How do you treat employer contributions to the Australian superannuation plan?

The Australian superannuation fund often causes confusion for American expats residing in Australia, especially when it comes time to report it on your US returns! One of the biggest questions we receive is how the employer contributions are treated.

Employer contributions should be treated like compensation. So, for foreign tax credit purposes, it will fall in the general income category. These contributions would need to be included in the return as income. If you are considered a highly compensated employee, some additional rules apply.

A highly compensated employee is currently an individual receiving salary of $110,000 or more. In this case, you should also look to include the growth in the fund (earnings minus expenses) in addition to the contributions. Fortunately, a foreign tax credit can be claimed for the 15% contributions tax. Neither the employer contributions nor growth can be considered earned income when calculating the Foreign Earned Income Exclusion.