US Taxes for Americans Living in Australia
Australia is a popular destination for US expats, offering a high quality of life, and a reasonably high tax burden. The Australian Tax Office (ATO) and the IRS both need to be satisfied, but the US-Australia tax treaty and Foreign Tax Credit framework keep most expats from paying double. The unique complexity lies in Australian superannuation accounts and how they interact with US reporting requirements.
Local tax authority
The US-Australia tax treaty (1982, amended 2001) covers income tax, withholding on dividends and interest, pensions, and capital gains. Australia imposes dividend withholding at 15% under treaty (vs 30% statutory). The treaty includes a Saving Clause for US citizens.
Australia-specific complexities
- Australian superannuation is subject to complex US reporting, it's not treaty-protected like a pension in most treaty countries
- Australian financial year runs 1 July to 30 June, mismatching with the US calendar year creates exchange-rate complexity
- Australian CGT discount (50% for assets held over 12 months) doesn't translate to US CGT treatment
- FBAR applies to all Australian bank accounts and super funds above $10,000
- Medicare Levy Surcharge may create FTC complications
What's different about filing from Australia
Australian superannuation and US reporting
Australian superannuation (super) funds are not explicitly recognized as pension plans under the US-Australia treaty, unlike Canadian RRSPs or UK pensions which have specific treaty provisions. Super contributions, investment growth, and distributions may all be taxable to US persons on a current basis. This is one of the most complex areas for US expats in Australia, and professional advice is strongly recommended.
Australian tax year vs US tax year
Australia's tax year runs 1 July to 30 June, while the US uses a calendar year (January to December). This mismatch means your Australian income needs to be allocated between two different US tax years, and Australian taxes paid need to be carefully attributed to the correct US tax period for FTC purposes.
FEIE vs FTC for Australian income
Australia's top marginal tax rate (45% plus 2% Medicare Levy) substantially exceeds US rates for most income levels. The Foreign Tax Credit generally eliminates US tax on Australian-source income at most income levels. Using FEIE instead could result in a worse outcome, and locking into the 5-year revocation bar if you later move to a lower-tax country.
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Frequently asked questions about US taxes in Australia
Do I need to report my Australian super fund to the IRS?
Yes. Australian super funds likely require reporting on FBAR (if the balance exceeds $10,000 threshold when aggregated with other foreign accounts), and potentially on Form 8938 (FATCA). The tax treatment of super earnings is complex, consult with a professional.
What is the FEIE limit for 2024?
$126,500 for tax year 2024 (filed in 2025). However, for most US expats in Australia, the Foreign Tax Credit is the better choice than FEIE because Australian tax rates are high enough to fully offset US liability.
How does the Australian dividend imputation (franking credits) work for US persons?
Australia has a dividend imputation system where Australian companies pay dividends with attached franking credits (representing corporate tax already paid). US persons can use Australian withholding tax as FTC, but franking credits are not creditable for US purposes, they're an Australian domestic tax mechanism.
I have Australian rental property, how is it taxed in the US?
Australian rental income must be reported on your US return (Schedule E). Australian taxes paid on rental income are creditable via FTC (passive income basket). Australian capital gains on the property (if sold) are also reportable in the US, though the 50% CGT discount doesn't apply for US purposes.