U.S. Expat Tax Guide: Americans Living in Australia (Filing in 2026)

According to IRS data from 2016-2021, over 100,000 Americans have chosen Australia’s sunshine, exceptional quality of life, and strong economy as their home. While you must file taxes in both countries, the combination of the U.S.-Australia tax treaty, Foreign Earned Income Exclusion, and Foreign Tax Credit typically eliminate any U.S. tax liability entirely. The challenge isn’t paying double taxes; it’s filing correctly and knowing which protections to use.

Australia uses a July 1 to June 30 tax year (different from the U.S. calendar year), which adds a layer of complexity. But with proper planning and the right strategy, most Americans in Australia breathe easy knowing they won’t owe anything to the IRS when filing correctly. Australia’s progressive tax system means you’re often paying more in Australian taxes than you would in the U.S., which creates foreign tax credits that eliminate most U.S. tax liability.

Why Do I Have to File Taxes in Both Countries?

As a U.S. citizen or green card holder, you’re required to file U.S. taxes regardless of where you live. The U.S. uses citizenship-based taxation, meaning your tax obligations follow your passport, not your residence. This applies whether you’re working in Sydney, retired in Melbourne, running a business in Brisbane, or a dual citizen who’s lived in Australia your entire life.

Australia determines tax residency using four tests. You’re considered an Australian tax resident if you meet any of these:

The Four Australian Residency Tests:

Resides Test: You live permanently (or for a considerable time) in Australia and have a settled or usual home in the country
Domicile Test: Your primary permanent domicile, or home, is in Australia
183-Day Test: You’ve spent at least 183 days in Australia during the tax year (unless you establish that your usual place of abode is outside Australia and you have no intention of taking up residence)
Commonwealth Superannuation Fund Test: You’re employed by the Australian government or an Australian company and eligible to contribute to the Public Sector Superannuation Scheme (PSS) or Commonwealth Superannuation Scheme (CSS)

Australian tax residents pay taxes on worldwide income at progressive rates from 0% to 45%, plus a 2% Medicare levy.

Non-residents pay taxes only on Australian-source income, starting at 32.5% from the first dollar (no tax-free threshold), and don’t pay the Medicare levy.

The key insight? Your U.S. filing obligation continues regardless of your Australian residency status. But the tax treaty and exclusions work together to prevent you from paying taxes twice on the same income.

Unsure how to file a US return while living in Australia?

Even if you pay Australian tax, the IRS still requires a US return each year. We help you claim the Foreign Tax Credit or FEIE so your US tax bill is fully minimized.

How Do the U.S. Tax Exclusions and Credits Protect Me?

Two main protections eliminate most U.S. tax liability for Americans in Australia.

Foreign Earned Income Exclusion (FEIE)

The FEIE allows you to exclude up to $130,000 of foreign earned income for the 2025 tax year (filed in 2026) from U.S. taxation. This works particularly well for Americans earning moderate incomes in Australia.

To qualify, you must meet either:

Physical Presence Test: Present in foreign countries for 330+ days in any 12-month period
Bona Fide Residence Test: Genuine resident of Australia with intent to remain indefinitely

Example: Software Developer in Sydney Using FEIE

Annual salary: AUD $95,000 (approximately $63,000)
FEIE exclusion applied: $63,000 (full amount excluded)
U.S. tax owed: $0

The FEIE works well when your Australian income falls below the exclusion threshold. But what about higher earners?

Foreign Tax Credit (FTC)

The Foreign Tax Credit provides a dollar-for-dollar credit against U.S. taxes for income taxes paid to Australia. This is powerful because Australian tax rates are often higher than U.S. rates, especially when you include Australia’s Medicare levy.

Example: Business Consultant in Melbourne Using FTC

Annual income: AUD $180,000 ($119,000)
Australian taxes paid: AUD $52,000 ($34,400)
U.S. taxes before credit: $21,500
Foreign Tax Credit applied: $21,500
U.S. tax owed: $0

Pro Tip

Many expats benefit from strategically combining both the FEIE and FTC. Use the exclusion for earned income and credits for investment income or amounts above the exclusion threshold. An experienced expat tax professional can help you determine the optimal strategy for your situation.

What Are Australia’s Tax Rates and How Do They Compare?

Australia uses a progressive tax system where you pay different rates on different portions of your income.

Australian Resident Tax Rates (2025-26)

Taxable Income (AUD)	Tax Rate
$0 – $18,200	0% (tax-free threshold)
$18,201 – $45,000	16% on income over $18,200
$45,001 – $135,000	$4,288 + 30% on income over $45,000
$135,001 – $190,000	$31,288 + 37% on income over $135,000
Over $190,000	$51,638 + 45% on income over $190,000

Note: These rates don’t include the 2% Medicare levy, which applies to most residents. Low-income earners may also qualify for the Low Income Tax Offset (LITO), which provides up to $700 for incomes below $37,500.

Foreign Resident Tax Rates (2025-26)

Taxable Income (AUD)	Tax Rate
$0 – $135,000	32.5% from the first dollar
$135,001 – $190,000	$43,875 + 37% on income over $135,000
Over $190,000	$64,225 + 45% on income over $190,000

Note: Foreign residents don’t pay the Medicare levy and don’t receive the tax-free threshold.

Key Comparison Insights

Because Australia’s rates (especially with the 2% Medicare levy) are often higher than U.S. rates, most expats find that the Foreign Tax Credit works best for eliminating U.S. tax liability. For those with moderate incomes below $130,000, the FEIE provides maximum benefit.

Important

Australia’s tax year runs from July 1 to June 30, while the U.S. tax year follows the calendar year (January 1 to December 31). This means you’ll need to juggle two different tax years when preparing your returns.

How Do I File Taxes in Australia?

The Australian Tax Filing Process

Australia uses a sophisticated online filing system that makes tax preparation relatively straightforward once you understand the process. The Australian Taxation Office (ATO) manages all tax collection and provides free online tools for individuals.

Australian Tax Year: July 1 to June 30
Filing Deadline: October 31 for individuals filing their own return
Extended Deadline: May 15 of the following year if using a registered tax agent (must register before October 31)
Required System: myTax (accessed through myGov)

Setting Up Your Australian Tax Filing System

To file your Australian taxes, you need access to myGov, the Australian Government’s secure online portal.

Quick Setup Process:

Create myGov Account: Go to my.gov.au, select “Create account,” provide email and password, set up multi factor authentication
Link to ATO: Connect your account by signing into myGov, selecting “Australian Taxation Office,” confirming details, and answering security questions
Optional Security Enhancement: Use myGovID app for stronger identity verification

Filing Your Return with myTax

The myTax system automatically pre-fills most information by late July from employers, banks, government agencies, health funds, and superannuation funds.

Filing Process:

Access myTax through myGov or the ATO app
Personalize your return by selecting applicable sections
Review pre-filled data carefully (you’re responsible for accuracy)
Add missing information like deductions or foreign income
Calculate estimate and review
Submit your completed return
Receive Notice of Assessment within 2 weeks

Important

The myTax estimate is preliminary. Your final assessment may differ based on ATO verification.

Alternative Filing Methods

Registered Tax Agent:

Many expats prefer using a registered tax agent, especially with complex situations involving:

International income sources
Australian superannuation
Investment properties
Capital gains
Business income

Benefits of using a tax agent:

Automatic extension to May 15 deadline
Expert handling of complex situations
Professional review of deductions
Assistance with ATO queries

Paper Filing:

Paper returns are available but strongly discouraged by the ATO. Online filing provides:

Faster processing (typically 2 weeks vs. 10+ weeks for paper)
Pre-filled information
Calculation assistance
Immediate confirmation of lodgment
Direct deposit of refunds

Payment Options

If You Owe Australian Tax:

Pay online through myGov using BPAY or credit card
Direct debit from Australian bank account
Payment plan arrangements available if needed
Due date: 21 days after lodgment (or November 21 if lodged on time)

U.S. Tax Filing from Australia

U.S. Tax Year: January 1 to December 31
Filing Deadline: June 15 (automatic two-month extension for expats)
Extension Available: October 15 (with Form 4868)
Payment Deadline: April 15 (even with filing extension)

Required Forms:

Form 1040: U.S. Individual Income Tax Return
Form 2555: Foreign Earned Income (for FEIE)
Form 1116: Foreign Tax Credit (for FTC)
FinCEN Form 114 (FBAR): Report of Foreign Bank and Financial Accounts (if accounts exceed $10,000)
Form 8938 (FATCA): Statement of Specified Foreign Financial Assets (if thresholds met)

Important

While you get extra time to file, any taxes owed are still due by April 15 to avoid interest charges. Most Americans in Australia owe nothing, but it’s crucial to file on time to avoid penalties.

What Common Scenarios Should I Know About?

Scenario 1: Corporate Expat in Sydney

Situation: American working for a U.S. multinational company on assignment, AUD $140,000 salary, housing allowance, company car

Tax Strategy:

Use FEIE to exclude $130,000 of earned income for the 2025 tax year
Remaining $10,000 (in USD) is taxable in the U.S.
Australian taxes paid create Foreign Tax Credit for the remaining amount
Result: $0 U.S. tax owed
Key consideration: Employer benefits and allowances must be properly reported on both returns

Scenario 2: Self-Employed Consultant in Brisbane

Situation: American freelance business consultant, AUD $160,000 income, clients in Australia and Asia

Tax Strategy:

Use FTC to credit Australian taxes paid
Pay Australian income tax and Medicare levy on full amount
Use Foreign Tax Credit for all U.S. tax liability
Result: $0 U.S. tax owed
Important note: Self-employment tax may apply under U.S.-Australia totalization agreement rules

Scenario 3: Retiree in Adelaide

Situation: Retired American, U.S. Social Security $35,000, IRA distributions $40,000, Australian rental property income AUD $25,000

Tax Strategy:

U.S. Social Security may be partially taxable under the tax treaty
IRA distributions taxed in both countries, use FTC
Australian rental income taxed in Australia first, credited against U.S.
Total U.S. tax after credits: Minimal to $0
Treaty provisions for retirement income provide significant benefits

Scenario 4: Digital Nomad Frequent Traveler

Situation: American with Australian permanent residency, travels frequently for work, AUD $95,000 income from multiple countries

Tax Strategy:

Must track days carefully for Physical Presence Test
Use FEIE if qualifying for full exclusion
Australian tax residency may depend on maintaining home base
Result: $0 U.S. tax if properly documented
Critical: Keep detailed records of travel dates and income sources

What Filing Requirements and Deadlines Do I Need to Know?

Requirement	Australia	United States
Tax Year	July 1 – June 30	January 1 – December 31
Filing Deadline	October 31 (May if using tax agent)	June 15 (automatic extension for expats)
Payment Deadline	October 31 (or installment arrangements)	April 15 (even with filing extension)
FBAR Deadline	N/A	April 15 (automatic extension to October 15)
Extension Available	Automatic with registered tax agent	October 15 (Form 4868)
Online Filing	Mandatory (myTax system)	Available through IRS or tax software

FBAR Filing Requirement: If your combined Australian bank accounts, superannuation accounts, and other financial accounts exceed $10,000 at any point during the year, you must file FBAR electronically.

FATCA Filing Requirement: Americans living abroad must file Form 8938 if specified foreign financial assets exceed:

$200,000 on the last day of the tax year, OR
$300,000 at any time during the year (For married filing jointly, these thresholds double)

Pro Tip

Keep quarterly statements for all Australian accounts and superannuation funds. Since the Australian tax year differs from the U.S. tax year, year-end statements are less helpful than quarterly records for preparing your U.S. return.

What Common Mistakes Should I Avoid?

Mistake 1: Not Recognizing Australian Tax Residency Rules

Many Americans accidentally become Australian tax residents without realizing the implications. Australia’s 183-day rule and the “resides” test are broadly applied. If you maintain a home in Australia and spend significant time there, you’re likely a tax resident, even if you don’t intend to stay permanently.

How to avoid it: Understand the four residency tests and your status. If uncertain, consult with a tax professional who knows both systems before establishing significant ties to Australia.

Mistake 2: Mishandling Australian Superannuation

Australian superannuation (retirement savings) creates complex U.S. reporting requirements. The IRS typically treats superannuation funds as grantor trusts or employee benefit trusts, not qualified retirement plans like a 401(k).

Key issues:

Employer contributions are immediately taxable to the IRS (unlike Australian treatment)
Fund earnings may require annual reporting on Forms 3520 and 3520-A
Distributions face complex tax treatment
Early access provisions differ dramatically between countries
Transferring superannuation to a 401(k) requires careful planning

How to avoid it: Work with an expat tax professional who specializes in Australian superannuation. These accounts are one of the most complicated aspects of U.S.-Australia tax compliance. See our comprehensive guide on how superannuation impacts your US expatriate tax return for detailed information.

Mistake 3: Missing FBAR Requirements

Australian bank accounts, investment accounts, and superannuation funds all count toward the $10,000 FBAR threshold. The penalties for non-compliance are severe: up to $10,000 per violation for non-willful failures, and much higher for willful violations.

How to avoid it: Track all foreign financial accounts throughout the year, including:

Australian bank accounts
Superannuation accounts
Investment and brokerage accounts
Life insurance policies with cash value
Any accounts where you have signature authority (even if not yours)

Mistake 4: Overlooking the Goods and Services Tax (GST)

If you run a business in Australia with more than AUD $75,000 in receipts, you must register for GST and collect this 10% tax. Failure to register when required creates compliance issues with the ATO.

How to avoid it: If you’re self-employed or run a business, understand GST thresholds and registration requirements. This is separate from income tax but equally important.

Mistake 5: Claiming Treaty Benefits Incorrectly

The U.S.-Australia tax treaty provides benefits, but claiming treaty positions incorrectly can be costly and may require disclosure on Form 8833.

How to avoid it: Understand which treaty provisions apply to your situation. Don’t assume treaty benefits automatically apply; many require specific documentation and filing requirements.

What Tax Treaty Benefits Apply?

U.S.-Australia Tax Treaty

The comprehensive tax treaty between the U.S. and Australia provides several key benefits:

Eliminates double taxation on most types of income
Provides clarity on which country has primary taxing rights
Reduces withholding rates on dividends, interest, and royalties
Includes tie-breaker rules for dual residency situations
Special provisions for pensions, government service, and students

Key Treaty Provisions:

Dividends: Reduced withholding rates (0-15% depending on circumstances)
Interest: Often 0-10% withholding
Royalties: 5% maximum withholding
Pensions: Generally taxed only in country of residence
Government Service: Specific rules for government employees

Important

The Savings Clause: The treaty includes a “savings clause” that preserves the U.S. government’s right to tax its citizens as if the treaty didn’t exist. This means U.S. citizens must still report and pay U.S. taxes on their worldwide income, though the treaty prevents double taxation through credits and exclusions.

Totalization Agreement

The U.S.-Australia totalization agreement prevents double social security taxation and helps coordinate benefits.

Key Rules:

For U.S. company assignments:

Assignments under 5 years: Pay into U.S. Social Security system
Assignments over 5 years: Pay into Australian Superannuation Guarantee system
Certificate of Coverage required to prove exemption from other country’s system

For Australian employers:

You pay into the Australian Superannuation Guarantee system
Exempt from U.S. Social Security on this employment

For self-employed Americans in Australia:

You may choose which system to contribute to
Australian SG program doesn’t compulsory cover self-employment
Self-employed U.S. citizens residing in Australia are exempt from U.S. Social Security contributions on self-employment income

Benefits Coordination:

Credits from both countries can count toward minimum requirements
Must have at least 6 quarters (1.5 years) of U.S. work for totalization
Outside Australia, need 12 months Australian residence (6 continuous) to totalize
Benefits may be proportionally reduced based on coverage periods

Pro Tip

The totalization agreement is particularly valuable for self-employed expats, who otherwise would pay into both systems (covering both employer and employee portions). The exemption from U.S. Social Security can save thousands annually.

What Other Considerations Should I Know About?

U.S. State Tax Obligations

Moving to Australia doesn’t automatically eliminate your U.S. state tax obligations. Some states (particularly California, Virginia, New York, South Carolina, and New Mexico) have “sticky” tax residency rules that may continue to claim you as a resident even after you move abroad.

If you maintain ties to your former state (property ownership, driver’s license, bank accounts, voter registration), you may still owe state taxes on your Australian income. Learn more in our guide on state taxation for expats.

Example: Sarah earns $85,000 in Australia and pays $25,000 in Australian taxes. For federal purposes, she excludes her entire salary using the FEIE and owes $0. But if Virginia still considers her a resident, she owes Virginia tax on the full $85,000 with no credit for Australian taxes paid (approximately $4,250 annually).

Cost of Living Considerations

Australia consistently ranks as one of the more expensive countries for expats, particularly in major cities like Sydney and Melbourne. According to international living cost data, Australia’s inflation rate (4.1% in recent years) impacts expat budgeting significantly.

Major expense categories:

Housing: Sydney and Melbourne rent is among the world’s highest
Healthcare: Excellent quality but expensive without Medicare access
Transportation: Public transport is good but car ownership is costly
Food and dining: Generally 20-30% more expensive than the U.S.

However, salaries in Australia often compensate for higher costs, and the quality of life benefits are substantial.

Building Credit in Australia

Your U.S. credit score doesn’t transfer to Australia. As our guide on credit scores in other countries explains, Australia utilizes a Comprehensive Credit Reporting (CCR) system with credit scores ranging from 0 to 1,200.

To establish Australian credit:

Open an Australian bank account
Apply for a secured credit card initially
Pay utilities and bills on time
Maintain consistent employment
Build history over 6-12 months before major purchases

Managing Dual Tax Years

One of the biggest challenges for Americans in Australia is managing two different tax years:

Australian tax year: July 1 – June 30
U.S. tax year: January 1 – December 31

This creates a 6-month offset that complicates record-keeping. As noted in our tax deadlines by country guide, strategic planning helps:

Keep quarterly income records (January-March, April-June, July-September, October-December)
File Australian taxes first (by October 31) to use that information for U.S. filing
Maintain detailed records of all income and deductions in both currencies
Convert AUD to USD using IRS-approved exchange rates
Save all Australian payment summaries and tax documents

What Are My Next Steps?

If you’re planning your move to Australia:

Understand Australian residency rules before establishing ties
Consider timing of significant financial transactions around your move
Research how Australian superannuation will be taxed by the U.S.
Set up proper record-keeping systems for dual-country filing
Determine whether you’ll maintain U.S. state tax obligations

If you’re already living in Australia:

Determine your Australian tax residency status
Evaluate whether FEIE or FTC provides better tax benefits for your situation
Ensure compliance with FBAR and FATCA reporting
Review superannuation reporting requirements
Consider getting a Certificate of Coverage for social security
Track travel dates carefully if using Physical Presence Test
Keep quarterly statements for all financial accounts

If you’re behind on filings:

Don’t panic. Streamlined procedures can help you catch up with minimal penalties
Gather Australian tax returns and payment records systematically
Document income sources and foreign taxes paid
Start with the most recent three years (typically required for streamlined filing)
Consider voluntary disclosure programs for optimal outcomes

Living as an American expat in Australia offers incredible lifestyle benefits, from world-class beaches and cities to excellent healthcare and a thriving economy. With proper tax planning and compliance, you can focus on enjoying Australia’s laid-back culture and spectacular quality of life without worrying about your tax obligations.

The key is staying informed, planning ahead, and getting professional help when needed. Australia’s higher tax rates combined with U.S. expat provisions and the tax treaty typically result in fair overall tax treatment that won’t derail your Australian adventure.

Need Help with U.S. Expat Taxes in Australia?

Whether you’re just moving to Australia, have been there for years, or are behind on filings, we can help. No matter how late, messy, or complex your return may be, you’ll have peace of mind knowing that your taxes were done right.

Don’t just guess. Get the best advice from one of our expat expert CPAs and EAs. Whether you need tax advice to prepare for a move abroad, to handle superannuation complications, or to catch up on late filings, Greenback can help. Consults upfront can help avoid costly mistakes and stress later.

If you’re ready to be matched with a Greenback accountant, click the Get Started button below. For general questions on US expat taxes or working with Greenback, contact our Customer Champions.

Make your US filing easy this year

Whether your tax situation feels simple or complicated, our team prepares your full US return with the expat rules that apply specifically to Americans in Australia. Get started today.

This article is for informational purposes only and should not be considered tax advice. Tax situations vary greatly, and you should consult with a qualified tax professional for advice specific to your circumstances.

Essential Resources for Americans in Australia

Australian Government Resources

Australian Taxation Office (ATO):

ATO Main Website – Official tax authority
myTax Online Filing System – Lodge your return online
myTax Instructions 2025 – Step-by-step filing guide
ATO Tax Rates – Current tax rates and brackets
ATO App – Mobile tax management

myGov Platform:

myGov Home – Create account and access services
Create myGov Account – Registration instructions
Link to ATO – Connect your tax account

Digital Identity:

myGovID Setup – Enhanced security option

U.S. Government Resources

U.S.-Australia Tax Treaty – Full treaty text and explanations
U.S.-Australia Totalization Agreement – Complete agreement details
Agreement Text – Legal document

Greenback Tax Resources

Australia-Specific Guides:

Australian Superannuation U.S. Tax Guide – Complete superannuation reporting
Transferring Superannuation to 401(k) – Distribution and transfer strategies

General Expat Tax Guides:

Foreign Earned Income Exclusion Guide – FEIE details and strategies
Foreign Tax Credit Guide – FTC maximization
FBAR Filing Guide – Foreign bank account reporting
FATCA Reporting – Form 8938 requirements
Streamlined Filing Procedures – Catching up on late returns
Physical Presence Test – Qualifying for FEIE
Bona Fide Residence Test – Alternative FEIE qualification

Additional Resources:

State Taxation for Expats – Severing state tax ties
Tax Deadlines by Country – Managing dual deadlines
Totalization Agreements Guide – Social security coordination
International Living Costs – Budgeting for Australia
Credit Scores in Other Countries – Building Australian credit
U.S. Citizen Abroad Taxes – Overview of expat obligations

Free Guide 15 Tax Tips Every American Expat Needs To Know in 2025

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