Investment Strategy if you are planning live and work in US for 5+ years

I have been contemplating moving to US. Current thinking is at least 5 years but can potentially move on permanent basis as well. Want to minimize financial impact on investment journey. I have been doing some reading and documented below what I have gathered so far.

Looking for your comments and inputs.

1. Strategy for PPOR

Option A - Sell before leaving and claim tax free CG
Option B - Rent out and sell before becoming foreign resident for tax purpose (Reason - Foreign residents are not entitled to the tax-free threshold, 50% CGT discount, and the main residence exemption)

Current plan - Option A , as foreign residency may kick-in after 1 or 2 years. Selling from overseas might be difficult.
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2. Strategy for SMSF (corporate trustee)

Option A - Book loss in stock investment and close SMSF. Move leftover to an Industry super fund. Close Industry super fund and withdraw super after becoming foreign resident /citizen
Option B - Add a trusted relative as director of corporate trustee. Keep SMSF for 2-3 years until investment losses are wiped out. Then close SMSF and move funds to US after becoming foreign resident /citizen

Current plan - Option B , if it is possible

Src - What are the SMSF residency requirements?​

3. Existing Property Investments

Option A - Sell before leaving and claim 50% CGT discount
Option B - Sell before becoming foreign resident for tax purpose (Reason - Foreign residents are not entitled to the tax-free threshold, 50% CGT discount, and the main residence exemption)​

Current plan - Option B , let gain compound for longer
​

4. New Property Investments

Option A - Sell before leaving and claim 50% CGT discount
Option B - Sell before becoming foreign resident for tax purpose (Reason - Foreign residents are not entitled to the tax-free threshold, 50% CGT discount, and the main residence exemption)​

Current plan - Option B , let gain compound for longer​

3. Existing Stock / ETF Investments

Option A - Sell before leaving and claim 50% CGT discount
Option B - Sell before becoming foreign resident for tax purpose (Reason - Foreign residents are not entitled to the tax-free threshold, 50% CGT discount, and the main residence exemption)​

Current plan - Option B , let gain compound for longer​

4. New Stock / ETF Investments

Option A - Sell before leaving and claim 50% CGT discount
Option B - Sell before becoming foreign resident for tax purpose (Reason - Foreign residents are not entitled to the tax-free threshold, 50% CGT discount, and the main residence exemption)​

Current plan - Option B , let gain compound for longer​

 

Bumping it for attention

 

@Terry_w @Sackie @Paul@PAS @Globetrekker @sash @Hockey Monkey - Any comments?

 

You're probably not getting a response because the question is incredibly open ended without any real parameters.

From a lending perspective it gets a lot harder to borrow money when you start earning in a foreign income. Lenders don't have a problem with US dollars but they will shade the amount (usually only use 80%) and they will apply Australian tax rates to it. This will reduce borrowing power significantly.

If you'll be self employed overseas, then the finance options are almost zero.

Overall if your strategy moving forward requires you to borrow money in Australia, you need to factor in that your borrowing power will be very limited compared to what it might otherwise be.

 

Hard to answer your question as there are no details and where the properties are. If your PPOR is in Sydney may good to get out now and buy back in when it drops. Same with investments. I would keep a few good ones till you return...but hard to tell

As for SMSF....just keep it and put into ETFs or funds. Might need advice on this.

As for stocks for ETF depends. ETF ok to hold particularly if VAS/VGS. But individual stocks more of an issue.

Cheers
Sash

 

Not sure that is correct. If you depart Australia to emmigrate and expect the period to be 2+ years then the change of tax residency may occur on the date of departure.

The SMSF faces a number of issues. LIkely a need for a appointed enduring power of attorney to act as trustee in your absence. It has a range of risks and issues. A members change of tax residency doesnt allow ability to pay benefits on its own. USA and SMSFs are a poor mix. US tax law may personally assess super benefits as they accrue as income.

I always suggest personal tax advice on the facts and what the actual tax issues wil be and what choices occur.

 

I am all about addition and multiplication, so for such open ended analysis I would like to leave what worked for me and just continue to accumulate more or to add more if possible? Maybe beneficial to hold various investments spread against various currencies, economies and both countries?

 

Thanks Peter. No, i wont be looking to borrow further in Australia. But existing loans will continue till property is sold off. On contrary, I will be borrowing in US once I am settled

 

Thanks Sash. My PPOR is in sydney and an investment property each in Marsden Park, Brisbane (carina heights) and Melbourne (eastern suburbs). ETFs - Mix of IVV and NDQ and bluechips stock in ASX and NYSE.

 

Make sense. Its potentially huge CGT implications upon sale of Australian assets (due to non residency status and maybe eventually US emigration) , which is prompting me to think of strategy where i will need to sell Australian assets.

 

Hi I live and work in the US on an E3 visa and have been here for the last 7 years (and also own investment property in Australia). It is financially advantageous from a taxation perspective to work on a visa in the US - and (in tech anyway) certain mid level positions pay far more than Australia.

Some quick tips:

1) Do NOT have a SMSF as the US will likely tax these entities punitively. The growth in a regular Super account *should* be safe from US tax but some tax advisors differ.

2) Do NOT have any investments in ETFs in your regular brokerage account, as the IRS will tax these punitively under complex PFIC (Passive Foreign Investment Company) rules. Trust me. You can continue to own individual shares however.

3) You will need to declare Australian rental income in both your Australian tax return (even if you are a non-resident for taxation purposes in Australia) and on your US tax return. The US does not have negative gearing (above a certain income) so losses have to be carried forward. Their depreciation allowances are amazing though.

4) Make sure you max out the contributions to your employers US 401k plan as your contributions are taken out pre-tax AND when you return to Australia only the growth is taxed as it is considered a "foreign trust" by the ATO. Under the US/Australia tax treaty only Australia can tax the 401k.

5) Invest in a US private brokerage account once you're over there as much as you can since your cost basis resets when you become an Australian tax resident again so free capital gains until that point

6) You probably need to pay tax on any shares you own already when you cease Australian tax residency (I did not have any when I left so consult a tax agent on this point)

7) Try and live in an income tax free state e.g. Texas but I lived in NYC for 5 years and it was WORTH IT

8) If you work in the US for 10 years you will be fully vested in US Social Security so you can get a full benefit starting at age 67

9) Do not invest in Roth IRAs post tax in the US (with the intent of withdrawing tax free later) - Australia regards distributions from such accounts as trust income and so you'll be double taxed - on the way IN while in the US AND while on the way OUT back in Australia.

10) Property in the US is complicated (property tax, deposit requirements, tenancy rules if renting them out etc) and the benefits of points 4 and 5 above have meant I've avoided it as my intent is to return to Australia and not have to worry about filing US tax returns. You do get 30 year fixed rates though.

11) A Green Card has many implications e.g. after spending 8 out of 15 years on one then you might have to pay an exit tax if your worldwide assets are greater than $2 mil (subject to a number of exclusions). Being a US citizen is even more awful as you will have to file a US return forever and many Australian benefits e.g. Superannuation is taxed by the IRS.

Watch all of this guys videos - he is brilliant and you might want to hire his firm: https://www.youtube.com/channel/UCUDWXYRE7IyEb7p3zdToZig/videos

 

I strongly suggest you get Australian and us tax advice. There are Australian accountants that do both jurisdictions other than the big 4.

Tax planning is vital but it won’t be cheap to get the advice however it will be worth the money. I also strongly recommend think long and hard before getting a green card as there are adverse tax implications.

 

An update

We are still in Australia. EB1A expected by July end. Then, I believe we need to apply for GC - which can take another 6 months. My questions

1. Do we need to sell primary residence before getting GC to avoid CGT from the US tax department? Or can we sell after settling down in the US in 1-2 years time, and immediately buy investment properties from the profit and defer CGT using 1031 exchange provisions

2. Should i convert SMSF to industry super fund before GC ?

3. When moving to US, should i leave super money in industry superfund or can i transfer it to 401k without incurring tax by US and Australian tax authorities?

Thank you in advance