US Expat Taxes in Australia

Tax Treaty Information

Applying the US–Australia Treaty

For an individual resident in both countries under Article 4, assess permanent home, then habitual abode, then closer personal and economic relations, in that order. Article 4(3) directs consideration of the family dwelling for permanent home and citizenship for closer relations. The treaty does not place closer relations before habitual abode or add nationality as a fourth test. The Article 1 saving clause and its express exceptions must still be considered for a US citizen who is a treaty resident of Australia.

FBAR & FATCA Requirements

FBAR and Form 8938 are separate reporting obligations. A US person generally files FinCEN Form 114 when foreign financial accounts in which they have a financial interest or signature authority exceed USD 10,000 in aggregate at any time during the calendar year, subject to exceptions. Review bank and custodial accounts, foreign mutual funds and cash-value insurance accounts. Reportable accounts are generally reported as accounts rather than by listing every security inside them. File the FBAR separately with FinCEN; filing Form 8938 does not replace it. Do not assume every Australian crypto exchange account is FBAR-reportable. FinCEN Notice 2020-2 distinguishes accounts holding only virtual currency from accounts that also hold otherwise reportable assets. Check the applicable rules and what the account actually holds; this FBAR distinction does not determine other tax or information-return obligations. For Form 8938, the higher overseas thresholds require a foreign tax home and the applicable presence-abroad test. The thresholds are more than USD 200,000 at year-end or USD 300,000 at any time for unmarried or married-separate filers, and more than USD 400,000 or USD 600,000 respectively for a joint return. If no income tax return is required, Form 8938 is not required solely because the assets exceed those thresholds. Filing-status, ownership, valuation and reporting exceptions still apply. An interest in a foreign pension or deferred compensation plan is addressed by the Form 8938 instructions; report the plan interest rather than separately listing its underlying assets on that form. Review a superannuation account’s structure, ownership and authority separately for FBAR purposes. The rules for foreign government Social Security-type benefits differ from those for private pension plans. Australia’s FATCA agreement was signed on April 28, 2014, and entered into force on June 30, 2014. Institutional FATCA arrangements and an individual’s own FBAR and Form 8938 requirements are distinct; determine each individual filing requirement from the relevant instructions.

Foreign Earned Income Exclusion (FEIE)

For tax year 2026, the Foreign Earned Income Exclusion (FEIE) has a maximum of USD 132,900 per qualifying person, limited by eligible foreign earned income and adjusted for a partial qualifying year. You must have a foreign tax home and meet the applicable bona fide residence or physical presence test. For a US citizen, the residence test requires an uninterrupted foreign residence period including an entire tax year; the physical presence test requires at least 330 full days in foreign countries during a consecutive 12-month period. Use Form 2555 to claim the exclusion; living in Australia alone does not establish eligibility. A foreign housing exclusion or deduction also requires eligibility and qualifying expenses. The exclusion applies to employer-provided amounts, including qualifying taxable wages; the deduction applies to self-employment earnings. The base amount is calculated using 16% of the annual FEIE maximum and qualifying days. Expenses are subject to limits that depend on location and the applicable year. The cost of buying a home is not an eligible housing expense. Compare the FEIE and Foreign Tax Credit using the actual return rather than a salary cutoff. Foreign tax credits require qualifying taxes and are limited by the US tax on the relevant foreign-source income category. Taxes attributable to income excluded under the FEIE or housing exclusion cannot also produce a credit. The FEIE itself does not reduce self-employment tax. After revocation, choosing the same exclusion again within five tax years requires IRS approval. For a US calendar-year filer, reconcile income and tax records to January through December. Cash-basis income is generally reported when received, while FEIE allocation can also depend on when the services were performed. Cash-basis taxpayers generally claim foreign tax credits when the taxes are paid unless they elect the accrual method; that election applies to future returns. FEIE proration follows qualifying days, not simply the difference between Australian and US tax-year dates. SSA states that self-employed US citizens residing in Australia are exempt from US Social Security contributions on their self-employment income. Australia’s SG program does not compulsorily cover self-employment. SSA provides an exemption-letter procedure and instructs eligible taxpayers to attach the letter to their US income tax return each year.

Common Tax Issues in Australia

• 1From July 1, 2026, the ATO’s Payday Super guidance calculates SG at 12% of qualifying earnings and requires contributions to be paid on payday and received by the fund within seven business days, unless an extended timeframe applies. Australian contribution rules do not establish the US tax treatment of every superannuation arrangement. Review contributions and distributions separately, including the plan terms, US tax basis and applicable treaty provisions.
• 2PFIC reporting for investments held through a superannuation arrangement depends on US entity classification, direct or indirect ownership and applicable exceptions. The Form 8621 instructions include limited exceptions for certain treaty pension arrangements; this does not establish that every Australian super fund qualifies. Do not assume every investment option automatically requires a separate Form 8621.
• 3Foreign-trust information reporting depends on the arrangement and the individual’s ownership or transactions. The Form 3520 instructions include exceptions for specified compensatory arrangements and eligible tax-favored foreign trusts; an exception must be established, not assumed from the label “superannuation.” Penalties depend on the reporting failure and applicable rules, including reasonable cause. An exception from trust reporting does not automatically remove FBAR, Form 8938 or income-tax obligations.
• 4An Australian fund’s US tax classification must be established before applying the PFIC tests to a foreign corporation. Form 8621 filing, QEF treatment and mark-to-market treatment have separate conditions and exceptions. Review the fund documents and existing elections before selecting a tax treatment.
• 5Franking credits allocate Australian company tax to shareholders through the imputation system. Australian offsets and refunds have eligibility and integrity conditions. For a US foreign tax credit, separately identify tax legally imposed on you and paid or accrued by you; a franking-credit entry alone does not establish eligibility. Keep the dividend statement, any withholding and refund records, and the Australian assessment for review.
• 6The Medicare levy is generally 2% of taxable income, with reductions and exemptions. The separate Medicare levy surcharge depends on income for surcharge purposes, family circumstances and eligible hospital cover. For July 1, 2026–June 30, 2027, the base thresholds are AUD 105,000 for singles and AUD 210,000 for families, with AUD 1,500 added for each dependent child after the first. US foreign-tax-credit eligibility requires a separate review; do not assume either charge is creditable solely because Australia collects it with income tax.
• 7HELP repayments remain relevant when a borrower moves overseas. For 2026–27, compulsory repayments start above repayment income of AUD 69,528; use that year’s marginal repayment calculation. A borrower planning to be overseas for at least 183 days in any 12-month period must notify the ATO. Keep HELP repayment records separate from income-tax assessments.
• 8Australian CGT depends on the event date, asset and residence history. Before July 1, 2027, eligible resident individuals can generally use the 50% discount after the required holding period. Foreign or temporary residence after May 8, 2012 can reduce the discount; Australian-resident periods and pre-May 2012 ownership can matter. The Tax Reform No. 1 Act 2026 changes the rules for events from July 1, 2027, with transition provisions and exceptions for qualifying new dwellings and affordable housing. That date is not a blanket grace period for foreign residents. Calculate US gains separately using US adjusted-basis and holding-period rules.
• 9Australia’s July–June tax year differs from the US calendar year. Reconcile income, withholding and tax-payment records for the applicable US year rather than splitting every Australian annual total equally. Foreign tax credit timing depends on the paid or accrued method, while FEIE limits depend on qualifying income and qualifying days.
• 10US rental activities are generally passive, so losses may be limited even when the Australian return permits a deduction. A qualifying real estate professional must also materially participate for the relevant rental activity to be nonpassive. Separately, active participation can qualify for a limited rental-real-estate loss allowance, subject to income, ownership and filing-status conditions. Check the at-risk and other applicable loss limitations as well; real estate professional status is not the only possible exception. Australia also has enacted residential-rental deduction restrictions from 2027–28. Subject to exceptions, excess deductions are quarantined, may offset specified capital gains and can carry forward. Exceptions include qualifying new dwellings and ownership interests last acquired before 7:30 pm ACT time on May 12, 2026; contract timing and the statutory conditions matter. Confirm the property’s treatment in each country before assuming a rental loss offsets other income.
• 11Use the rate table for the year being filed. The standard resident marginal rate above the tax-free threshold and up to AUD 45,000 is 16% for 2025–26, 15% for 2026–27 and 14% from 2027–28. A rate change alone does not establish your final tax bill or US foreign tax credit; those require your income, deductions and applicable credit rules.
• 12A Tax File Number identifies you for Australian tax and superannuation purposes. Quoting it to an authorised recipient is not compulsory, but not providing it can have financial consequences, including higher withholding. Use the government’s TFN guidance to find your existing number or the appropriate application route; do not treat it as a general identity number.

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Frequently Asked Questions: US Taxes in Australia

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