Discussion:Australian Superannuation Lump Sum Distribution
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Discussion Forum Index --> Advanced Tax Questions --> Australian Superannuation Lump Sum Distribution
Discussion Forum Index --> Tax Questions --> Australian Superannuation Lump Sum Distribution
| 27 March 2008 | |
| Client lived in Australia from 1996 - 1998 (US citizen now living in US), collected superannuation during his time there that has been dormant until 2007. In 2007, he took a lump sum distribution of funds (using Departing Australia Superannuation Payment - DASP). Payed 30% Australian tax upon withdrawal.
How are these funds treated from an IRS taxation perspective? | |
| 27 March 2008 | |
| This is taxable as pension income, less basis figured under section 72, with credit for foreign taxes.
I expect you will find basis details if you ask client. Depending on age you may have a 10% excise tax to figure on form 5329. | |
| 1 April 2008 | |
| But this isn't a "qualified" retirement plan.
Wouldn't he just file it as foreign "passive/unearned" income, with credit for foreign taxes paid? | |
| 1 April 2008 | |
| Most foreign pension plans have basis because employee contributions are clearly basis and employer contributions would have been includible in income when contributed under 402(b). If he was highly compensated then growth would also have been includable. | |
| 1 April 2008 | |
| Rgill, If you want a second opinion, Guya is right. And make sure that no Australian tax was withheld. If it was, he can get it rebated by filing an Australian tax return and making a treaty claim. | |
| 9 May 2008 | |
| I agree that, under the treaty, Australia should not have taxed the superannuation distribution. However, I disagree that this client would have had basis in his pension plan. Under previous law he may have had basis, but with the enactment of the 2004 American Jobs Creation Act and the addition of Sec. 72(w) to the Code, a distribution in 2007 would not have basis for employer contributions (nor for growth of the account as a highly compensated employee) while he was a nonresident alien.
Further, he would not be subject to the 10% penalty imposed by Sec. 72(t) (Form 5329). As Rgill indicated, this penalty only applies to qualified retirement plans. | |
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