Hi @PDonaldson,
The tax treatment depends on what you're transferring and your residency status. As an Australian resident for tax purposes, you're required to declare foreign and worldwide income in Australia.
For your three scenarios:
1. Transfer of cash: The transfer itself isn't taxable. However, you'll need to declare any income that cash generates (such as interest) in your Australian tax return.
2. Transfer of direct shares: Simply transferring shares between brokerage accounts without selling them isn't a taxable event. You'll need to declare any dividends or income the shares produce. When you eventually dispose of the shares, you'll calculate capital gains tax based on the original acquisition cost.
3. Withdrawal of 401(k) and transfer to Australia: This is more complex. If you withdraw a lump sum directly from your 401(k) as an Australian resident, you don't include the full withdrawal in your tax return. Instead, you only include the applicable fund earnings (AFE), which is the growth that occurred after you became an Australian tax resident. The AFE is taxed at your marginal tax rate.
Regarding the double taxation arrangement (DTA), you can claim a foreign income tax offset for US tax that's been paid and won't be refunded. If you expect a refund from the IRS, you can't claim that portion as an offset. If you claimed an offset and later receive a US tax refund, you'll need to declare that refund as income in the year you receive it.
6 views
0 replies