What Americans in Australia usually get wrong
Most Americans in Sydney, Melbourne or Perth owe the IRS nothing on their wages, because Australian tax is higher than US tax and the US gives you credit for it. So people assume they can stop filing. You can’t, and that includes dual citizens and "accidental Americans" born in the US who left as kids.
What actually costs money here is your super fund, the ETFs your broker or micro-investing app sold you, and the forms that report them.
Which year these figures are for
US figures are for tax year 2025, the return you file in 2026. Australian figures are for the 2024–25 and 2025–26 income years, which have the same resident rates. Where we convert, we use the IRS yearly average for 2025: A$1.551 per US$1, or about 64 US cents to the Aussie dollar.
Do I need to file a US return from Australia?
Yes, if your worldwide gross income reaches the filing threshold: $15,750 for 2025 if you’re single and under 65, counting income you’ll later exclude or credit. Married to an Australian who isn’t a US person? Unless you elect to treat them as a US resident you’ll usually file married filing separately, where the threshold is just $5. (A de facto partner isn’t a spouse for US purposes.) Sole traders with an ABN file once net self-employment earnings hit $400.
US deadlines for Americans in Australia (tax year 2025)
- 1
15 April 2026: pay what you owe
The regular due date. You can file later, but tax owed is due now and interest runs from here.
- 2
15 June 2026: automatic extension for Americans abroad
If on 15 April you live and work outside the US, you get two extra months to file without asking. Attach a statement saying you qualify.
- 3
15 October 2026: with Form 4868
File Form 4868 by 15 June to push filing out to 15 October. The FBAR is automatically extended to the same date.
Moved here partway through 2025? Form 2350 extends your deadline until you qualify for the foreign earned income exclusion, so you file once instead of filing and amending.
How do I fit a 1 July Australian tax year onto a calendar-year US return?
Australia’s income year runs 1 July to 30 June; the US uses the calendar year. Your 2025 US return takes the back half of 2024–25 and the front half of 2025–26, and none of your Australian year-end paperwork matches it.
We build the calendar year from your income statement in myGov (salary, PAYG, fringe benefits and reportable super to 30 June) and your December payslip (year to date from 1 July). Your notice of assessment gives the real Australian tax, Medicare levy included, and your super fund statement gives contributions, earnings, the 15% contributions tax and the balance for the FBAR.
When you prepare your 2025 US return in early 2026, your 2024–25 Australian return is usually done (it’s due 31 October if you lodge it yourself, later through a tax agent) and 2025–26 isn’t. You can claim Australian tax when paid or elect to claim it as it accrues, and that election sticks once made. Either way PAYG is the starting point and the assessment is the final word, so a US return occasionally needs a tweak later.
For currency, regular income and PAYG go through at the IRS yearly average rate. One-offs like selling shares or a home use the spot rate on the day, and FBAR balances use the Treasury rate for 31 December.
Foreign tax credit or FEIE: which one for Americans in Australia?
Our default for most people here is the foreign tax credit (Form 1116), a dollar-for-dollar credit against US tax for Australian tax on the same income.
Australian resident rates for 2024–25 and 2025–26 are 16% from A$18,201, 30% from A$45,001, 37% from A$135,001 and 45% above A$190,000, with the 2% Medicare levy on top. On a normal salary that’s more than the US would charge, so the credit usually takes US tax on your wages to $0, and the excess carries forward ten years (or back one). It works on rent, interest and dividends too, as far as Australia taxed them.
We treat the Medicare levy as creditable too, since it’s assessed on taxable income through your return; there’s no IRS ruling on it, but that’s the prevailing view. One catch: credits sit in separate baskets. Spare credit from your salary can’t shelter investment income that Australia taxed lightly or not at all.
Example: Emily, a US citizen on an A$150,000 Sydney salary
Say Emily is single, works for an Australian employer in Sydney and earns A$150,000 in calendar 2025, about $96,700. Her employer pays the Superannuation Guarantee into her fund and she has no other income.
Her Australian tax is about A$36,840 plus a A$3,000 Medicare levy, roughly A$39,840 or $25,700. On the US side, after the $15,750 standard deduction she has about $81,000 of taxable income and roughly $12,700 of tax before credits. Her Australian tax covers that, so her US bill is $0 and about $13,000 of credit carries forward.
Now add super. If her employer’s contributions (about A$18,000 at 12%) count as US wages under the foreign employees’ trust view, her US tax before credits rises to about $15,300. Australia still covers it.
The exclusion would also get her to $0, since she’s under $130,000. We’d still use the credit: the exclusion builds no carryforward, and excluded wages can’t fund an IRA.
Illustrative, rounded figures. A real return also handles fringe benefits, Australian offsets and how tax falls across the two income years.
When the FEIE still makes sense
The foreign earned income exclusion (Form 2555) lets you exclude up to $130,000 of foreign earned income for 2025 if your tax home is in Australia and you pass the bona fide residence or physical presence test. It covers wages and self-employment income only, and here it tends to suit lower earners, a first part-year and sole traders with modest profits. It never removes US self-employment tax. You can also exclude housing costs above a $20,800 base for 2025, up to a cap that’s higher in some expensive cities. Don’t pick it casually: revoke it and you generally can’t claim it again for five years without IRS consent.
If you’re on a temporary visa and count as a temporary resident for Australian tax, Australia mostly leaves your foreign income alone: US dividends, gains on non-Australian assets and so on. Nice in Australia, but with no Australian tax to credit, the US taxes that income in full.
Does the US–Australia tax treaty help?
Less than people hope. The 1982 treaty (amended by a 2001 protocol) trims withholding on cross-border dividends, interest and royalties, but Article 1(3) is a saving clause letting the US tax its citizens as if the treaty had never come into effect. So for salary, rent, dividends and gains, it’s the foreign tax credit doing the work.
Article 1(4) lists what survives. The ones that matter here are Article 18(2), under which social security benefits are generally taxed only by the paying country (the Age Pension by Australia, US Social Security by the IRS), and Article 22 on relief from double taxation. Unlike the UK and Canadian treaties, this one doesn’t treat super as a retirement plan. Some advisers argue super falls under the social security article; that’s a minority position, and we wouldn’t take it without disclosing it on Form 8833.
Do I pay into super and US Social Security?
Normally just one. Australia has no FICA-style payroll tax; the Age Pension comes out of general revenue. The US–Australia totalization agreement, in force since 2002, covers the Superannuation Guarantee instead.
If you work for an Australian employer, they pay the Guarantee (12% of ordinary time earnings from 1 July 2025, 11.5% in 2024–25) and you don’t pay US Social Security. If a US employer sent you here temporarily, generally for up to five years, you can stay in US Social Security and Medicare and skip the Guarantee, but only with a US certificate of coverage. And if you’re self-employed and live here, the agreement generally exempts you from US self-employment tax. Keep proof of your Australian residence, or the IRS can assess self-employment tax even where the FEIE wiped out your income tax.
How does the IRS treat my superannuation?
This is the big one, and there’s no IRS guidance specific to super. Good practitioners reach different answers. What nobody disputes is that super doesn’t get automatic 401(k) or IRA treatment, and the Australian concessions don’t carry over. These are the positions you’ll see.
| Approach | What it means on the US return | Where it’s used |
|---|---|---|
| Foreign employees’ trust (non-exempt employees’ trust) | Employer contributions, including the Superannuation Guarantee and salary sacrifice, are taxable pay when they vest, which is usually straight away. Earnings are generally taxed on withdrawal, though higher earners may be taxed on the annual growth | The most common view for employer-sponsored retail and industry funds |
| Foreign grantor trust | You’re treated as owning the fund’s assets: earnings are taxed every year, and Forms 3520 and 3520-A may be due. Funds held inside may be PFICs | Personal (non-concessional) contributions and, above all, self-managed super funds (SMSFs) |
| Social security (treaty Article 18(2)) | Super treated as social security, taxable only in Australia | A minority, aggressive position; not one to take without full disclosure |
For an ordinary employer fund, we generally start from the employees’ trust view. On reporting, many practitioners read Revenue Procedure 2020-17, which exempts certain tax-favoured foreign retirement trusts from Forms 3520 and 3520-A, as covering those accounts. Whether it covers an SMSF, or a fund you mostly contribute to outside work, is more contested. The penalties for a missed 3520 or 3520-A are large, so that one gets decided on the facts of your fund.
Concessional contributions (the Guarantee, salary sacrifice and deductible personal contributions) are capped at A$30,000 for 2024–25 and 2025–26 and taxed at 15% in the fund. Salary sacrifice cuts your Australian tax, but on the employees’ trust view it’s still US wages. The fund pays that 15%, not you, so crediting it is unclear and practitioners split. Withdrawals are generally taxable in the US above your basis (what’s already been taxed), with no Australian tax to credit after 60, though credits carried forward from working years can sometimes absorb part of it. Keep tidy records.
Pick a position and keep to it
The worst outcome with super isn’t choosing the "wrong" view. It’s switching views between years, or never reporting the fund at all. Basis, carryforwards and trust filings all hang off what earlier returns did. If your past returns ignored super, fixing that belongs in a catch-up, not something to start quietly this year.
Why Australian ETFs and managed funds are a PFIC problem
Nearly any non-US pooled investment is a passive foreign investment company (PFIC) for US tax. That means Australian managed funds, unit trusts, listed investment companies, most ASX-listed ETFs, and the portfolios inside Australian micro-investing apps and robo-advisers.
Each one generally needs its own Form 8621 every year. Without an election, gains and large distributions get spread back over the years you held the fund, taxed at the top US rate for each year, plus an interest charge, with no capital gains rates. A mark-to-market election (listed funds) or QEF election (if the fund supplies the numbers) limits the damage, ideally made from year one.
Two ways round it: a few ASX-listed ETFs are really US-domiciled funds and aren’t PFICs (check each fund’s disclosure documents), and shares held directly in Australian companies generally aren’t PFICs either.
Example: Daniel’s ETF portfolio, super and FBAR
Take Daniel, a dual US/Australian citizen in Melbourne. He has three Australian ETFs in a brokerage account worth A$80,000, A$120,000 in super and A$20,000 in the bank, about $142,000 altogether at the 2025 average rate.
Each ETF is an Australian unit trust, so that’s three Forms 8621 a year, and his distributions and any gain on sale fall under the PFIC rules unless he’s made an election. A mark-to-market election on each fund, made now, stops it getting worse. His accounts are well over $10,000 combined, so he files an FBAR listing the bank, the broker and the super fund. He’s under the $200,000 year-end and $300,000 any-time thresholds for a single filer abroad, so no Form 8938 yet, though a growing super balance will change that.
Going forward, we’d put new money into individual shares, or into US-domiciled funds through a broker that accepts Australian residents, so he stops adding PFICs.
Illustrative, rounded figures. FBAR and Form 8938 values use each account’s highest and year-end balances at the Treasury year-end rate, not the average rate used here.
What about franking credits?
Australian dividends often come with franking credits for company tax already paid, which cut your Australian tax or get refunded. On the US side the usual view is that a franking credit is not a foreign tax you paid, so it isn’t creditable on Form 1116. The cash dividend is taxable, and any Australian tax you pay on it after the franking offset is creditable. Whether the dividend gets the lower US qualified rates depends on the company’s treaty eligibility and holding-period rules. Listed Australian companies commonly qualify, but we check.
Negative gearing an Australian rental: why the US loss often waits
Australia lets you negatively gear: a rental loss from interest, depreciation and costs exceeding the rent comes off your salary. The US doesn’t, mostly. Under the passive activity rules a rental loss generally can’t offset wages. There’s an allowance of up to $25,000 if you actively participate, but it phases out between $100,000 and $150,000 of modified AGI, and anything disallowed carries forward until you have passive income or sell.
Depreciation differs too. Foreign residential rentals placed in service after 2017 are depreciated over 30 years straight line on the dollar cost of the building, and your Australian depreciation schedules don’t carry over, so the property needs its own US records in dollars. The upshot: a useful Australian loss often becomes a US loss you can’t use yet. It comes free when you sell, and Australian tax on the sale can generally be credited against the US tax on the gain.
Selling your home in Australia: main residence exemption vs US §121
In Australia the main residence exemption usually makes the gain on your home CGT-free, as long as you’re an Australian tax resident when you sell. Since 1 July 2020, foreign residents generally lose it unless they meet a narrow life events test, which catches Americans who move home before selling.
The US is less generous anyway. Section 121 excludes up to $250,000 of gain ($500,000 married filing jointly) if you owned and lived in the home for two of the five years before sale. Anything above that is taxable in the US with no Australian tax to credit. The gain is measured in dollars at the rates on purchase and sale, so the currency can move it either way. The mortgage has its own result: if the Aussie dollar has fallen by the time you repay an A$ loan, the difference is a taxable exchange gain in the US, even though you repaid exactly what you borrowed. A loss on a personal mortgage isn’t deductible.
A long-held house in Sydney or Melbourne, with strong price growth plus a currency swing, is the classic sale that’s tax-free in Australia and still sends a bill from the IRS. Plan the timing before you list it, and if only one of you is American, think about whose name the house is in.
Reporting Australian accounts: FBAR and Form 8938
If the highest balances of all your non-US accounts added up to more than $10,000 at any point in 2025, you file an FBAR (FinCEN Form 114). That covers transaction, savings and offset accounts, brokerage accounts, accounts you can sign on but don’t own, and in the usual view your super. It goes to FinCEN, not with your return, and it’s due 15 April with an automatic extension to 15 October. Our FBAR guide has the detail, or we can file it for you.
Form 8938 (FATCA) goes with your 1040 once your foreign financial assets pass the thresholds for people living abroad:
| Filing status | File if foreign assets exceed… |
|---|---|
| Single or married filing separately | $200,000 on the last day of the year, or $300,000 at any time |
| Married filing jointly | $400,000 on the last day of the year, or $600,000 at any time |
Assume the IRS already knows about your accounts. Under the US–Australia FATCA agreement, Australian banks, brokers and super funds identify US account holders (that’s why they ask about citizenship and your US tax number) and report them to the ATO, which passes it on to the IRS.
Is my old US state still taxing me?
Possibly. Moving to Australia doesn’t automatically end state residency, and states like California, New York and Virginia can keep treating you as a resident if you hold on to a home, a driver’s licence, voter registration or other ties. California doesn’t allow the FEIE at all. Our state tax guide for expats covers how to leave cleanly.
Behind on US filing from Australia? The Streamlined procedures
Plenty of Americans here, dual citizens especially, find out about US filing years late, usually when their bank or super fund asks about citizenship. If the failure was non-willful, the Streamlined Foreign Offshore Procedures let you catch up with three years of returns, six years of FBARs and a signed certification (Form 14653). If you meet the non-residency requirement there’s no penalty; you pay any tax and interest, which for many Australian residents is little or nothing. Read our Streamlined guide or see our Streamlined package (from $1,500).
What we’d do for you
For most Australian employees, our Expat return at $599 covers it: the 1040 with the foreign tax credit or FEIE, the FBAR and Form 8938. If you hold Australian ETFs or managed funds you’ll need Form 8621, which is in our Premier return ($999) along with RSUs and other equity pay. An extra state return is $75, and Forms 5471 and 8865 for an Australian company or partnership you control start from $450. See full pricing or get in touch, and we’ll start by asking what’s in your super.