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‘Overlooked’ tax on wealthy clients hitting hard


An international law firm has warned accountants to be conscious of a tax that is often overlooked for wealthy clients, with many getting a “big surprise” when the regulators catch up with them.

By Katarina Taurian and Miranda Brownlee 9 minute read

Moodys Gartner director Roy Berg explained that it’s not strictly US citizens that are subject to US estate tax, in a recent podcast with Accountants Daily. 

“It’s one of those issues that not many people know about. You [might know that] you’ve got some US stocks in your super – but US estate tax is not top of mind, the income tax is more top of mind, it’s an issue that gets frequently forgotten,” Mr Berg said.

Australian residents can also be subject to this estate tax, he said, where their total net worth exceeds the exemption threshold, which is currently US$5.49 million, and they hold certain US investments.

“With respect to investments in US stocks, for example, those are subject to US estate tax when somebody dies. That’s not just for a US citizen, but also for an Australian resident who has no US connections at all,” said Mr Berg.

“If they have say a half a million dollar position in Microsoft and they die, then that’s going to be subject to the US estate tax. Just exactly the same exposure as though they had a half a million dollar condo in Hawaii.”

While the US estate tax only applies where an individual’s total worldwide net wealth is above a certain threshold, which is US$5.49 million, when it does apply, it applies at 40 per cent of the asset value.

“If you’ve got a million-dollar position in Microsoft or Starbucks, it could cost you hundreds of thousands that you may not have been counting on,” said Mr Berg.

Mr Berg noted the interaction of Australian tax law and US tax is often “confounding” and can capture clients who are acting with honest intentions.

“The US Internal Revenue Code, for example, right now weighs in at 75,000 pages. Contrast that with the Income Tax Act, which weighs in at about 3,500 pages. Does that mean that Australian tax law is a lot simpler than US tax law? Absolutely not. They are both complicated. They are both confounding, but for different reasons,” he said.

“The US Internal Revenue Code is a very rules-based body of law, which means you get lots of rules on top of rules. In Australia, it’s more an intent-based body of law – equally confounding, but for different reasons than US tax.”


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Katarina Taurian and Miranda Brownlee


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