Non-US Investing • Death tax for an Australian domiciled individual investing in US stock market

Welcome to the forum.

1. Does Australia have a tax treaty with the US that negates this death tax?

Yes. See Estate & gift tax treaties from the IRS. And from Expat Tax Professionals:

For example, NRAs living in Australia can benefit from the U.S.-Australia Estate Tax Treaty. Under Article IV of the treaty, the larger exemption threshold of $12.92 million (as of 2023) extends to NRAs who are residents of Australia. In order to take such a treaty position, it is important that the estate comply with the U.S. tax reporting requirements, which include reporting on both the U.S. estate tax return (Form 706-NA) and the treaty disclosure form (Form 8833).

Provided you are domiciled in Australia, you should be safe from rapacious US estate tax, although only to the extent that your worldwide assets are below the US estate tax exemption for US citizens, currently a little above $13M USD (compare to the miserly $60k USD allowed to non-treaty countries). A pointless yet long-winded paperwork exercise with the IRS for your heirs then, but no actual US estate tax liability.

2. If I were to transfer my US ETrade portfolio to an Australian based and regulated brokerage, would I avoid the death tax event?

Not unless you also invest in non-US domiciled funds or non-US stocks. Aside from broker cash, it is the location of the stock or fund that matters, not the location of the broker. Using a non-US broker to hold US stocks or US domiciled funds does not in itself protect you from confiscatory US estate tax.

3. Are there any other work around that exist so I can continue investing in US securities while living in Australia - without the liability of this death tax?

For most US nonresident aliens, holding non-US domiciled (typically Ireland) funds and ETFs offers by far the best isolation from discriminatory US estate taxes.

Again though, for you, if you can use the US/Australia estate tax treaty, you should not have to face it even if you hold US stocks or US domiciled ETFs unless and until your worldwide assets exceed the sizeable exemption the US allows for US citizens. (Although, avoiding 'US situs' holdings as well would nevertheless help your heirs avoid tangling with most of the tedious and arcane IRS estate tax paperwork.)

For more on all of this nonsense, see: US tax complications for nonresident aliens

Statistics: Posted by TedSwippet — Sat Apr 06, 2024 2:31 am — Replies 1 — Views 190

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