If you’re self-employed in Australia, you’ll likely need an ABN, may need to register for GST once turnover hits $75,000, and could be automatically enrolled in quarterly PAYG instalments.
On the US side, you generally still owe self-employment tax on Schedule SE, though most self-employed Americans residing in Australia are exempt from US Social Security tax under the US-Australia Totalization Agreement.
Running your own business as an American in Australia means juggling two tax systems that were not built with each other in mind.
Getting the sequencing wrong (registering for GST too late, missing a PAYG instalment, or overpaying US self-employment tax you didn’t actually owe) tends to be expensive to fix after the fact.
Key Takeaways: Self-Employment and PAYG Tax for US Expats in Australia
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Get an ABN before invoicing Australian clients to avoid 47% no-ABN withholding
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GST registration becomes mandatory at $75,000 in turnover, and the threshold is forward-looking
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PAYG instalments typically start in your second year once ATO thresholds are met, so budget for them from day one
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Self-employed Americans in Australia are generally exempt from US Social Security tax under the Totalization Agreement, but must actively claim the exemption
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FEIE does not exempt self-employment income from US self-employment tax
Self-Employment Tax Snapshot for Americans in Australia
| ABN | Free to apply, generally required to invoice without 47% withholding |
| GST registration threshold | $75,000 in annual turnover (mandatory above this) |
| PAYG instalments | Auto-enrollment once instalment income ≥ $4,000 and tax payable ≥ $1,000 |
| US self-employment tax | Generally exempt under the US-Australia Totalization Agreement |
| US reporting form | Schedule C and Schedule SE with Form 1040 |
| Superannuation for sole traders | Not mandatory, but voluntary contributions are tax-deductible up to the concessional cap |
Setting Up as a Self-Employed US Expat in Australia
Most Americans working for themselves in Australia operate as sole traders, the simplest business structure available. As a sole trader, your business isn’t a separate legal entity. Your business income and expenses flow directly onto your individual Australian tax return.
To start, you’ll need:
- An Australian Business Number (ABN), applied for free through the Australian Business Register
- A Tax File Number (TFN), if you don’t already have one from other Australian income
- Business records, kept for at least five years, covering all income and deductible expenses
If you’re a non-resident sole trader working entirely with overseas clients, an ABN may not be strictly necessary. But if you invoice any Australian clients, they’ll generally ask for one, and without it they may be required to withhold tax from what they pay you.
Why You Need an ABN: No-ABN Withholding
If you invoice an Australian business without quoting an ABN, the payer is generally required to withhold 47% of the payment and remit it to the ATO.
You can eventually reclaim that withholding through your tax return, but it creates a real cash flow problem in the meantime, especially in your first year of business when you’re least able to absorb it.
A handful of exceptions exist, mainly for hobby income, one-off payments under $75, and minors earning under $350 a week, but none of these typically apply to a working self-employed expat. If you’re invoicing Australian clients at all, getting an ABN before your first invoice is the simplest way to avoid this.
Make Sense of Your US and Australian Tax Obligations
Self-employment income and PAYG can create complex cross-border tax issues. Our team helps US expats understand their filing requirements and avoid costly mistakes.
GST Registration and the $75,000 Threshold
Once your business turnover reaches $75,000 in a rolling 12-month period, GST registration becomes mandatory. Below that threshold, registration is optional, and many self-employed expats choose to stay unregistered if their clients are individuals rather than GST-registered businesses, since adding 10% to your invoices can make your pricing less competitive.
Once registered, you’ll need to:
- Charge GST on your taxable sales
- Claim GST credits on eligible business purchases
- Lodge a Business Activity Statement (BAS), usually quarterly
The $75,000 threshold is forward-looking as well as backward-looking. If you reasonably expect your turnover to exceed $75,000 in the next 12 months, you’re required to register within 21 days, even if you haven’t hit the threshold yet.
PAYG Instalments: Prepaying Your Australian Tax
Pay As You Go (PAYG) instalments are quarterly prepayments toward your expected annual income tax bill. They are not an additional tax.
When you lodge your annual return, the instalments you’ve paid during the year are credited against your total liability. Overpay, and you get a refund. Underpay, and you owe the balance.
The ATO automatically enrolls you once you meet all three conditions from your most recent tax return:
- Instalment income of $4,000 or more
- Tax payable of $1,000 or more
- Estimated tax above a set threshold
Many first-year sole traders are caught off guard by this, since it typically kicks in only after your first return shows a full year of business income. Budgeting roughly a quarter to a third of every invoice for tax, from day one, avoids the scramble when PAYG instalments start.
US Self-Employment Tax and the Totalization Agreement
On the US side, self-employment income is reportable on Schedule C, with the resulting net profit subject to self-employment tax on Schedule SE, covering Social Security and Medicare.
This is where the US-Australia Totalization Agreement matters. Under the agreement, self-employed US citizens residing in Australia are generally exempt from US Social Security contributions on their self-employment income, since Australia’s superannuation system is treated as the equivalent coverage. This exemption is not automatic.
You typically need to write to the Social Security Administration to request an exemption letter, and you should attach a copy of that letter to your US tax return each year as proof of the exemption.
Without claiming this exemption correctly, you risk overpaying US self-employment tax on income that’s already effectively covered under Australia’s system. This is a distinct question from your income tax treatment. The US-Australia tax treaty and the totalization agreement operate independently of each other, and a treaty position on income tax doesn’t extend to self-employment tax.
Reporting Australian Self-Employment Income on Your US Return
Self-employed Americans in Australia still need to report their business income in full on their US return, converting Australian dollars to US dollars using an appropriate exchange rate for the year. From there, most expats reduce or eliminate their US income tax liability using:
- The Foreign Earned Income Exclusion (FEIE), which can exclude a substantial portion of self-employment income earned abroad, though it does not exempt you from self-employment tax itself
- The Foreign Tax Credit, which credits US tax liability for Australian tax already paid on the same income
Because FEIE doesn’t shelter self-employment tax, the totalization agreement exemption is often the more meaningful tax saving for self-employed expats, not the exclusion itself.
US Tax Help for Expats in Australia
Whether you’re self-employed or earning income through PAYG, we can help you stay compliant with your US tax obligations while navigating your Australian income.
Superannuation for the Self-Employed
Unlike employees, sole traders are not legally required to make superannuation contributions for themselves.
Voluntary contributions are optional, though they’re tax-deductible in Australia up to the annual concessional cap. Whether voluntary super contributions make sense for you depends on your broader retirement planning and how your fund would be treated for US reporting purposes.
