US Australia Tax Treaty and Expat Taxes: What Americans Owe
Author: Randall Brody, Enrolled Agent | Licensed by the U.S. Department of the Treasury | Last Reviewed: October 2026

Yes, the United States and Australia have an income tax treaty, but Americans in Australia still file a US return every year on their worldwide income. The treaty’s saving clause lets the United States tax its citizens as if the treaty did not exist, and the treaty does not mention superannuation, which is the biggest US tax question most Americans in Australia face. Because Australian tax rates are high, the foreign tax credit usually covers the US tax on a salary. The difficulties are superannuation, Australian managed funds, and the gap between Australia’s July to June tax year and the US calendar year.
Is There a US-Australia Tax Treaty?
Yes. The United States and Australia signed their income tax treaty in 1982, and a protocol updated it in 2001. It sets which country has the first right to tax each type of income, reduces withholding on dividends, interest, and royalties paid between the two countries, and includes a tie breaker for anyone both countries treat as a resident.
As with every US treaty, a saving clause keeps the US right to tax citizens and green card holders as if the treaty did not apply, with limited exceptions. An American employed in Sydney reports the salary on the US return and relies on the foreign tax credit, not the treaty, to avoid paying twice. Taking a treaty-based position on your return can require Form 8833.
Dividends from Australian companies can qualify for the lower US rate on qualified dividends, because Australian companies are eligible for treaty benefits. Franking credits do not carry across: the US taxes the dividend, and the Australian company tax behind a franking credit is not tax you paid, so it cannot be credited on your US return.
How Does Australia Tax Americans Who Live There?
The Australian tax year runs from July 1 to June 30. Individual returns are due October 31, or later if you lodge through a registered tax agent. Employers withhold tax from wages under the Pay As You Go (PAYG) system.
Australian residents pay tax on worldwide income at progressive rates that reach 45 percent on income above A$190,000, plus a 2 percent Medicare levy. Foreign residents pay tax on Australian income only, with no tax-free threshold. You are generally a resident if you live in Australia, and someone in Australia for more than half the tax year is usually treated as resident unless their usual home is elsewhere and they do not intend to live in Australia.
Many Americans on work visas are temporary residents. Temporary residents pay Australian tax on Australian income and on foreign employment income, but are generally exempt on other foreign income and on most foreign capital gains. That exemption has no effect on the US side. The United States still taxes all of it.
The different tax years are a practical problem rather than a legal one. Your US return reports income for the calendar year, which means combining parts of two Australian years, and the Australian tax paid has to be matched to the US year before the foreign tax credit is claimed.
US-Australia Totalization Agreement and Superannuation
Yes. The United States and Australia have a totalization agreement, in force since 2002. It prevents paying into both countries’ retirement systems on the same earnings, and it lets you combine work credits from both countries to qualify for US benefits.
For Australia, the system the agreement covers is the superannuation guarantee: the compulsory contribution an employer makes to an employee’s super fund. An American sent to Australia by a US employer for five years or less can stay in US Social Security with a certificate of coverage, and the employer does not have to make superannuation guarantee contributions for that employee. An American hired locally is covered by the Australian system instead: the employer contributes to super, and no US Social Security tax is due on those wages.
Self-employed U.S. citizens who reside in Australia are generally exempt from U.S. self-employment tax under the U.S.-Australia Totalization Agreement. Australia’s Superannuation Guarantee does not generally provide compulsory coverage for self-employed workers, although some contractors may be treated as employees for Australian super purposes depending on the nature of the arrangement. Social Security Administration
How the US Taxes Superannuation
Superannuation is the hardest part of a US return for an American in Australia, and the US rules are not settled. The treaty does not address super, and the IRS has not issued guidance that resolves how a super fund should be treated. Practitioners take different positions on three questions: whether employer contributions are taxable to you in the year they are made, whether growth inside the fund is taxed each year or only when you withdraw, and whether the fund must be reported as a foreign trust.
Two points are settled. Super accounts count toward the FBAR and Form 8938 thresholds, and withdrawals in retirement are reportable on your US return even when Australia does not tax them. Our guide to the US tax treatment of foreign pensions covers withdrawals in more detail.
Australian Managed Funds, Shares, and Your Home
Australian managed funds and many exchange-traded funds are generally treated as passive foreign investment companies (PFICs) for U.S. tax purposes, which can trigger Form 8621 reporting and special tax rules. Holding the investment through an Australian investment platform does not generally change the treatment of the underlying fund. Shares in ordinary operating Australian companies are generally not PFICs, although an individual company can still qualify as a PFIC if it meets the PFIC income or asset tests.
Australia does not tax the gain on your main residence. The US does, after an exclusion of up to $250,000, or $500,000 for a married couple filing jointly, if you owned and lived in the home for two of the last five years. Exchange rate movement counts toward the gain, and paying off an Australian dollar mortgage can create a separate taxable currency gain.
What US Taxes You Still Owe While Living in Australia
US citizens and green card holders file a US tax return on worldwide income every year, wherever they live. Americans abroad get an automatic extension of the filing deadline to June 15, and can extend to October 15 on request. Tax owed is still due April 15, and interest runs from that date.
The foreign tax credit gives a dollar-for-dollar credit for Australian income tax paid on the same income, claimed on Form 1116. Because Australian rates are high, it often eliminates the US tax on a salary entirely, unused credits carry forward for ten years, and it also covers investment income.
The foreign earned income exclusion removes up to $132,900 of foreign earnings from US tax in 2026, claimed on Form 2555, if you meet the physical presence test or the bona fide residence test. It does not reach investment income or super, it pushes any income above the exclusion into a higher US bracket, and an American who claims it cannot claim the refundable part of the Child Tax Credit. For most Americans in Australia the credit is the better choice.
Reporting Australian Bank Accounts
If the combined highest balance across your foreign financial accounts exceeds $10,000 at any point during the year, you file a Foreign Bank Account Report (FBAR). The threshold is measured on all accounts together, not per account, and on the highest balance during the year rather than the year-end balance. The FBAR goes to FinCEN, not the IRS, separately from your tax return. It is due April 15 with an automatic extension to October 15.
A second, separate requirement covers foreign financial assets more broadly and is filed with your tax return on Form 8938. For taxpayers living abroad the thresholds are:
- Single or married filing separately: more than $200,000 on the last day of the year or more than $300,000 at any time during the year
- Married filing jointly: more than $400,000 on the last day of the year or more than $600,000 at any time during the year
Australian bank accounts, superannuation accounts, and managed fund and platform accounts can all count toward both thresholds. A joint account with an Australian spouse is reported at its full value.
Forms Americans in Australia Usually File
Most Americans in Australia file a predictable set of forms each year. The list below is the common case, not an exhaustive one. A self-managed super fund, a company, or rental property can add more.
|
Form |
What it is |
|---|---|
|
Form 1040 |
The annual individual income tax return |
|
Form 1116 |
The foreign tax credit, claiming credit for Australian income tax paid |
|
Form 2555 |
The foreign earned income exclusion, if you claim it |
|
FinCEN Form 114 |
The foreign bank account report (FBAR), if the aggregate threshold is met |
|
The foreign financial asset statement, if the higher threshold is met |
|
|
Form 8621 |
Annual reporting for Australian managed funds and ETFs |
|
Foreign trust reporting for a self-managed super fund, and for other super funds if that is the position taken |
|
|
Form 5471 |
The information return for Americans who own or control an Australian company |
|
Form 8833 |
Disclosure of a treaty-based position on your return, where required |
Working With a US Tax Advisor in Australia
Tax Samaritan prepares US tax returns for Americans living in Australia. Randall Brody is an Enrolled Agent, a federal credential that allows representation before the IRS from any country, so there is no need for an advisor based in Australia.
The situations where advice pays for itself in Australia are specific. Superannuation, because a position has to be chosen and then applied the same way every year. Managed funds, because the PFIC rules make them expensive to hold. An Australian company, because owning one adds Form 5471. Your first year in Australia, because the two tax years and the residence tests both turn on facts established that year. And several unfiled years, because catching up through the IRS streamlined procedures has to be done in the right order, and the wrong order creates penalties that the right one avoids.
Planning to retire in Australia? Our guide to retiring abroad covers Social Security, US retirement accounts, and state tax after you move. Guides for other countries are in our country tax guides.
Frequently Asked Questions
Request A Tax Preparation Quote
Tax Samaritan prepares US tax returns for Americans in Australia, including the superannuation, managed fund, and treaty reporting covered above. Request a free quote and an enrolled agent will review your situation and tell you exactly what needs to be filed, or request a free 30-minute tax consultation.
