With President Donald J. Trump taking the oath of office on 20 January 2017, Americans living and working in Australia, as well as American companies with operations in Australia, have reason to wonder whether the new President intends to change, rescind, or in any way modify the 3 key agreements that govern commercial and tax dealings between the two countries.
It is therefore worth revisiting what the key agreements are:
(a) U.S. – Australia Free Trade Agreement
This agreement took effect on 1 January 2005, and has been in effect for 12 years. Importantly, in the final negotiations the United States created a new visa category – the E-3 – which is available only to Australians seeking to work in America. President Trump’s hostility towards free trade agreements is well-known, and there is a possibility that he will seek to renegotiate or perhaps scrap this agreement. However, the consensus view is that this agreement already favours the United States which has benefitted disproportionately so any changes would be questionable. As the E-3 Visa is not technically a part of the agreement it should not be affected, however, it is certainly possible that the agreement will be revisited at some point during a Trump presidency and there is no guarantee that the E-3 Visa will be available indefinitely to Australians.
(b) U.S. – Australia Tax Treaty
This treaty took effect on 1 October 1983 and, generally speaking, seeks to avoid double taxation on Americans that live in Australia and earn income here. It is in many ways similar to the tax treaties which the U.S. has with many other countries. The treaty was based on a model tax convention that the U.S. Department of Treasury published in 1981 and the OECD model published in 1977. Whilst it is possible it will be amended there has been no indication so far that changes are forthcoming. Presumably, any changes would be in line with similar changes proposed to other treaties that the U.S. has that are aimed at eliminating double taxation.
(c) Agreement between Australia and the United States to Improve Tax Compliance with the Foreign Account Tax Compliance Act (FATCA)
This agreement only came into effect on 30 June 2014 and is specifically aimed at ensuring the sharing of taxpayer information between the two governments. It arises directly because of the enactment of FATCA, legislation that was passed in the U.S. and is aimed at collecting all taxes due and payable from persons outside the U.S. Importantly, each jurisdiction is not required to share all information. Rather, the information has to have been requested by the other country’s tax authority, ie. the IRS or the ATO.
While it is uncertain as to what will happen in relation to the agreements in effect between the United States and Australia during the Trump presidency, it is important to watch this space for further developments.
More information
If you have any questions in relation to this specialised area, please contact David Weinberger, Principal Lawyer, on 8600 8863 or dweinberger@kcllaw.com.au.