Living in Australia as an American comes with sunshine, flat whites, and a tax filing puzzle that many don’t expect. Even though you’ve packed up your life and moved thousands of miles away, Uncle Sam still wants a word…especially during tax season.
This manual will dissect all you should know concerning US expat tax in Australia, from what has to be filed to how not to double tax, to what mistakes expats often make.
Why expats in Australia still need to file US taxes
The US is actually one of the only nations that taxes on a citizenship, rather than residency basis. This implies that, if you’re an Australian resident who’s a US citizen or has a Green Card, you’ll have to file a US tax return annually (even if you had no income in the US at all).
You’re also likely required to file a tax return with the Australian Taxation Office (ATO), making it a dual filing responsibility that can easily get complicated.
Common filing requirements for US expats in Australia
Here are the key US tax obligations that apply to most Americans living Down Under:
1. Federal Tax Return (Form 1040)
You must report worldwide income, including wages, self-employment earnings, investment income, and even Australian superannuation.
Here’s the filing deadline:
- April 15 – Normal deadline for US citizens
- June 15 – Automatic extension for US expats
- October 15 – Additional extension for US expats (Upon request using Form 4868)
2. Foreign Bank Account Report (FBAR)
If the foreign account balance is over US$10,000 at any point in the year, you must report through an FBAR using FinCEN Form 114. If you have multiple accounts, then the aggregate balance will be required.
3. Form 8938 (FATCA reporting)
Form 8938 is required if your foreign financial assets are more than:
- US$200,000 for single filers overseas
- US$400,000 for married filing joint overseas
4. State Tax Returns
Even in Australia, you might still have to pay state taxes based on your US previous residency and connections.
Australian tax requirements for US expats
Expats must also abide by Australian tax requirements in case they’re tax residents. This typically entails:
- Reporting worldwide income to the ATO
- Reporting income tax on a sliding scale
- Reporting capital gain and investment income
- Contributions and income in superannuation, which enjoys a special treatment
Common issues and how to fix them
Issue 1: Double Taxation Concerns
Solution:
Employ the Foreign Earned Income Exclusion (FEIE) on Form 2555 to exclude foreign income up to Us$120,000+. Alternatively, use the Foreign Tax Credit (FTC) on Form 1116 to balance US tax against Australian taxes paid. The majority of expats in Australia are better off with the FTC because of Australia’s increased tax rates.
Issue 2: Superannuation Misconceptions
Solution:
Super accounts are not well dealt with by the IRS. Some expats handle them as foreign trusts, which may invite complex reporting. Seek professional guidance before taking super as tax-free in the US
Issue 3: Missing Deadlines and Penalties
Solution:
Employ expat-friendly tax software or engage a professional tax consultant who is well-versed in expats filing taxes in Australia. Being late could involve heavy penalties, particularly for omitted FBARs.
Personal Experience: What I Discovered Filing as a US Expatriate in Australia
I figured my US tax responsibilities would vanish when I relocated to Melbourne. What a blunder. Twelve months later, I was introduced to the FBAR, Form 8938, and the terminology “foreign tax credits.” It was daunting.
What did work? Engaging a tax professional who really knew both systems. It was expensive, but it prevented me from incurring penalties and a potential audit. I have learned the hard way that expat taxation in Australia is not something you wish to “wing.”
PAA (People Also Ask)
Do US expats residing in Australia need to file taxes in the US?
Yes. Americans will have to file with the IRS, wherever they live, each tax year.
What is the US-Australia tax treaty?
The US-Australia tax treaty is a vehicle for US citizens residing in Australia to avoid double taxation between nations. The treaty addresses which nation has the authority to tax you on your income.
Can you get around paying US taxes if you reside in Australia?
It is dependent on your circumstances. Some individuals do not entirely get out of paying US taxes, but you can eliminate or decrease your US tax liability through the Foreign Tax Credit or the Foreign Earned Income Exclusion.
Is Australian superannuation tax in the US?
It also varies depending on how it’s set up and what it’s read. The IRS hasn’t given clear-cut guidance, so a lot of Americans turn to advice to prevent errors in filings.
FAQs
Do I need to hire someone to help me file my expat tax return, or can I do it myself?
If your situation is straightforward, expat filing software may be enough. But if you have investments, a super fund, or run a business, it’s wise to use professional assistance.
What if I haven’t filed for years?
You might qualify for the Streamlined Filing Compliance Procedures, which allows you to catch up penalty-free.
Do I have to file FBAR and FATCA forms yearly?
Yes, if you’re above the thresholds. These are in addition to your Form 1040 and have different due dates.
Final Thoughts
American expats in Australia frequently underestimate their filing obligations. New to Australia or been here for some time, it’s a good idea to go over your US tax commitments every year.
With the proper techniques, such as applying foreign tax credits and avoiding the reporting pitfalls. You can be compliant without overpaying.
If you don’t know where to begin, consult a tax expert specializing in US expat tax Australia. The earlier you get your filings organized, the simpler it is each year.
