Nahan in US tax dispute

Updated: State opposition leader Mike Nahan has revealed that his attempts to renounce his US citizenship in 2008 failed due to an ongoing tax dispute with the US government.

The exact value of the dispute is unknown, and Dr Nahan said he was unsure when the issue would be resolved.

“I continue to pursue the renunciation of the US citizenship, I hope it’s finalised soon,” he said.

America’s Internal Revenue Service is pursuing Dr Nahan for taxes owed on his Australian superannuation account with GESB and in relation to capital gains tax.

Dr Nahan said he was only made aware of the issue last week.

The US government will not allow Dr Nahan to renounce his US citizenship until the dispute is resolved.

The news comes after a host of federal politicians with dual citizenship were forced to resign from parliament after a High Court ruling removed Labor senator Katy Gallagher.

While the same rules do not apply to state politicians, there has been speculation in recent weeks that this may not be the case.

Dr Nahan said he had been advised that his dual citizenship would not compromise his position in parliament.

Dr Nahan entered parliament in 2008 and previously served as the state’s treasurer under the Barnett government.  

He immigrated to Australia in 1978, arriving in Western Australia in 1982.

Treasurer Ben Wyatt said it was an unusual situation.

"There is no question there is a significant issue," he said.

"I don't know the detail of the issue, I don't know what has triggered the IRS' interest."

Statement below from Dr Nahan:

I would like to clarify the nature of the dispute I currently have with the US Internal Revenue Service.

I need to make it clear I do not have an outstanding debt with the IRS. I am simply aware of a potential liability that now exists following a change to the US tax laws.

Under US laws, American citizens with dual citizenship of another country can be taxed by the US Government on income they earn in the country in which they are a dual citizen.

Knowing this, since becoming an Australian citizen, I have submitted my Australian Tax returns to the US Government for scrutiny.

Under a tax treaty between the US and Australia, until 2010 the US accepted the Australian Government’s determination of taxable income and levied no additional taxes on my income earned in Australia.

In 2010, the US Government made changes to its tax laws which effectively meant that money earned within Australian superannuation funds, would be treated differently for US tax purposes.

In Australia, income earned within a superannuation fund gets preferential tax treatment and any taxes owing are paid from within the fund. Also under Australian law, access to monies in super funds is restricted and preserved until retirement.

The changes to the US laws have led to the IRS attempting to levy an additional tax, over and above what is levied in Australia, on the investment in and earnings of superannuation funds and assumes this additional tax can be paid from the fund, which cannot happen under Australian law.

I have paid all relevant Australian taxes on all income I have earned throughout my working life in Australia.  In the last 40 years I have not earned any income from any activity outside Australia.

I am one of thousands of US citizens living in Australia who have been swept up in this tax grab.

A number of legal actions have been launched to challenge the right of the US Government to levy this tax; I am awaiting the outcome of those challenges. I have been advised it is most likely the challenges will be successful.

Once those legal challenges have been completed, which I am confident will be sooner rather than later, I will, if it is confirmed my tax liability is legal, pay the tax owing. Alternatively, as I expect will happen, the tax liability will be expunged.