US and Australian Tax Residency: How Both Systems Apply
US Citizenship-Based Taxation
The United States taxes are based on citizenship, not location. A US citizen living in Sydney for 20 years still owes annual IRS filings. This applies to:
- US citizens
- Green card holders (lawful permanent residents)
Moving to Australia does not suspend, reduce, or replace this obligation.
Australian Tax Residency Rules
Australia’s taxes are based on residency. The Australian Taxation Office (ATO) uses several tests to determine if someone qualifies:
Resides test— ongoing physical presence in Australia
Domicile test— permanent home is in Australia
183-day test— physically present for more than half the tax year
Superannuation test— applies to government employees
Once classified as an Australian tax resident, individuals must declare both Australian and overseas income to the ATO.
Becoming an Australian tax resident does not replace, reduce, or override US tax obligations. Both systems apply at the same time. An American in Australia is simultaneously subject to IRS filing requirements and ATO reporting obligations.
How Australia’s Tax System Works
Australia’s tax system is administered by the ATO and operates on a July 1 – June 30 tax year. Employers withhold income tax through the Pay As You Go (PAYG) system, remitting it to the ATO on each pay cycle.
Australian Income Tax Rates (2025–2026)
| Income Range (AUD) | Tax Rate |
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Additional Australian Taxes
| Tax | What It Covers |
| Medicare Levy | 2% of taxable income; funds Australia's public healthcare system |
| Capital Gains Tax (CGT) | Applied to profits from selling assets; included in individual income tax |
| Superannuation | Mandatory employer contributions (currently 12%) into retirement accounts |
Superannuation: What Americans Must Know
Superannuation is Australia’s mandatory retirement savings system, and it is one of the most misunderstood areas of US expat taxation.
Unlike a US 401(k) or IRA, superannuation does not automatically receive tax-deferred treatment under US law.
How Superannuation Works in Australia
Employers are legally required to contribute a percentage of an employee’s ordinary time earnings into a superannuation fund. The Superannuation Guarantee rate is currently 12%, effective from 1 July 2025.
Funds invest contributions in diversified portfolios, and earnings grow within the fund. Withdrawals are generally available from age 60 (for those born after 30 June 1964) and are tax-free under Australian law.
How the IRS Treats Superannuation
The IRS has not issued definitive guidance classifying superannuation as a tax-deferred retirement plan. As a result:
- Employer contributions may be taxable to the employee as current income in the year contributed
- Earnings within the fund may need to be recognized annually rather than deferred
- The US–Australia Tax Treaty offers some relief, but its application to super is interpreted differently by different tax professionals
Super vs. US Retirement Accounts
| Feature | Superannuation | US 401(k) / IRA |
| Mandatory | Yes (employer-funded) | No |
| IRS tax deferral | Unclear / not guaranteed | Yes |
| Treaty protection | Partial and contested | N/A |
| Reporting complexity | High | Low |
| FBAR / FATCA reporting | Yes | No |
Unlike a US 401(k) or IRA, superannuation does not automatically receive tax-deferred treatment under US law. Contributions and earnings inside the fund may be subject to current US taxation rather than being deferred until withdrawal, which can result in unexpected tax bills and additional reporting obligations if foreign tax credits are not properly applied.
Where to Report Superannuation on US Tax Returns
Depending on interpretation and fund structure, super may require reporting across multiple forms:
| Form | Purpose |
| Form 1040 | Report super earnings as income if not treaty-protected |
| Form 8833 | Treaty-based return position (if claiming treaty protection) |
| FinCEN 114 (FBAR) | Required if super fund balance exceeds $10,000 at any point |
| Form 8938 (FATCA) | Required if super balance exceeds FATCA thresholds |
| Form 3520 / 3520-A | Required for Self-Managed Super Funds (see below) |
Self-Managed Superannuation Funds (SMSFs) and IRS Form 3520
A Self-Managed Super Fund (SMSF) is a private superannuation fund that individuals control themselves, with up to six members serving as their own trustees. SMSFs are popular in Australia for the flexibility they offer, but they create significant US tax complexity.
IRS Classification of SMSFs
The IRS treats an SMSF as a foreign trust rather than a retirement account. This classification triggers reporting requirements under the foreign trust rules, not the retirement plan rules.
SMSF Reporting Requirements
Because an SMSF is a foreign trust for US purposes, the following forms apply:
| Form | When Required | What It Reports |
| Form 3520 | When a US person receives a distribution from a foreign trust, or makes a contribution to one | Distributions, contributions, and foreign trust transactions |
| Form 3520-A | Annually, if the US person is treated as the owner of the foreign trust | Annual information return for the trust — income, assets, beneficiaries |
American Expat Living in Australia?
Living in Australia doesn’t make your US tax obligations disappear. Navigating both tax systems, managing different deadlines, and making sense of a treaty that offers less relief than many expect can be overwhelming.
Penalties for SMSF Non-Compliance
Failure to file Forms 3520 and 3520-A carries severe penalties:
- Form 3520: The greater of $10,000 or 35% of the gross reportable amount
- Form 3520-A: The greater of $10,000 or 5% of the gross value of trust assets
These penalties apply per year per form. Americans with SMSFs who are not currently filing these forms should seek compliance advice urgently.
An SMSF is not treated as a retirement account by the IRS, it is treated as a foreign trust. This distinction changes everything about how it is reported and taxed under US law. The retirement account rules that apply to a standard super fund do not carry over to an SMSF for US purposes.
Key SMSF Considerations
- Each year the SMSF exists, Form 3520-A must be filed
- Contributions made to the SMSF by a US person trigger Form 3520 reporting
- Investment income earned inside the SMSF may be taxable in the US currently
- PFIC rules may apply to assets held inside the SMSF (see below)
How Australian Investments Are Taxed by the IRS
Many standard Australian investment products, including those widely used by locals, are classified as Passive Foreign Investment Companies (PFICs) under US tax law. This is one of the most consequential issues for US expats investing in Australia.
What is a PFIC?
A PFIC is a foreign corporation that meets either:
- Income test: At least 75% of gross income is passive (interest, dividends, rents, gains)
- Asset test: At least 50% of assets produce or are held to produce passive income
Common Australian Investments That Trigger PFIC Rules
| Investment Type | PFIC Status |
| Australian managed funds | Typically yes |
| Exchange-Traded Funds (ETFs) on the ASX | Often yes |
| Pooled investment vehicles | Typically yes |
| Direct Australian shares | No |
| Australian investment property | No |
| Term deposits (bank accounts) | No |
PFIC Tax Treatment
PFICs are subject to a punitive default tax regime:
- Gains on sale and excess distributions are taxed at ordinary income rates (not capital gains rates)
- An interest charge is added going back to when the PFIC was first held
- No preferential long-term capital gains treatment applies
PFIC Reporting
| Form | Purpose |
| Form 8621 | Required annually for each PFIC held; reports income, distributions, elections, and tax calculations |
Unsure if your Australian investments are PFICs?
PFIC rules are complex, and penalties add up fast. Our CPAs specialize in PFIC reporting for US expats, keeping you compliant with confidence.
Foreign Tax Credits: The Primary Tool for Avoiding Double Tax
For most Americans in Australia, the Foreign Tax Credit (FTC) is the most effective mechanism for eliminating US tax liability on Australian-sourced income.
Why the FTC Works Well in Australia
Australia’s income tax rates are comparable to or higher than US rates at similar income levels. This means the Australian tax paid typically equals or exceeds the US tax owed on the same income, resulting in a full offset and no additional US tax due.
The FTC applies broadly, earned income, investment income, and rental income, with excess credits carried forward for up to 10 years. The FEIE only covers earned income, making it the weaker choice for most Americans in Australia. It can apply in low-tax situations, but those are uncommon here.
Where the choice has a real impact is the Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC). Claiming the FEIE reduces US taxable income, which can limit or eliminate CTC eligibility. Switching to the FTC instead keeps US taxable income intact, which can unlock the CTC and, for families who qualify, the refundable portion known as the ACTC.
The ACTC can result in a refund of up to $1,700 per child even if no US tax is owed, making it one of the most valuable and overlooked benefits for American parents living in Australia.
FTC vs. Foreign Earned Income Exclusion (FEIE)
| Feature | FTC | FEIE |
| Earned income | Yes | Yes |
| Investment income | Yes | No |
| Rental income | Yes | No |
| Carryforward of excess credit | Yes (10 years) | No |
| Preserve Child Tax Credit | Yes | Can reduce or eliminate eligibility |
US Tax Filing Requirements for Americans in Australia
Filing US taxes from Australia isn’t just about submitting a Form 1040. Depending on your financial situation, bank accounts, investments, superannuation, or business interests, you may have several additional reporting obligations.
Missing these forms can trigger significant penalties, even if no tax is owed.
Annual Filing Requirements
| Form | Description | Who Must File |
| Form 1040 | US individual income tax return | All US citizens / green card holders above threshold |
| FinCEN 114 (FBAR) | Foreign Bank Account Report | US persons with foreign accounts exceeding $10,000 |
| Form 8938 (FATCA) | Foreign financial asset statement | Single filers abroad with assets over $200,000 at year-end |
| Form 8621 | PFIC annual reporting | Anyone holding a PFIC investment |
| Form 8833 | Treaty-based return position | Anyone claiming treaty benefits (e.g., on superannuation) |
| Form 3520 | Foreign trust transactions | US persons with SMSF transactions |
| Form 3520-A | Annual foreign trust information return | US persons who own or control an SMSF |
| Form 5471 | Foreign corporation ownership | US persons with 10%+ ownership in an Australian company |
| Form 8865 | Foreign partnership reporting | US persons with interests in Australian partnerships |
Not Sure Which US Forms to File in Australia?
Missing a required form can trigger significant penalties, even if no tax is owed. Our CPAs know exactly what’s required, from bank accounts and super to business interests.
FBAR and FATCA Thresholds
| Requirement | Threshold (Single Filers Living Abroad) | Filed With |
| FBAR (FinCEN 114) | 1$10,000 aggregate at any point during the year | FinCEN (separate from tax return) |
| FATCA (Form 8938) | $200,000 at year-end or $300,000 at any point | IRS (with Form 1040) |
FBAR and FATCA are entirely separate requirements filed with different agencies. Filing one does not satisfy the obligation of the other. Failure to comply with either can result in significant penalties, accurate and timely reporting of both is essential.
Navigating the US-AU Tax Year Mismatch
One of the practical challenges of US–Australia dual filing is the difference in tax years.
| Country | Tax Year |
| United States | January 1 – December 31 |
| Australia | July 1 – June 30 |
File a US extension — requesting an extension to October 15 gives additional time for Australian figures to finalize.
Use estimated FTCs — some expats file using estimated Australian tax figures and amend later if needed. This is a valid approach but adds administrative burden.
Foreign Account Reporting: FBAR and FATCA in Australia
Americans in Australia almost always have reportable foreign accounts. Bank accounts, superannuation funds, investment accounts, and offset accounts may all need to be disclosed.
FBAR (FinCEN Form 114)
- Required if the aggregate balance of all foreign accounts exceeds $10,000 at any point during the calendar year
- Includes: Australian bank accounts, superannuation accounts, brokerage accounts
- Filed electronically with the FinCen (not the IRS)
- Deadline: April 15, with automatic extension to October 15
FATCA (Form 8938)
- Filed as part of Form 1040 with the IRS
- Higher thresholds than FBAR, but covers a broader range of assets including foreign investment interests and certain ownership interests in foreign entities
- Applies to: bank accounts, super, managed funds, and more
Penalties for Non-Compliance
| Violation | Potential Penalty |
| Non-willful FBAR failure | Up to $10,000 per violation |
| Willful FBAR failure | Greater of $100,000 or 50% of account value per violation |
| FATCA non-disclosure | $10,000 initial penalty; up to $50,000 for continued failure |
Unsure What to Disclose?
FBAR and FATCA rules catch more Americans in Australia than most expect. Our CPAs will review your accounts and make sure every required disclosure is filed correctly and on time.
Self-Employment and Business Ownership in Australia
Americans who operate a business in Australia, whether as a sole trader, through an Australian company, or as part of a partnership, face additional IRS reporting obligations.
Australian Business Structures and their US Reporting Requirements
| Business Structure | Australian Tax | US Reporting |
| Sole trader | Personal income tax via ATO | Report income on Schedule C (Form 1040) |
| Australian Pty Ltd | Company tax (30% or 25%) | Form 5471 if 10%+ ownership |
| Partnership | Pass-through to partners | Form 8865 |
Self-Employment Tax Note
US citizens operating as sole traders in Australia may still owe US self-employment tax (Social Security and Medicare), even if they pay Australian payroll-equivalent taxes.
The US–Australia Totalization Agreement addresses this for employees but has limited application for self-employed individuals, an area worth professional review.
Australian Documents Needed to File your US Tax Return
| Document | Source | Purpose |
| PAYG Payment Summary / Income Statement | Employer / myGov | Employment income and withheld tax for Australian filing |
| Notice of Assessment | ATO | Official confirmation of Australian tax liability; used to calculate FTCs |
| Superannuation Statements | Super fund | Balance reporting (FBAR, FATCA) and income recognition |
| Bank Statements | Australian banks | FBAR aggregate balance verification |
| Investment Reports | Broker / fund manager | PFIC analysis, capital gains, dividend income |
| SMSF Financial Statements | SMSF auditor | Form 3520 / 3520-A reporting |
Catching Up on Unfiled US Returns
It is common for Americans who move to Australia to stop filing US returns, often without realizing they are still required to. The IRS offers formal procedures for catching up.
Streamlined Filing Compliance Procedures
If you’re behind on US taxes, you’re not alone, and there’s a formal IRS program designed specifically for expats in your situation.
The Streamlined Filing Compliance Procedures offer a penalty-free path back into compliance for Americans who missed their filing obligations due to genuine unawareness, not deliberate avoidance.
For Americans living in Australia, the relevant program is the Streamlined Foreign Offshore Procedures (SFOP).
To qualify, you must file 3 years of back tax returns, 6 years of FBARs, and submit a non-willfulness certification explaining why you didn’t file. If accepted, no penalties apply, including no FBAR penalties, which can otherwise be severe.
Depending on your financial situation in Australia, your streamlined submission may also need to include:
Form 3520 and 3520-A— if you hold or have transacted through a Self-Managed Super Fund (SMSF), which the IRS treats as a foreign trust
Form 8621— for each year you held Australian managed funds or other investments classified as PFICs
Form 5471— if you owned 10% or more of an Australian company during the non-filing period
Eligibility depends on your conduct being classified as non-willful. If you were aware of your filing obligations and chose not to comply, you may not qualify and should seek legal advice before submitting anything to the IRS.
Behind Your US Tax Returns?
Many expats fall behind on filings after moving to Australia, and the IRS has programs designed for exactly that. Our CPAs will guide you through the Streamlined Filing Compliance Procedures and get you back on track.
US Expat Tax Services in Australia
Most general tax preparers, whether in the US or Australia, are not set up to handle the overlap between these two systems in a practical way.
In Australia, accountants typically focus on local compliance through the Australian Taxation Office (ATO), including PAYG income, capital gains, and superannuation. However, they generally do not deal with US filings such as Form 1040, FBAR, or FATCA reporting.
On the US side, many preparers are unfamiliar with how Australian income is structured, particularly salary packaging, super contributions, or the timing differences between tax years. This often leads to misreporting, missed foreign tax credits, or confusion around how Australian income translates into US terms.
For Americans living and working in Australia, this disconnect can result in unnecessary tax exposure, reporting errors, or compliance gaps that go unnoticed for years.
Universal Tax Professionals: US–Australia Expat Tax Specialists
Universal Tax Professionals focuses on helping Americans abroad manage their US tax obligations while living in countries like Australia.
For expats in Australia, this means dealing with real-world issues such as aligning PAYG income with US reporting, handling superannuation correctly, and coordinating foreign tax credits across two different tax years.
Rather than treating these as occasional cases, the firm works with these cross-border scenarios as a core part of its practice. This allows for a more practical, experience-based approach to compliance.
What Makes Universal Tax Professionals Different
Built for Americans Actually Living Abroad
Universal Tax Professionals works exclusively with US expats, not occasional travelers or part-year filers.
Every advisor on the team understands what it means to live and work in Australia full-time, which means your return is handled by someone who already knows the tax landscape you are operating in.
Clear Handling of Australian Income and Super
Australian income structures, such as PAYG withholding, bonuses, and employer super contributions, do not always translate cleanly into US tax reporting.
Universal Tax Professionals focuses on correctly aligning these items to avoid misreporting or lost tax credits.
Experts with Missed Filings and Catch-Up Cases
Many Americans in Australia go years without realizing they are required to file US taxes.
Universal Tax Professionals has guided hundreds of clients through the IRS Streamlined Filing Compliance Procedures, one of the most effective tools available for becoming current without facing steep penalties.
We Advise Beyond Tax Season
Contributing to super, investing in Australian managed funds, buying property, or starting a business in Australia all carry US tax implications that most general accountants miss entirely.
Universal Tax Professionals provides year-round support so you make informed decisions from the start, not expensive corrections after the fact.
What Our Clients Say
Here’s what Americans living in Australia have to say about working with Universal Tax Professionals. Check our 4.9 rating on Google Reviews and Trustpilot:
⭐⭐⭐⭐⭐
“We have been working with Asher from Universal Tax Professionals for over 5 years now and have had nothing but a fantastic experience every year. We are permanently living in Australia and he is so knowledgeable about translating our assets and finances into the US system.”
— Nikki A. from Australia (Verified Trustpilot Review)
⭐⭐⭐⭐⭐
“This company jumped on my late taxes and completed them within a week. As an expat living in Australia I have stressed every tax time with on-line systems that only work for US residents. Thank you UTP.”
— Allison R. from Australia (Verified Trustpilot Review)
⭐⭐⭐⭐⭐
“This is my 4th year using Universal Tax Professionals. Always quick, efficient, and friendly service. For those looking for help navigating the complicated taxes of a US expat, these people know their stuff.”
— American Expat, Per O. (Verified Google Review)
Filing or Getting Back on Track?
Whether you recently moved to Australia, own a local business, are planning your relocation, or have fallen behind on your US returns, our CPAs have you covered at every step.
