Tax Planning & Structuring
Pre-Planning is Essential To Ensure
Tax-Efficient Outcomes
How your personal assets and/or business operations are structured can have significant tax implications and reporting obligations, especially in the U.S.-Australia cross-border context.
Examples:
- U.S. citizens and green card holders are subject to U.S. taxation regardless of residency.
- Non-residents of Australia do not receive the benefit of the Australian capital gains tax (CGT) 50% discount.
- Non-residents of Australia are not entitled to the main residence exemption from CGT for property sold after 30 June 2020, except in limited circumstances.
- Certain Australian trusts may be subject to the U.S. grantor trust rules, creating income tax and estate tax exposure and as additional international tax disclosure obligations, for the individuals who “own” or control the trust (even if they have not received distributions from the trust.)
- Australian resident beneficiaries of foreign trusts have additional tax and reporting obligations when money or other assets of a foreign trust are paid to them, or applied for their benefit.
- Shareholders of Australian companies may receive a “franking credit” for dividends received from Australian companies . However, an individual shareholder who is also subject to tax in the U.S. may be taxed on those dividends and may only claim a U.S. foreign tax credit on the “top-up” tax paid in Australia.
- U.S. corporations pay tax at the corporate level. Shareholders who are natural persons pay tax on dividends received at their marginal tax rate. An Australian-resident shareholder of a U.S. corporation may pay additional tax on those dividends in Australia, subject to the Australian Foreign Income Tax Offset rules.
Tax Planning & Structuring Therefore Involves:
An Assessment of several factors, including:
For Individuals
- Citizenship and residency for tax purposes.
- Where assets are located, and how they are held.
- Control and ownership of foreign entities: as beneficiaries, trustees, or appointors of trusts, and/or as shareholders and directors of corporations.
- Family dynamic
- Income sources and which country has the primary taxing rights.
For Businesses
- Current structure.
- Future plans for expansion.
- “Global” effective tax rates: which jurisdiction has taxing rights, the availability of foreign tax credits, Treaty rights.
- Governing documents: are they up to date, and appropriate?
- Key personnel: where are they located?
- Business Succession planning: who will succeed in the family business? Where do they live?