Tax compliance for US citizens residing in New Zealand and Australia
Tuesday 24 April 2012, 11:17AM
By Accru - Chartered Accountants
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Did you recently move to New Zealand (NZ) or Australia from the United States (US)?
Are you aware that your US tax obligations do not end after departing the US?
US Citizens & Green Card Holders
US citizens and green card holders are required to file a US income tax return annually regardless of where they reside. The US taxes its citizens and green card holders on their worldwide income. The deadline to file a US individual income tax return isthe 15th day of the 4th month after the close of the tax year, which is usually the 15th April. US citizens and green card holders are allowed a six-month automatic extension of time (up to 15th October) to file their US tax returns. However, this extension only applies to filing dates. It is not an extension of time for tax payment. Any tax owing to the US Internal Revenue Service (IRS) must be paid by 15th April or penalties and interest will be charged by the IRS.
US citizens and green card holders living abroad have an automatic 2 months extension up to 15th June. If returns cannot be filed by 15th June, an additional 4 months extension can be requested by applying to the IRS, extending filing to October 15th.
The IRS also allows taxpayers personal exemption which is in the form of a deduction against their income. For 2011, the personal exemption level is $3,700 per dependent.
Disclosure Requirements
The IRS requires US citizens and green card holders to disclose their interest in foreign entities. Some of the disclosure requirements for US citizens and green card holders are:
- A settlor of a foreign (non-US) trust is required to file Form 3520 and/or Form 3520A
- A US citizen or green card holder holding more than 10% shareholdings in a foreign (non-US) company/corporation is required to file Form 5471
- A US citizen or green card holder holding the equivalent of US$10,000 or more in aggregate in foreign bank accounts is required to file TDF 90.22-1
From 2012 onwards, US citizens who own certain foreign financial assets are also required to file Form 8938 Statement of Specified Foreign Financial Assets. This form is filed together with the US income tax return.
Capital Gains Taxes
The IRS imposes capital gains taxes on sale of assets such as investment properties, stocks, personal home and holiday homes. New Zealand does not have a capital gains tax regime. Any capital gains is tax-free to the NZ taxpayer. Australia does impose capital gains tax.
Self Employment Taxes
Self-employed taxpayers are liable for Self-Employment Taxes if their net self-employment income exceeds US$400. The selfemployment tax rate for 2011 is 13.3%. The 2010 Tax Relief Act reduced the self-employment tax rate by 2% (from 15.3%) for self-employment income. The rate consists of 12.4% for social security and 2.9% for Medicare.
Article By:
Sharon Cohen and Steven Khoo, Accru Smith Chilcott Limited, New Zealand
Accru Smith Chilcott Ltd specialises in US tax for US citizens residing in New Zealand. If you would like assistance with your US tax affairs, please contact Peter Chatfield or Steven Khoo Accru Smith Chilcott - Auckland Chartered Accountants.
The material is to the best of the authors’ knowledge true and correct. Whilst every care has been taken in the presentation of the article, no liability is assumed by the authors or publishers for any losses suffered by any person relying directly or indirectly upon this article. It is recommended that a senior representative of the firm be consulted before acting upon this information.