Is a Superannuation From Australia a Foreign Grantor Trust?

Is a Superannuation From Australia a Foreign Grantor Trust?

Is a Superannuation From Australia a Foreign Grantor Trust? The Superannuation Foreign Grantor Trust issue is almost always a non-issue. The IRS rules for reporting a Foreign Grantor Trust are complex. But, the owner of the Super generally does not have to file a Form 3520-A (Annual Information Return of Foreign Trust With a U.S. Owner).

Australian Superannuation Foreign Grantor Trust Reporting

Generally, a superannuation such as an Australian Superannuation is not a considered a foreign grantor trust.

Yes, the Internal Revenue Service has taken an aggressive position involving foreign accounts compliance, but they have also begun to dial-back requirements, especially with the introduction of Revenue Procedure 2020-17.

So While an Australian Super is reportable on many different IRS international reporting forms, such as FBAR, FATCA, and Form 8621 (pending the investment type) it may not require a Form 3520/3520-A 

If you are out of compliance for reporting, you may consider FBAR Amnesty or other offshore voluntary disclosure alternatives.

The Australian Super & U.S. Foreign Grantor Trusts

Analyzing Superannuation Foreign Grantor Trust rules is complex. 

A Superannuation is an employer trust.

A super is compulsory retirement plan and the majority of contributions come from employment deferrals. This is important, because the Internal Revenue Service requires a foreign grantor trust to be reported each year on an IRS Form 3520-A/3520.

Reporting a foreign grantor trust is a time-intensive exercise.

The form 3520-A is an international reporting form, which requires the filer to provide significant amounts of data of the trust, earnings, holdings, expenses, etc. 

Can a Super Become a Foreign Grantor Trust?

Yes. Without getting too much into the technicalities, a superannuation can become a foreign grantor trust.

Using an Australian Super as an example, typically the trust is comprised of employment deferrals. But, if the trust ever became primarily funded by post-employment earning (aka contributions from the employee), the superannuation can turn into a Foreign Grantor Trust.

How does a Super become a Grantor Trust?

Because now the trust is primarily funded by the individual grantor. And, if the individual grantor contributes more than 50% to the trust, the IRS may deem the superannuation a foreign grantor trust. This requires the filer to now submit a Form 3520-A.

How to Report to the IRS?

Generally, the superannuation is reported on multiple international reporting forms, including:

  • FBAR (FinCEN Form 114)
  • FATCA (Form 8938)
  • Schedule B (Question 7)

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