits for 2019/20 and 2020/21 are as follows (for all cars, whether fuel efficient or not):

YearNetGSTGross
2019/2052,346.365,234.6457,581.00
2020/2153,760.005,376.0059,136.oo

This is the maximum GST and depreciation you can claim. No need to pro rata for having bought the car sometime during the year. 

Step 4 – Adjust GST

So now you adjust the GST to these amounts. Here is the booking.

DR Fixed Asset 1BAS Excluded19,087.32
CR Fixed Asset 1GST on Expenses(17,352.11)
CR GSTSystem generated(1,735.21)

The GST of $1,735.21 you no longer claim increases the cost of the car from $73,030.15 to $74,765.36.

Step 5 – Instant Asset Write Off 

Thanks to the instant asset write off ($150,000 threshold until 30 June 2021), you can claim the car in one go. But you only get a tax deduction up to the car limit.

DR Instant Asset Write Off ExpenseBAS Excluded52,346.36
DR Non Deductible ExpensesBAS Excluded22,419.00
CR Accumulated Depreciation Asset 1BAS Excluded(74,765.36)

You can book the GST adjustment through a manual journal – as done above – or through the depreciation worksheet in Xero.

Step 6 – Determine FBT Days

In the year of purchase (or sale) you don’t hold the car for the full 365 days. Open the ATO day calculator here and calculate the days from the date of purchase to 31 March. The FBT year goes from 1 April to 31 March.

In this example you bought the car on 14 April 2020. So you calculate the FBT days from 14 April 2020 to 31 March 2021, which are 352 days.

Step 7 – Calculate FBT

Any company car takes you into FBT territory. FBT stands for Fringe Benefit Tax.

Providing you or any employee with a car constitutes a car benefit covered by Division 2 FBT Assessment Act, giving rise to FBT. 

To work out your FBT position, you choose between the statutory formula method and the operating cost method. The later requires a log book.

Which one is better depends on how much you REALLY use the car for business. If less than 80%, use the statutory formula method which works like this (base value excludes registration or stamp duty):

Taxable Value = Base Value (cost + delivery + GST) x 20% x Available Days/365 – Employee Contribution

Not relevant in the year of purchase or the subsequent 3 years, but once you owned the car for at least 4 years on 1 April, you can reduce the base value by 1/3 (33.33%).

NetGSTGross
Vehicle Price69,698.476,969.84776,668.32
Transfer Fee34.00034.00
TOTAL Base Value69,732.476,969.8576,702.32
x 20%15,340.46
x 352/365 days14,792.81

So you take 20% of the base value and then pro rata the amount. That is the employee contribution to reduce your FBT to nil.

Step 8 – Book Employee Contribution

You have a choice. You can lodge an FBT return and then pay the FBT. Or you recognise an employee contribution for the amount and voila: No FBT to pay and no FBT return to lodge. Most sole sharesholders do the later.

The employee contribution is subject to GST. In the example it would look like this.

DRShareholder LoanBAS Excluded14,792.81
CROther IncomeGST on Income(13,448.00)
CRGSTSystem Generated(1,344.81)

If you set amounts to ‘GST inclusive’ in Xero, you don’t need to calculate the GST. The software does it for you.

Step 9 – Div 7A

You just have one last potential problem to deal with if you booked the employee contribution in Step 8. And that is Div 7A. If the company has a receivable to the shareholder at year end, you have a Div 7A problem.

So create a Div 7A agreement or reduce the distributable suplus to nil.

Summary

And that’s it. This is how you book a company car in Xero. In future years, you still have to deal with loan repayments and FBT employee contributions, but the rest is done and dusted.

Does this make sense? Please give me a call if you get stuck.

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Jobkeeper 2.1

Help is Coming

COVID-19 Help for Business

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

IRS Streamlined Procedures

Late 1040 While in Australia

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So you you got a late 1040 while in Australia?

Late 1040 While in Australia

You are not alone. Happens to many. And often it is not just the 1040, but the FBAR as well. 

The bad news is that this can cost you a lot of money if you don’t act. Think US$10,000 per FBAR you didn’t file.

The good news is that there is an IRS amnesty to get you out of this penalty-free. It’s called the IRS ‘Streamlined Procedures’. You still need to pay the actual tax plus interest, but at least the huge IRS penalties are off the table.

To qualify you show that your failure to file was not willful, meaning you didn’t do it with intention. You explain your personal and financial background and how it happened. We can guide you through this process.

The IRS Streamlined Procedures are only for individual taxpayers. Companies and partnerships are excluded. 

Nobody knows how long this amnesty will last. So use it while you can. Just call us if your US tax is troubling you. We deal with late filing issues all the time.

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Jobkeeper 2.1

IRS Streamlined Procedures

IRS Amnesty Programs For US Citizens in Australia

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

 

IRS amnesty programs for us citizens in Australia

IRS Amnesty Programs For US Citizens in Australia

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IRS amnesty programs for US citizens in Australia because it is so easy to forget. You are having a great time in Australia – maybe you lived here most of your life or maybe you arrived a short while ago – either way it is easy to forget that your US tax obligations didn’t stop when you became an Australian resident.

IRS Amnesty Programs For US Citizens in Australia

And so it is easy to fall behind with your US filing. There are hefty fines when you do, but luckily all is not lost. The IRS has a number of amnesty programs that should get you out of trouble relatively scot-free. Here are five of these. The first three are general amnesties. The last two are form specific amnesties.

1 – IRS Streamlined Procedures

With this one you can come clean and avoid penalties if you file tax returns for the past 3 years and FBARs for the past 6 years. To qualify, you must file Form 14653 showing that your previous non-compliance was non-willful. That is the key word: Non-Willful.

You still pay interest on the outstanding tax but at least you avoid most of the penalties.

2 – Voluntary Disclosure Program

This one will help you if you are nervous about something. You didn’t think it was important and so you didn’t include it in your tax return, but now you are awake at night, worrying that maybe it is bigger than you thought. So this one will make sure that the IRS doesn’t slam you as ‘willful’ – there is the word again – and aren’t hit with criminal penalties.

3 – Relief Procedures for Former Citizens

This one is for accidental Americans. Let’s say you were born in Australia and one of your parents had a US passport at the time and so you ended up with US citizenship ‘by accident’. And now you want to renounce your US citizenship but first want to close all your IRS filing obligations. If this is you, then this relief will get you there.

There is just one catch. This one only applies if your total tax liablity was US$25,000 or less for the past 5 years.

4 – Delinquent FBAR Submission Procedures (“DFSP”)

If you have submitted your tax returns on time but forgot your FBARs, then this one is for you. You file the missing FBARs with a brief statement explaining why you are late.

As long as the IRS has not yet contacted you regarding the missing FBARs and as long as you are not under a civil or criminal investigation by the IRS, this amnesty will allow you to file the FBARs for up to 6 years without any penalties.

5 – Delinquent International Information Return Submission Procedures (“DIIRSP”)

This one is for you if you just forgot to file certain information about your international affairs. For example Form 5471 about your Pty Ltd in Australia (‘interest in foreign corporations’) or Form 3520 about your Australian family trust (‘transactions with foreign trusts’) or Form 8938 when your your Australian shares, units and options (‘foreign financial assets’) exceed certain thresholds.

If you have a ‘reasonable cause’ for not filing these on time and the IRS hasn’t contacted you yet asking where they are and if you are not under civil or criminal investigation by the IRS , then you can use this amnesty to file these forms without any penalties, explaining your reasonable cause.

So if you are late, don’t despair. There is almost always a solution. Just contact us. We take care of your Australian and US taxes together with our sister company in the US.

Imagine no longer having your US tax weighing on your shoulders.

 

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Late 1040 While in Australia

IRS Streamlined Procedures

Accounting Tips for Your Business

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

IRS Streamlined Procedures

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The IRS streamlined procedures allow you to come clean penalty-free.

IRS Streamlined Procedures

If you forgot to file FBARs and US tax returns for quite a while, the IRS Streamlined Procedures are for you. All you need to show is that your failure to file was not willful, meaning you didn’t do it with intention.

The IRS Streamlined Procedures are the most popular and generous of IRS amnesties. And here is why.

Penalties

If you live in Australia and anywhere else in the world outside the US, this amnesty wipes out all your penalties. And there are quite a few of those.

There are – among others – penalties for failure to file (5%) or pay (0.5%) and most significant the $10,000 penalty for each FBAR you didn’t file. 

And these are just the three most common ones.

Then there is also an additional 20% penalty if your income is substantially understated. A civil penalty of $10,000 per year per entity when you fail to file Form 5471, Form 8865 and/or Form 8858. Not to mention criminal penalties when the IRS finds you to have willfully neglected your filing obligations.

But all this is off the table when you apply for the IRS Streamlined Procedures.

What You Still Pay

This amnesty wipes out all penalties, but you still have to pay the actual taxes you owe plus any interest on these. 

Eligibility

To qualify you need to file tax and information returns for the past three years, FBARs for the past six years plus your Non-Willful Certification (Form 14653).

The IRS Streamlined Procedures are only for individual taxpayers. Companies and partnerships are excluded. 

There are different more stringent rules for taxpayers living in the US, but since you live in Australia, these won’t apply to you. 

Non-Willful Certification

In your non-willful certification in Form 14653 you explain how you unintentially got into this mess and that your conduct was non-willful. So you explain your personal and financial background and explain how it happened.

You also need to explain the source of all foreign funds and assets – inheritance, bank account while living in Australia etc – and what you did with them – investment decisions, withdrawals to cover cost of living etc. List the name and address of your tax agent and anybody else who helped you with your financial affairs.

Nobody knows how long this amnesty will last. So use it while you can. Just call us if your US tax is troubling you. We deal with late filing issues all the time together with our sister agent in the US.

 

MORE

Late 1040 While in Australia

IRS Amnesty Programs For US Citizens in Australia

Minor Benefit Rule

 

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.