Why This Matters?

Many Australians arrive in the US with sensible portfolios at home such as ASX listed exchange traded funds, listed investment companies, unit trusts or managed funds, and sometimes investments held through family trusts or private companies. In the US those vehicles can fall under the Passive Foreign Investment Company (PFIC) regime. That regime can impose punitive tax, interest charges, and heavy reporting. In addition, attribution rules can make you a PFIC shareholder even when you do not hold the shares directly. Understanding the touchpoints early allows you to restructure intelligently and avoid unnecessary cost and compliance friction.

What Is A PFIC?

A foreign corporation is a PFIC if it meets either of two tests in the Internal Revenue Code. The income test looks for at least seventy-five per cent of gross income being passive. The asset test looks for at least fifty per cent of assets that produce or are held to produce passive income. 

In practice many non-US pooled funds are PFICs for US purposes. These include mutual funds, exchange traded funds, listed investment companies, and some investment companies. 

Classification of Australian unit trusts depends on US entity classification rules and the facts. Many widely held, manager controlled vehicles are not treated as trusts for US tax and end up analysed as corporations, but this is fact specific.

Default Taxation And The Main Elections

If no election is made, PFICs are taxed under the excess distribution regime. Excess distributions and gains are allocated back over your holding period, taxed at the highest historic rates for each year, and layered with an interest charge that is not deductible. Two elections can improve outcomes.

• Qualified Electing Fund Election – You include your share of the PFIC ordinary earnings and net capital gain each year. The practical hurdle is that you need a PFIC annual information statement from the fund. Australian funds rarely provide it.

• Mark To Market Election – If the PFIC stock is marketable you mark to fair value each year. Increases are ordinary income and decreases are ordinary loss subject to limits. Marketable stock requires regular trading on a qualified exchange or market with published quotations. The ASX typically satisfies the regulatory criteria.

New US Residents And The Helpful Basis Rule

When an individual first becomes a US person and makes a timely Mark to Market election the regulations allow a basis step up. For Mark to Market purposes your adjusted basis is treated as the greater of cost or fair market value on the first day of US residency. That ring fences pre immigration appreciation from the Mark to Market computation. Other basis rules may still apply for non-Mark to Market purposes, so records matter.

Once A PFIC Always A PFIC And Purging

PFIC taint follows the stock. If the company was ever a PFIC during your holding period the stock remains PFIC stock until you make an appropriate election or purge. The law allows a purge by recognizing gain as of the last PFIC year. Planning before arrival is powerful. Disposing of PFICs before US residency or arranging elections in time can avoid years of complexity.

Reporting And Form 8621 With Small Holder Relief

A US person who is a direct or indirect shareholder in a PFIC generally files Form 8621 each year if they receive distributions, recognize gain, report a QEF or Mark to Market inclusion, make certain elections, or otherwise hold PFIC stock that triggers reporting under the statute. The instructions also explain who counts as an indirect shareholder.

There is limited relief. You may omit Part I of Form 8621 for a section 1291 fund if the aggregate value of all PFICs is not more than twenty-five thousand US dollars at year end or fifty thousand US dollars for joint filers and you had no excess distributions or gains. For indirect PFIC stock a five thousand US dollar per fund threshold applies. This is a Part I exception only. Other parts still apply if you made QEF or Mark to Market elections or had income. In most expat cases with meaningful balances or any distributions or sales Form 8621 is still unavoidable.

Attribution Rules And Why You Can Be A Shareholder Without Holding The Shares

Attribution rules sit in section 1298. Key points follow.

• Partnerships Trusts and Estates – PFIC stock owned by these entities is considered owned proportionately by partners and beneficiaries.
• Corporations – Normally attribution up from a corporation requires owning at least fifty per cent of that corporation by value. However, if you are a shareholder of a PFIC the fifty per cent limitation is waived for purposes of looking through that PFIC to its lower tier holdings. As a result, a PFIC that holds other PFICs can push those up to you even if you own only a small percentage of the top company.
• Options – Options to acquire stock are treated as ownership. Successive attribution applies so treated ownership can be pushed further up the chain.

What This Means For Australians?

Family Trusts That Are Not Grantor Trusts

A US beneficiary may be an indirect PFIC shareholder when distributions are attributable to PFIC income or gains. The Form 8621 rules indicate that a US beneficiary of a foreign non grantor trust generally does not complete Part I unless they have made a QEF or Mark to Market election or had an excess distribution or gain. When those occur, reporting applies.

Private Companies

If you own at least fifty per cent of an Australian private company that itself holds PFIC stock, attribution can push PFIC ownership up to you. If the company is itself a PFIC, look through can apply to its lower tier holdings without the fifty per cent threshold.

CFC Overlap Which Can Be Useful

If you control an Australian company and it is a controlled foreign corporation for US purposes, the CFC overlap rule prevents the same entity from being both a CFC and a PFIC with respect to you during the period you are a US shareholder. It is treated as a CFC only. This is often helpful for active businesses that might otherwise drift into PFIC status due to large cash or portfolio assets. It does not rescue widely held funds.

Treaty Relief Is Limited For PFIC

The US Australia income tax treaty contains a saving clause that allows the US to tax its citizens and residents as if the treaty did not exist subject to limited exceptions. As a practical matter the treaty does not neutralize PFIC outcomes for US residents.

Common Australian Holdings And Practical Choices

ASX listed exchange traded funds listed investment companies and managed funds usually require PFIC analysis. If you intend to keep them, consider Mark to Market if the marketability criteria are met. For new US residents, a timely Mark to Market election can use the first day basis rule. Otherwise, the default excess distribution regime is often costly.

1. Unit Trusts Require A US Classification Analysis First – Many manager-controlled widely held unit trusts are analyzed as corporations but not always. PFIC status hinges on corporate status.
2. Superannuation Requires Separate Analysis – US treatment is complex and can involve trust or deferred compensation concepts. Even where the Form 8621 instructions provide limited references for certain foreign pensions, the saving clause and lack of robust mutual pension recognition mean that PFIC exposure inside super is not automatically fixed. Specialized advice is essential.
3. Direct Shares On The ASX Are Not PFICs – For many expats shifting from funds to directly held portfolios or to US domiciled exchange traded funds that provide global exposure is the cleanest approach.

Pre-Immigration And Early Residency Planning

1. Prepare an inventory and classification of all non-US vehicles before moving. Confirm US entity status and PFIC status.
2. Decide whether to exit PFICs before the move or to plan for a QEF or Mark to Market election where possible. For listed vehicles Mark to Market is often the pragmatic choice. For Australian funds QEF is rarely available.
3. Use the Mark to Market first year rule where available to ring fence pre arrival gains.
4. Map attribution through family trusts partnerships and private companies. Document the chain so you know who files Form 8621 and when.
5. Do not rely on treaty relief to soften PFIC outcomes.

In Summary

For Australian expats building a life in the US the PFIC regime is more of a compliance hazard than an investment edge. Where possible migrate to US domiciled exchange traded funds even for global exposure or build separately managed or directly held share portfolios. If you truly need to keep ASX funds, a timely Mark to Market election usually provides a better long term result than the default excess distribution method. The most costly mistakes are assuming unit trusts cannot be PFICs missing indirect ownership through family structures and overlooking the first year Mark to Market basis relief.

This is general information only and not tax advice. For client matters confirm facts entity classification and filing positions against the current year rules and instructions.

For many Australians, moving to the UK for career opportunities, family, or a change of scenery, can be a rewarding and enriching experience. But while you might be enjoying the best of British culture it is important to remember that your time in the UK will directly impact whether you are subject to UK’s inheritance tax (IHT) rules.

Recent changes to the UK’s inheritance laws have overturned the concept of taxing individuals based on their “domicile” and made it more important than ever to understand the long-term tax consequences of estate planning.

For anyone living in the UK on a long-term basis it is important to understand that even if you’re planning to return home to Australia, you may still be subject to IHT.

What Is UK Inheritance Tax (IHT)?

IHT is a tax that is imposed on the estate of a deceased individual. 

As of June 2025 the standard IHT rate is 40% on the value of an estate above the tax-free threshold, which is currently £325,000. There are a range of allowances and reliefs that may apply to reduce this tax. For example, a reduced IHT rate applies when you leave at least 10% of the net value of your assets to charity in your will.

Historical Application Of IHT

IHT is a tax that is imposed on the estate of a deceased individual. 

As of June 2025 the standard IHT rate is 40% on the value of an estate above the tax-free threshold, which is currently £325,000. There are a range of allowances and reliefs that may apply to reduce this tax. For example, a reduced IHT rate applies when you leave at least 10% of the net value of your assets to charity in your will.

New Changes To UK Inheritance Law

In 2025, the UK government introduced big changes to the residency and “deemed domicile” rules. These new rules focus on tax residency, and give clear, fixed timeframes that outline when an individual is liable for IHT.

When You Are Subject To The UK’s Inheritance Tax:

Under the new rules both individuals living in the UK, and individuals who have previously lived in the UK on a long-term basis, may be subject to UK IHT:

• An individual is subject to IHT after they have lived in the UK for a period of 10 years.
• Additionally, once an individual becomes liable to IHT they will continue to be subject to UK IHT for up to 10 years after leaving the UK. 

Scenario 1: Staying In The UK Long-Term

Let’s say you’re an Australian who moved to London in 2015 for work, bought a home, and are planning to retire in the UK.

• By 2025, you will now be subject to UK IHT, regardless of whether you still consider Australia your “real” home.
• If you pass away after this time, your entire worldwide estate, including your Australian property, superannuation, and other assets, may be subject to 40% UK inheritance tax above the nil-rate band.

This IHT needs to be factored into estate planning, since it could mean a significant tax cost for your heirs, especially if your estate includes illiquid assets such as property.

Scenario 2: Moving Back To Australia

Now consider someone who lived in the UK for 12 years who then returns to Australia in 2026 before passing away 4 years later in 2030. Individuals who are “based abroad” are only liable for IHT on any UK assets. 

• An individual is only considered to be based abroad if they have lived in the UK for less than 10 years in the past 20 years. This means you can still be subject to UK tax laws for 10 years after returning to Australia on a permanent basis.
• This means that if you die within that 10-year window, your worldwide assets could still fall within the UK IHT net—even if you have fully re-established life in Australia.

This is a significant shift that affects long-term Australians who think they’ve “cut ties” with the UK.

What About Australian Inheritance Tax?

Australia does not currently impose inheritance tax.

However, capital gains tax (CGT) may apply when assets are transferred upon death.

The UK-Australia Double Taxation Agreement (DTA) doesn’t eliminate IHT. It merely prevents the same assets from being taxed twice, usually using a tax credit system that ensures an individual pays no more tax than they would pay if only paying tax in the higher taxing country.

Key Takeaways For Australians

Know Your Residency Status

Even if you think of Australia as your “true” home, the UK may treat you as a resident for tax purposes based on the length of time that you live in the UK. Furthermore, you may continue to be subject to certain UK taxes, such as IHT,  for up to ten years after leaving the UK. Understanding the timeframes for when UK taxes apply is crucial for inheritance planning.

Plan Early—Before You Reach 10 Years In The UK

Consider structuring your estate and trusts before hitting that 10 year timeframe. If you are planning to return to Australia, factor in the impact of taxation requirements when making timing decisions. Early action can offer opportunities to mitigate tax costs or shield certain assets from UK IHT.

Review Your Will And Estate Plan

Having separate wills for UK and Australian assets can help ensure clarity and tax efficiency. Make plans and review them as and when timing issues create significant changes to your tax status. Be mindful of how local laws interact across jurisdictions.

Seek Specialist Cross-Border Advice

Navigating the intersection of UK IHT and Australian tax law requires tailored, up-to-date guidance. Mistakes or inaction can be very costly.

Living between two tax systems can be complicated. But with the right advice, and a proactive approach, you can reduce the cost of tax bills, making sure your legacy stays where it belongs: supporting your family.

Singapore is more than just a gateway to Asia — it’s a launchpad for international growth. With its pro-business policies, robust financial system, and strategic location, the city-state consistently attracts global firms looking to establish a regional HQ.

What often surprises newcomers is the depth of government support available. Through a wide range of grants and incentive programmes, businesses can reduce costs, build local capabilities, and accelerate their expansion journey.

Singapore’s government doesn’t just welcome international companies — it actively partners with them. These grants provide tangible financial support that reduces entry risk and accelerates scale.

Below are the key grants every international business should know when setting up in Singapore.

Market Readiness Assistance (MRA) Grant

• Purpose – Helps companies expand into new overseas markets.
• Funding – Up to 50% of eligible costs, capped at S$100,000 per market.
• Covers – Market promotion (up to S$20k), business development (up to S$50k), and market set-up (up to S$30k).
• Eligibility – Singapore-incorporated, with ≥ 30% local equity and ≤ S$100m turnover or ≤ 200 employees.
• Pro Tip – Only one activity per market per application. Apply before your project starts — at least 6 months ahead.

Enterprise Development Grant (EDG)

• Purpose – Supports capability building, productivity enhancements, and internationalisation.
• Funding – Up to 50–80% of qualifying project costs.
• Eligibility – Singapore-registered with ≥ 30% local shareholding. Projects must show clear business outcomes.
• Application Note – Projects typically run 12–18 months. A detailed proposal with measurable outcomes is key.

Tech@SG Programme (By EDB & Enterprise SG)

• Purpose – Designed for high-growth global tech companies to set up core teams in Singapore.
• Support -Eases the process of obtaining Employment Pass approvals for critical foreign talent.
• Eligibility – Selective — targeted at companies with high growth potential.

Tip: Applications go through EDB. Best suited for firms scaling regional HQ teams quickly.

Business Adaptation Grant (Launching October 2025)

• Purpose – A new initiative to help businesses tackle rising costs and global trade challenges.
• Support – Details will be announced closer to launch. Expected to run for two years.
• Next Step – Keep watch on Enterprise Singapore’s updates — early movers tend to benefit most.

Startup SG Programmes

• Startup SG Tech – Funding of S$400k–S$800k for the commercialisation of innovative tech (Proof of Concept / Proof of Value stages). Requires matching capital.
• Startup SG Founder – Provides S$20k–S$50k plus mentorship for first-time entrepreneurs launching innovative startups.

Strategic Takeaways for International Businesses

1. Structure Matters – Most grants require ≥ 30% local equity. Plan your corporate setup accordingly.  This requirement may mean finding a Singapore partner. 
2. Think In Phases – Sequence your support — build teams (Tech@SG), upgrade capabilities (EDG), then expand to new markets (MRA).
3. Capital Matching – Be prepared for matching funds when applying for innovation-heavy grants like Startup SG Tech.
4. Don’t Wait – Applications must be submitted before projects start. Timing is critical.
5. Stay Ahead Of New Schemes – The Business Adaptation Grant could be pivotal for international firms managing costs and supply chains from late 2025.