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There are plenty of reasons why Australia is such a popular home for Americans living abroad. With its laid-back culture and warm climate, Australia can be the ideal place to build a new life. But what are Australian taxes like for US expats? Let’s take a look.
In most cases, American citizens living in Australia have to file tax returns with both the US and Australian governments. This can get complicated. Plus, Australia uses a different tax year from the US, meaning that expats will need to juggle both.
To help clear up what taxes you may need to file—and when—here’s an overview of Australian taxes for expats.
Whether or not an expat has to file an Australian tax return—or “lodge” it, as they say down under—depends on their residency status and income.
Australian tax residents are required to file a tax return if their annual income is over 18,200 Australian dollars (AUD). If you are required to file as a resident, you will have to report your worldwide income, not just income that came from an Australian source. The good news is that Australia has various mechanisms in place—such as the US-Australian tax treaty—to help you avoid double taxation.
Non-residents must file a tax return if they have any Australian-source income at all, with no minimum threshold. Non-residents are also taxed at higher rates than residents. However, unlike residents, non-residents are only required to report Australian-source income, not worldwide.
Residency status can have a major impact on Australian expat taxes. So what qualifies you as a tax resident, non-resident, or temporary resident?
An Australian tax resident is someone who meets the standards of any of the following four tests:
If you do not meet any of these qualifications, you will generally be considered a non-resident for tax purposes.
In Australia, residents and non-residents are taxed at different rates. Below, you can see the rates for both. (All amounts are given in AUD.)
Note: the above rates do not include the 2% Medicare levy.
Note: Foreign residents do not pay the 2% Medicare levy.
Capital gains are taxed in Australia, but they are considered part of the standard income tax rather than a separate category. As such, capital gains are taxed at the same rates as income.
Capital losses can be claimed to reduce taxes on capital gains, but not used to offset any other forms of income.
Australia’s capital gains tax does not apply to assets received through the transference of an estate. Capital gains are only incurred if you later sell the asset you acquired.
The goods and services tax (GST) is a value-added tax that applies to most transactions involving goods and services. The GST is applied at a flat rate of 10%.
Business owners with more than 75,000 AUD in receipts will have to register with the government and collect this tax.
Tourists to Australia are eligible for a refund of the GST that they paid upon the presentation of the items and receipts when exiting the country.
In Australia, companies do not necessarily have to be incorporated to be considered a corporation for tax purposes. All that is required is that the company carries out business in Australia, with Australian ownership or control.
The Australian corporate tax rate depends on the size of the company.
Like the US, Australia has a social security system in place to provide for its citizens and residents. This could lead to confusion over which system a US expat living in Australia should contribute to. Fortunately, the US-Australia totalization agreement establishes rules for social security contributions.
Self-employed Americans living abroad in Australia may choose to contribute to either social security system.
Superannuation is Australia’s version of a pension system. Superannuation is partly mandatory and partly voluntary. Beyond salary and wages, the government has minimums for both employers and employees to meet to fulfill superannuation requirements. The current rate is 9.5%, but this will increase to 12% by 2025.
Employee investments are both funded and vested.
Superannuation funds can make filing expat taxes extra complicated. The IRS typically treats these funds as grantor trusts or employee benefit trusts, so they are not considered qualified retirement plans, though they operate very similarly to a 401(k). Anyone who has control over these funds will encounter additional IRS reporting requirements.
Yes—the US has a formal tax treaty with Australia. This US-Australia tax treaty helps US expats avoid double taxation while living in Australia.
The US also has a totalization agreement with Australia, which clarifies whether an American living abroad should contribute to the Australian or US social security system.
In Australia, the primary income tax form is NAT 2541. This is Australia’s equivalent of IRS Form 1040.
Unlike in the US, the Australian tax year starts July 1 and ends on June 30 of the following calendar year, and the deadline for filing your Australian income tax return is generally October 31 after the end of the tax year.
Extensions are available for taxpayers in certain situations for exceptional and unforeseen circumstances, such as those affected by natural disasters or even those who volunteered to aid victims of natural disasters.
If you hire a registered tax agent before October 31, the filing deadline is automatically extended to June 5 of the following year.
Keep quarterly statements of all your income documents, including superannuation fund statements. Since the Australian tax year is different from the American tax year, the year-end statements that are provided are less helpful than quarterly statements.
Form 1040 is the standard US individual income tax return. Every US citizen is required to file this form regardless of where they live in the world.
The due date for Form 1040 is typically April 15, but in the case of expats, that due date is automatically extended to June 15. (You can also request a further extension to October 15.)
As an expat, if you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Australia.
If you are required to file a FATCA report, attach it to your Form 1040 once you’ve completed it and file them together.
If you have a total of at least $10,000 in a non-US bank account, you’ll have to report it by filing FinCEN Form 114, better known as FBAR. (This applies whether the money is in a single account or spread out over multiple.)
You should file the FBAR electronically using the FinCEN BSA E-Filing System. The standard due date for the FBAR is April 15, but if you miss that deadline, there’s an automatic extension until October 15.
Because of the US-Australia tax treaty, most Americans living in Australia are already exempt from double taxation. However, the IRS also provides several other potential tax credits and deductions for expats, such as:
Most expats who use these tax credits are able to erase their US tax debt entirely.
We hope this guide has given you a better understanding of how Australia’s tax policies affect American’s living abroad.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.