Does anyone have any experience or advice on effective tax planning for US rental property income for an ozzie tax resident?
My preference is to have property in LLC and pass through taxation to my ozzie trust. I understand that I am up for 30% withholding tax not sure how I get the difference back if the trust beneficiaries were to pay less.
Any feedback appreciated.
Hi Bardon,
The LLC can purchase the property and rental income can be distributed to a C Corporation you setup (U.S company). U.S state & federal tax is paid on this.
Capital gains the LLC dervies are distributed to your Australian trust and taxed in Australia.
To get the money from U.S to Oz, the C Corporation will need to pay a dividend to your Australian trust. U.S withholding tax is withheld on this payment.
Regards,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auMark,
Thank you for response, which I understand. But I am having difficulty seeing the benefit of the C Corp as there is a double taxation issue as opposed to a straight non-resident return and withholding tax once.If the C corp pays income tax and then there is a withholding tax on a dividend and the trust will also be taxed (sure it gets credit on the withholding) on this dividend, as corporations are not part of the double taxation agreement.
So obviously the numbers need to be run through to see what the overall benefit is but generally speaking I cant see why the C Corp is beneficial if you want the profit to come back to oz.
Bardon
Bardon
Your spot on.
If you require the USA income in aust. (as we do as we have some AUD borrowings to fund the purchases in the USA) then the C Corp will result in double taxation, an effective rate of around 60%.
Even if you don’t require the income in Aust now, you will have to bring it back one day with the same result….
Other then that PM me and I can give you the details of the tax advisers we use both here and in the US.
Regards
TonyTony,
Thanks for that I have just Pm’d you, look forward to getting some certainty on this issue.
Hi Bardon & Tony,
My understanding is that there is a 15% withholding tax on the dividends paid from the U.S to Oz.
The withholding tax is offset against your Australian income payable on the dividend.
Depending on which state you incorporate your U.S C Corporation, you may only be paying 15% income tax in the U.S.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.au
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