I cannot believe this is a unique question, but no custodian I have queried can answer it.

US citizen working in Australia for 5 - 7 years. There is no US address during that time. Seems that Australia REQUIRES that all financial assets be moved to Australia for the duration of the work period. The question is what happens to the tax status of US IRA? Can it be transferred to an Australian equivalent and then back to an IRA when returning to the US?

BTW, why do the assets have to be transferred at all?

I have never heard of Australia requiring assets to be transferred there. This is very unlikely. You should confirm with another Australian advisor. I don't believe it.

You cannot transfer assets from a U.S. IRA to any Australian retirement plan without paying U.S. tax and possibly early distribution penalty.

In the U.S. you must file your tax return every year reporting your world wide income.
You will claim credit for taxes paid in the foreign country by filing Form 1116 or using Form 2555. Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

To learn more about your U.S. tax filing requirements, it is really much better to read IRS publication 54 at http://www.irs.gov/pub/irs-pdf/p54.pdf, than to read the links MukatA provides.

I agree with IntlTax. There is NO logical reason to require a U.S. citizen living in Australia to transfer assets to Australia.

Further, such transfer would probably be covered by the U.S.-Australia Tax Treaty, and I do not see that anywhere in the treaty, which is at the link below:

http://www.irs.gov/pub/irs-trty/aus.pdf

After reading the treaty, recommend you contact your original source and ask them to refer you to the actual Australian law or regulation requiring such a transfer.

I apologize for the confusion my question raised. The real problem is that US custodians cannot hold the IRA assets if there is no US address. That is the reason for needing to transfer.

That's simple.

You can give a relative's address to the IRA custodian, or, barring that, have the relative open a post office box and give the custodian the PO box address.

This assumes that you intend to return to the U.S.

I agree with ATE. You may also be able to shop around and find another custodian that will hold your IRA while you are outside the U.S. Make sure you tell them you are a U.S. citizen and going to your local bank may be your best bet.

Just today we are told that a law passed in Australia in 2004 requires brokerage accounts (IRA is in brokerage) of all Australian residents regardless of citizenship to use an Australian brokerage.

BTW, US brokerages will not accept only a PO box as an address -- Patriot Act.

Quote:

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Originally Posted by IntlTax

I agree with ATE. You may also be able to shop around and find another custodian that will hold your IRA while you are outside the U.S. Make sure you tell them you are a U.S. citizen and going to your local bank may be your best bet.

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Believe me, we have shopped around. No one will touch this. There must be a way to retain US custodianship and not be forced to incurr taxation of a $900,000 IRA this year.

Quote:

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Originally Posted by AtlantaTaxExpert

I agree with IntlTax. There is NO logical reason to require a U.S. citizen living in Australia to transfer assets to Australia.

Further, such transfer would probably be covered by the U.S.-Australia Tax Treaty, and I do not see that anywhere in the treaty, which is at the link below:

http://www.irs.gov/pub/irs-trty/aus.pdf

After reading the treaty, recommend you contact your original source and ask them to refer you to the actual Australian law or regulation requiring such a transfer.

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Just today we are told that a law passed in Australia in 2004 requires brokerage accounts (IRA is in brokerage) of all Australian residents regardless of citizenship to use an Australian brokerage.

Was not aware of that Patriot Act addition.

Okay, then use the address of a relative or friend. As IntlTax noted, you may need to transfer the IRA to a bank instead of a brokerage account.

Also, contact an Australian brokerage house and ask if there is an exception for IRA accounts. I suspect you will find that IRA brokerage accounts are exempt from this law.

I don't find this at all surprising. In essence, what is being stated is not that all assets must be moved, but rather than USA IRAs etc are not recognized tax exempt vehicles in Australia. In other words, if they are not tax exempt, then the earnings on your IRA would be reported for tax in Australia. You would need to move them to an Australian retirement account that does qualify, if you want to avoid tax on the earnings.

This is not inconsitent with the approach taken by the US. Foreign retirement accounts held by a US citizen are not treated the same as an IRA. In fact, a US person with a foreign retirement account should pay attention to the PFIC rules.

Intl Tax might share thoughts on this or post more on the PFIC rules if he has time.

I read TTE's post with interest.

Contact an Australian tax expert for guidance as to whether you are absolutely required to transfer the money from your IRA to an Australian-based retirement, or you must transfer the account in order for the earnings to be exempt from Australian taxes.

If it is the LATTER case, it probably would make more sense to keep the IRA in the U.S. and just pay the Australian taxes on the earnings, especially if you plan to return to the U.S. sometime in the future.