Australia Tax Guide for US Expats
This is a complete tax country guide on US expat taxes in Australia.
This guide breaks down everything you need to know, from optimizing your tax strategy to handling superannuation and franking credits, only unique to Australia.
Who needs to file US taxes from Australia?
US citizens or Green Card holders living and working in Australia who have earned income (including Australian income) reaching:
- Single (under age 65): US$15,000
- Head of Household (under age 65): US$22,500
- Married Filing Jointly: US$30,000
- Married Filing Separately: US$5 (yes, just US$5)
If you hit the amount for your filing status, then you’ll need to file a federal tax return (Form 1040) with the IRS. But don’t worry, filing doesn’t always mean you’ll owe taxes.
Head of Household vs Married Filing Separately
Not sure which filing status applies to you? Here’s how to tell if you qualify:
Head of Household
|
Married Filing Separately
|
💡 Important! You must meet all three requirements above to file as Head of Household.
At the end of the day, the Head of Household status is a better option because it offers extra tax benefits and higher deductions.
How does the US-Australia tax treaty help with double taxation?
This treaty explains which country has the right to tax your income, so it helps make sure you don’t get taxed twice. It also lets you claim benefits like the Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE).
There’s also a totalization agreement between the two countries that avoids dual social security taxation. So, you won’t pay for both Social Security (US) and Superannuation (Australia).
This applies to employees, business owners, and those who are self-employed in Australia.
What the FTC does
Most US expats in Australia no longer owe extra US taxes because the Foreign Tax Credit (FTC) gives you a dollar-for-dollar credit for taxes already paid to the Australian Tax Office (ATO).
What the FEIE does
You can exclude up to US$130,000 of your Australian income from your US tax under the Foreign Earned Income Exclusion (FEIE).
But make sure you qualify for this; you’ll either need to pass the Bona Fide Residence Test or the Physical Presence Test.
Additional Child Tax Credit for your children
Good news for expat parents! In 2025, you can refund up to US$2,000 per child under the Additional Child Tax Credit (ACTC).
If your US tax dues are low enough, this can become an actual refund, saving you real money in your pocket.
Which is better: FTC or FEIE?
Here are the main differences between the two:
FTC
|
FEIE
|
🔑 Bottom line: If you’re living in Australia, the Foreign Tax Credit is usually the smarter choice. Since Australia has higher tax rates than the US, you can use those Australian taxes to cancel out your US tax bill.
The biggest mistake Americans make when moving to Australia
The biggest mistake is not filing a US tax return just because they’re out of the country anymore or because they’re already paying Australian taxes…
The result? Many US expats are falling behind on their US tax filings, which means late fees and penalties that are just waiting for you.
But there is good news! You can get back on track without facing hefty penalties with the IRS by using the Streamlined Tax Amnesty Program.
💡 Important! In order to continue with the program, your missed tax filings must have been non-willful. This means that you didn’t know or misunderstood the rules, rather than intentionally trying to avoid paying taxes.
Download the Complete Australia Tax Guide (36 Pages of Must-Know Info)
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Should you include your non-US spouse in your tax filings?
If you are looking for extra tax benefits from including your non-US spouse, there could be some. But generally, filing separately can already bring opportunities for tax planning, and you get to leave your Aussie spouse out of the US tax exposure COMPLETELY.
Because getting them involved means that the US also has the right to tax them and that could do more harm than good.
Australians don’t file jointly even if they are married, your legal marital status won’t matter. So, it would be strange even for your Australian spouse to suddenly file a tax return with you in a country that they’re not even a citizen of.
How does the IRS treat superannuation?
Here’s what you’ll need to know…
The US doesn’t automatically see an Australian superannuation like a US retirement plan (similar to a 401(k)), which can lead to surprise taxes.
What could go wrong?
Even if the ATO gives your super account tax breaks, the IRS might still tax the money inside it, including:
- Contributions
- Growth (interest, dividends, capital gains)
- Withdrawals
So instead of helping you save on taxes, your super could end up costing you more on your US tax return.
Here are two common ways the IRS might treat your superannuation:
Scenario 1: Corporate super fund
This type of fund is set up by your employer, who also contributes to it, kind of like a US 401(k).
Since this structure is familiar to the IRS, taxes are usually deferred until you withdraw the money.
Scenario 2: Self-Managed Super Fund (SMSF)
An SMSF gives you full control over your retirement investments.
Because of that control, the IRS treats it as a Foreign Grantor Trust, which means all income inside the fund is taxable, and you’ll need to report it annually on Form 3520 and 3520-A.
What can you do?
Start by knowing exactly what type of super fund you have and what your reporting obligations are.
For the best outcome, speak with a US expat tax professional who understands how superannuation is taxed under both systems.
Should you file an FBAR?
Filing an FBAR is separate from filing a US tax return, but just as important.
Look closely at whether you should file one or not, because failing to do so could cost you an upfront penalty of more than US$10,000.
🔑 Bottom line: If the combined value of all your foreign accounts is over US$10,000 at any point during the year, you will need to file the FBAR. (even if none of the individual accounts reach US$10K.)
What’s a common mistake regarding FBAR filing?
Many US expats tend to underestimate the FBAR threshold. They assume they don’t need to file an FBAR because they believe only bank accounts count toward the US$10,000 threshold.
But that’s not true.
Here’s a quick example:
- Checking account: US$4,000
- Savings account: US$6,000
- Superannuation fund: US$20,000
Some people think only the checking + savings = US$10,000 matters. But the super fund also counts, bringing your total to US$30,000.
Filing Form 8938
What it is
This form lets you report any income from foreign accounts (like dividends or interests) in your US tax return.
This is different from FBAR.
Form 8938 is under FATCA, a law that requires specific institutions like your Australian bank to report your financial data to the IRS.
Is it mandatory to file Form 8938?
Not necessarily. Form 8938 has a set of thresholds related to your residency and filing status to determine if you will need to include this on your US tax return.
Make US taxes easier while living in Australia
Let our tax specialists guide you throughout the process.
Capital gains on Australian properties
If you plan to sell a property in Australia, you may have heard about the exemption for Australians on selling their main home.
But the US doesn’t follow the same rule. So, even if you are exempt from Capital Gains Tax in Australia, you could have a tax bill if your gains exceed:
- US$250,000 for single filers
- US$500,000 for married filing jointly
Capital gains on stocks
The very important thing to consider is timing.
If you bought stocks before you moved to Australia, the ATO can treat the value of those stocks as whatever they were worth on the day you became a tax resident, not what you originally paid.
So, imagine if the stocks grow in value after you move, then only that growth may be taxed in Australia, not the full gain from when you first bought them.
Of course, if you’re a temporary resident, you might not owe any Australian tax on your stocks.
Franking credits explained
What it is
In Australia, companies often pay tax on profits before issuing dividends. To avoid double taxation, shareholders receive “franking credits” alongside the dividends. A credit for the tax the company already paid.
What does it mean in the US?
The IRS doesn’t recognize franking credits. For US tax purposes, only the cash dividend is considered taxable income, and the franking credit is disregarded.
What can you do?
Instead of reporting the whole dividend amount with the attached franking credit, you just need to report the amount you ONLY received as dividends.
Holding local funds in Australia
If you’re a US citizen in Australia and invest in local funds like unit trusts or mutual funds, here’s a problem you might encounter.
The IRS treats these funds as PFICs (Passive Foreign Investment Companies). They can cause nasty US tax problems like:
- Being taxed at the highest possible rate on gains
- Owing interest charges, even if you haven’t sold or withdrawn anything
What can you do?
There are ways to mitigate the harsh tax bills by:
- QEF election: This tells the IRS you’ll pay US tax on the fund’s income yearly.
- Mark-to-market election: This will treat the fund as if it’s sold every year, so you pay tax on the gain annually.
However, these treatments must be filed correctly and on time, so it’s best to work with a US tax expert.
Owning a Pty Ltd in Australia
What it is
A Pty Ltd or Proprietary Limited company is a private company structure with limited liability, similar to some private corporations in the US.
The unique thing about limited liability is that if the company gets into debt or legal trouble, the owners aren’t personally responsible, they only lose what they put into the business.
What does it mean in the US?
Owning a Pty Ltd means there are additional requirements and filings on your US tax return, like:
- Form 5471: For shareholders owning 10% or more of the company.
- Controlled Foreign Corporation (CFC): For shareholders owning 50% or more of the company. This requires extensive reporting and potential tax bills.
- Form 8858: For companies treated as a foreign disregarded entity or foreign branch.
What can you do?
- Work with a tax advisor who understands both the US and Australian systems.
- Master how to structure your business, meet filing requirements, and avoid costly surprises.
Getting ready to file your US taxes from Australia?
There’s a lot to consider, but don’t worry! We’ve got you covered.
Download our FREE US Tax Guide for Americans in Australia: A more in-depth guide to taxes for US expats in Australia. This will help you understand what to file, when, and how to stay compliant with the IRS.
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Want to file your US taxes with a professional?
You can book a free consultation with one of our US expat tax specialists. We’ll help you successfully file your US taxes in Australia.
We can also tackle the tricky stuff like superannuation, franking credits, and more.
Andrew Landin
Tax Lawyer
Director | Tax
22 years Experience
30-minutes US$497.
Seth Hertz
Enrolled Agent
Director | Tax
34 years of Expat Tax Experience
30-minutes US$437.
Nick Wee
Enrolled Agent
Director | Tax
18 years of Expat Tax Experience
30-minutes US$437.
Jonathan Rose
Senior Manager | Tax
18 years of Expat Tax Experience
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Johenzon Febb Borje
Senior Manager | Tax
11 years of Expat Tax Experience
30-minutes US$347.
Depending on the chosen tax contact, the price may increase.