Tax for Expats in Australia: What Americans Need to Know Before Filing

Living in Australia as an American is an adventure—sunny beaches, vibrant cities, and a new way of life. But when it comes to tax for expats in Australia, things can get complicated fast. If you’re a U.S. citizen or green card holder, you’re still on the hook for U.S. taxes, even while enjoying life Down Under. This guide breaks down what you need to know before filing, so you can stay compliant, avoid double taxation, and make the most of your expat experience.

Understanding U.S. tax obligations for Americans living in Australia

The U.S. is one of the few countries that taxes its citizens on worldwide income, no matter where they live. That means if you’re an American living in Australia, you must file a U.S. tax return every year—regardless of whether you owe any tax. This applies even if you’re also paying taxes to the Australian Taxation Office (ATO).

Key points to remember:

• You must report all global income, including salary, self-employment, rental, and investment income.
• Filing is required even if you qualify for exclusions or credits that reduce your U.S. tax bill to zero.
• Failing to file can lead to penalties, interest, and loss of eligibility for valuable tax benefits.

It’s normal to feel overwhelmed by these rules, but understanding your obligations is the first step to stress-free compliance.

Australian tax residency rules and how they affect U.S. citizens

Australia has its own set of tax residency rules, which determine how you’re taxed by the ATO. Generally, you’re considered an Australian tax resident if you:

• Reside in Australia permanently or for most of the year
• Have your home, family, or business ties in Australia
• Intend to stay in Australia for the foreseeable future

Why does this matter?

If you’re an Australian tax resident, you’ll pay Australian tax on your worldwide income. If you’re a non-resident, you’re only taxed on income sourced in Australia. Most U.S. expats become Australian tax residents after moving, which means you’ll likely be taxed on the same income by both countries.

Filing requirements and deadlines for U.S. expat tax returns

U.S. expats in Australia must file a federal tax return (Form 1040) each year, typically by April 15. However, you automatically get a two-month extension to June 15 if you’re living abroad on the regular due date. You can also request an additional extension to October 15 if needed.

Important tax deadlines:

• April 15: Standard U.S. tax deadline
• June 15: Automatic extension for expats
• October 15: Additional extension (must be requested)

Don’t forget: If you owe U.S. tax, interest starts accruing from April 15, even if you file later. Plan ahead to avoid surprises.

Foreign Earned Income Exclusion: Maximizing Your Tax Savings

The Foreign Earned Income Exclusion (FEIE) is a powerful tool for reducing your U.S. tax bill. For tax year 2025, you can exclude up to $130,000 of foreign earned income (the limit is adjusted annually) if you meet certain requirements.

How to qualify:

• Your tax home must be outside the U.S.
• You must pass either the Physical Presence Test (330 days in a foreign country in a 12-month period) or the Bona Fide Residence Test (a full calendar year as a resident of another country)

Example: If you earn $100,000 working in Sydney and qualify for the FEIE, you can exclude the entire amount from U.S. tax. However, the exclusion only applies to earned income (like wages or self-employment), not to investment or rental income.

Foreign Tax Credit vs. FEIE: Choosing the right strategy

U.S. expats in Australia often face a choice: use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC). The FTC allows you to offset U.S. tax with taxes paid to Australia on the same income.

When to use each:

• FEIE: Best if your income is below the exclusion limit and you want to simplify your return.
• FTC: Often better for higher earners or those with significant Australian tax, since Australian tax rates can be higher than U.S. rates.

You can’t double-dip: You can’t use both the FEIE and FTC on the same income, but you can use a combination for different types of income. A tailored approach can maximize your savings and minimize your U.S. tax liability.

Avoiding double taxation through the U.S.-Australia tax treaty

The U.S. and Australia have a tax treaty designed to prevent double taxation and clarify which country has taxing rights over certain types of income. While the treaty doesn’t exempt you from filing a U.S. return, it can:

• Help determine residency for tax purposes
• Provide relief for certain types of income (like pensions or social security)
• Clarify how to claim credits or exemptions

Practical example: If you receive Australian superannuation payments, the treaty may affect how they’re taxed in the U.S. Always review the treaty provisions or consult an expat tax specialist to ensure you’re applying the rules correctly.

Australian superannuation and U.S. tax reporting requirements

Superannuation (or “super”) is Australia’s retirement savings system. For U.S. expats, superannuation can be a tax headache:

• The IRS generally does not recognize Australian super as a qualified retirement plan, so contributions and earnings may be taxable in the U.S.
• Employer contributions, investment growth, and even some distributions may need to be reported on your U.S. tax return.

Essential forms and reporting: FBAR, FATCA, and other compliance requirements

In addition to your tax return, you may have to file extra forms to report foreign accounts and assets:

FBAR (FinCEN form 114)

• Required if you have foreign financial accounts (including superannuation) totaling over $10,000 at any time during the year
• Due April 15 (with an automatic extension to October 15)

FATCA (form 8938)

• Required if your foreign assets exceed certain thresholds (for most expats, $200,000 on the last day of the year or $300,000 at any time)
• Filed with your tax return

Other forms: Depending on your situation, you may need to file additional forms for foreign trusts, corporations, or partnerships. Missing these forms can lead to steep penalties, so it’s crucial to review your reporting obligations each year.

Ready for peace of mind? Get expert help with your expat taxes

Navigating tax for expats in Australia doesn’t have to be stressful. With the right guidance, you can stay compliant, avoid double taxation, and focus on enjoying your life abroad. Our team of friendly, experienced expat tax professionals is here to help you every step of the way.

Frequently Asked Questions