How Superannuation Impacts Your US Expatriate Tax Return
If you are a U.S. citizen or resident who has an Australian Superannuation (Super) fund, whether you live in Sydney, London, or have recently moved back to the States, you face unique and complex U.S. tax reporting requirements. Because the IRS taxes U.S. persons on their worldwide assets, you must reconcile your Australian retirement savings with your annual U.S. tax return. Let’s take a look at how the IRS treats Superannuation, so you know what to expect come tax time.
Superannuation Basics: Why the U.S. Sees It Differently
In Australia, Super funds are typically run as trusts, primarily funded by mandatory contributions from the employer. While Super is a tax-advantaged retirement program in Australia, the U.S. tax system does not recognize it as equivalent to a U.S. 401(k) or IRA.
| Detail | U.S. Expat Summary (as of July 2025) |
| SG Contribution Rate | The employer is required to contribute 12% of an eligible employee’s ordinary time earnings. |
| Eligibility | It is the employer who is legally required to make the SG contribution, not the employee. Eligibility is broad but subject to specific rules (e.g., minimum monthly earnings, age thresholds for younger workers, etc.). |
| Future Rate | No further increases beyond the 12% rate are currently legislated. |
| Vesting and Access | Your entitlement to the accumulation is generally considered vested. However, Super funds are subject to strict preservation rules, meaning you cannot typically access or withdraw the funds until you meet a specific condition of release (such as reaching retirement age). |
Key Tax Truths for U.S. Expats:
- No Deduction: Contributions to your Super are generally not deductible on your U.S. tax return.
- No Deferral: The U.S.-Australia Tax Treaty does not include a clause that would treat Super like a U.S. qualified retirement plan.
- FATCA & FBAR: Regardless of how the IRS classifies your fund, you will almost certainly have a foreign asset reporting requirement (Form 8938 and FinCEN Form 114) if your balance exceeds the minimal thresholds.
Understanding the “Gray Area”
Like many foreign pension plans, the taxation of superannuation is a gray area. Because of this, you may find varying opinions on how this income should be taxed on your U.S. expatriate tax return.
The U.S. tax treatment depends on which of two classifications your fund most closely resembles:
1. Foreign Grantor Trust
This classification applies when the U.S. person is deemed to have ownership and control over the trust assets. This is the case for most Self-Managed Super Funds (SMSFs) or accounts where the employee’s voluntary contributions significantly outweigh the employer’s.
2. Employee Benefits Trust
This classification is generally applied to larger, institutionally managed Super funds where the employee has limited control and the fund is primarily funded by the employer.
Deep Dive: Comparing the Two Tax Treatments
The distinction above is crucial because it dictates the complexity of your annual tax filing and the potential immediate taxability of your fund’s investment growth.
Scenario A: Taxes for Superannuations That Are Considered Employee Benefits Trusts
If your superannuation is considered an employee benefits trust, the following U.S. tax situation will apply:
What Is Taxed?
- Contributions: Employer and employee contributions are taxable as current income from a U.S. perspective.
- Growth/Earnings: Investment growth is tax-deferred (only taxed if you are considered highly compensated and the plan is deemed a discriminatory plan).
How Is the Superannuation Reported?
| Reporting Requirement | Form Name / Number | Threshold / Notes |
| Income Tax Reporting | Form 1040 | Contributions are reported directly as taxable income. |
| Foreign Asset Disclosure (FATCA) | Form 8938 | Required if your total foreign assets exceed the filing thresholds. |
| Foreign Account Disclosure (FBAR) | FinCEN Form 114 | Required if the combined value of all your foreign accounts exceeds $10,000. (Recommended even if a trust exemption may technically apply). |
| Passive Foreign Investment (PFIC) Reporting | Form 8621 | NOT required for Passive Foreign Investment Company (PFIC) investments held within this type of trust. |
Tax Relief and Distributions
- Distributions: The contributions that were previously taxed on your U.S. return become your basis in the fund. This basis is not taxable upon final distribution, preventing double taxation of that amount.
- Foreign Earned Income Exclusion (FEIE): Superannuation income does not qualify for the FEIE. You must use Foreign Tax Credits to offset U.S. taxes on this income.
Scenario B: Taxes for Superannuations That Are Considered Foreign Grantor Trusts
If your superannuation is classified as a foreign grantor trust, the following U.S. tax situation will apply, which is significantly more complex:
What Is Taxed?
- Contributions & Growth: Both contributions and all investment growth income (realized and unrealized) will be taxed in the U.S. annually.
How Is the Superannuation Reported?
| Reporting Requirement | Form Name / Number | Purpose / Notes |
| Trust Ownership | Form 3520 | Reports transactions with the foreign trust (e.g., transfers/contributions) and ownership. |
| Trust Income & Activity | Form 3520-A | Reports the fund’s growth/income (which is then taxed on Form 1040). Failure to file this form carries substantial penalties. |
| Foreign Account Disclosure (FBAR) | FinCEN Form 114 | Required if the combined value of all your foreign accounts exceeds $10,000. |
| PFIC Reporting | Form 8621 | Required for Passive Foreign Investment Company (PFIC) investments held within the trust. |
How to Determine Your Classification
The main challenge for most U.S. taxpayers is determining where their Super falls. Since the IRS has offered very little direct guidance on superannuation funds, the determining factor is control.
A good line of reasoning is to ask the following questions regarding your superannuation:
- Who made the larger contribution, the employer or the employee? If the employee has made more than half of the contributions, the trust will likely be considered a Foreign Grantor Trust.
- Do you have the power to make decisions on Superannuation investments? The power to make investment decisions is usually considered control and causes a Superannuation fund to be a Foreign Grantor Trust (e.g., an SMSF). This applies even if you do not actually exercise this control; the ability to make these decisions is often sufficient.
Overview of Your U.S. Reporting Requirements
- Report your superannuation as income on your annual tax return
- Report your superannuation of FATCA Form 8938 if you have a filing requirement based on the thresholds
- Report your superannuation on the FBAR as applicable
Do You Need Help Filing Your US Expatriate Tax Return?
Greenback can help! Our team of experts can prepare your US expatriate tax return and ensure all appropriate forms are filed to report superannuation. Get started today on your US expatriate taxes.
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