You may have heard about a new U.S. tax bill, known as the One Big Beautiful Bill, but what does it mean for Australian investors, especially superannuation funds and small businesses with US exposure?
Where are things at?
Australian super funds currently have around $400 billion invested in the US, and tax concessions are available under current tax treaties. This could change.
There’s a new bill, backed by the Trump administration and recently passed by the US House of Representatives, which proposes higher taxes on countries perceived to be discriminating against American businesses, including Australia. If the bill becomes law, Australian super funds may face higher taxes on their US investments, which could directly impact the long-term returns of these funds.
The implications
Even if you don’t have any direct investment in the US, it will matter. If your business is associated with the superannuation funds or if you count on super returns for your retirement planning, then these changes can add pressure. It also adds uncertainty for Aussie businesses running globally.
As trade tensions increase and tax regulations change, international business is becoming more complicated and potentially more expensive. Tax professionals warn that these changes could override current treaties between the US and Australia. What’s more, these adjustments are not limited to large corporations, any individual or entity with exposure to the US could be impacted in some way.
What’s Being Done?
Industry groups like the Financial Services Council are requesting the Australian Government to step in and protect Australian investors through diplomatic and trade channels. Leading superannuation funds have already met with US lawmakers to remind them that Australia is a key source of capital for US markets and that strong partnerships should be mutual.
That said, this legislation is still making its way through Congress and is facing opposition, even from some Republicans. As one US political expert noted, “Bills that seemed doomed have passed before.”
What Can You Do?
Taking a cue from John Howard’s barometer, we’re currently at the “be alert but not alarmed” stage. If you are managing a business, planning for retirement, or investing internationally, this is a reminder of how global politics can impact your financial outcomes.
Here’s what we suggest:
- Stay informed: Tax rules can change rapidly.
- Ensure flexibility in your retirement planning so you can adjust if necessary, or reach out to us for assistance.
- Consult with us if you’re exposed to US investments, though you may also need advice from a US tax specialist.
With the tax and financial landscape shifting quickly, there’s certainly a lot to consider. But remember, you’re not navigating this alone. If you have any questions or concerns, don’t hesitate to reach out. We’re here to help.