Every 6 months, I have to pay income tax to one country or another. Australia runs on the financial year, 1 July to 30 June, and income tax returns are due by the 31st of October each year. We have an overseas trip coming up, and I need to complete my Aussie taxes before we leave.
Dual citizenship is wonderful at some times, tricky at others. It’s part of Family Globalisation; every day more and more people become part of multinational families, and this often includes becoming a citizen of two or more countries. One of my son’s closest friends is a citizen of Australia, Singapore, and the UK.
Multiple Issues, Including Money
Issues associated with dual citizenship can be emotional, practical, or bureaucratic. Some are related to feelings of the heart, and some are related to the more mundane but often equally sensitive issue of money. Financial challenges range from banking in multiple currencies to being aware of foreign exchange rates and their impact on the cost of travel to learning another country’s tax system.
There are benefits, too, in dealing with money and finances beyond one country; Clive and I believe it keeps our brains working to have to think in dollars (Australian and U.S.), euros, and pounds, and there is value in understanding broader global economic dynamics and trends. But when it comes to income tax, I find it difficult to talk about positives.
I don’t mind paying Australia income tax because I live, work, and earn my income in Australia. My taxes are straightforward and boring in the extreme; I do them myself, online. I don’t have a tax accountant and I don’t pull my hair out over the complexity of the tax code or the pain of the process. It’s tedious but has to be done, so I get on with it.
But doing income taxes in Australia reminds me that as a U.S. citizen, I must also pay U.S. income tax, regardless of whether I earned any income in the U.S. or not. My Sydney Paris life still requires me to pay U.S. income tax, so doing my Aussie taxes becomes more than a neutral financial transaction. It also raises emotional and conflicting feelings about my dual citizenship.
The U.S. Taxes You, Wherever You May Be
More and more, I find it outrageous that the U.S. taxes its citizens on income earned outside the U.S. Last December, the International Herald Tribune noted, “the United States is one of the few countries that taxes on the basis of citizenship rather than residence.” Granted, there’s a foreign income exclusion threshold and there are foreign tax credits, but the bottom line is the U.S. taxes your income — even if none of it was earned in the U.S.
Paying taxes in and to a country goes to the heart of my thoughts and feelings about what it means to be committed to a country, and to be literally and figuratively invested in it. My first commitment to Australia was in the mid-1990’s, when I became a local employee at the completion of my 2-year international assignment. To do so, I had to resign from the U.S. company. In 1999, we sold our house in Connecticut and bought a home in Sydney, a further investment and commitment to our life in Australia.
When I pay Australia income tax it feels right and is right. But it feels almost morally wrong to me that while none of this income has anything to do with the U.S., the U.S. requires me to pay taxes on it. If I had income in the U.S., it would be fair enough. And the high level answer to “why does the U.S. do this” would likely be, “it’s what you pay, literally, for being a U.S. citizen.”
It doesn’t seem right, but it’s the way it is. Last year I had virtually no income in the U.S., but in less than 6 months I will need to prepare and pay my 2008 U.S. income tax.
Right now, I’ll do my Aussie taxes.
Filed under: Family Globalisation |