U.S. EXPAT TAX GUIDE – AUSTRALIA

Do I need to file US taxes while living in Australia?

If you’re an American living in Australia, whether you’re working, retired, or just enjoying the sunshine, one big question might be: Do I still need to file US taxes?

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What are the main filing thresholds for Americans to be aware of?

Joint Return: Two spouses who are filing together as a joint return would have a filing threshold of $31,500 of gross income (the amount of money a person earns in one year before taxes and includes income from all sources)in the US tax year 2025.

This doesn’t necessarily mean that you have to pay any tax in the US, most Americans and Green Card holders don’t, but that you are required to file a return.

Head of Household: The filing status for Head of Household is $23,625 of gross income in the 2025 US tax year.

Single Filer: The filing status for a single filer is $15,750 of gross income in the 2025 US tax year.

Married Filing Separate: Those who are married filing separately only need to earn more than $5 in the 2025 US tax year.

An example here would be if you are married to a non-American and your worldwide income exceeds $5 you need to file a US tax return.

Just because you are not working, does not mean that you will not earn $5 and need to file. For example, you would be required to file if you made $5 through interest.

This threshold took a major change in 2018 following the Trump tax reforms of 2017. It’s important to reiterate the point made earlier that just because you have to file your tax returns, it doesn’t necessarily mean you will have to pay anything.

Is it better to file as Head of Household rather than Married Filing Separate?

There are certainly benefits to Head of Household filing status compared to Married Filing Separate, particularly as it comes with better tax benefits. There are however criteria that you must meet to qualify such as:

You must be providing more than 50% of the costs of expenses in the household.
You are unmarried (single, divorced or legally separated) or considered unmarried (for instance if you are married to a non-American or non-Green Card Holder) by December 31 of the year. Unfortunately, if you are married to an American, the status generally does not apply to you.
You also need a qualifying dependent – for example a child or an elderly relative.

What counts as a qualifying dependent when filing US tax returns as a Head of Household?

You must be providing more than 50% of the costs of expenses in the household.
You are unmarried (single, divorced or legally separated) or considered unmarried (for instance if you are married to a non-American or non-Green Card Holder) by December 31 of the year. Unfortunately, if you are married to an American, the status generally does not apply to you.
You also need a qualifying dependent – for example a child or an elderly relative.

What counts as household expenses in order to file as a Head of Household?

The following are some of the expenses that if you pay over 50% of, will qualify you to file as a Head of Household:

Rent
Insurance
Property taxes
Mortgage interest
Utility bills
Repairs and household maintenance

Is there an Australian/US Tax Treaty?

Yes, there is. The Treaty is used by us almost every day: it has a lot within it to help us prevent double taxation and also to assign taxing rights of certain incomes between Australia and the US.

However, it isn’t a silver bullet, making your liability the lowest possible or preventing you from paying tax at all in the US.

The Treaty has a savings clause, by which the US Government reserves the right to tax a US citizen or Green Card Holder as they see fit under domestic tax laws.

What is the main benefit of the Australian/US Tax Treaty?

The Treaty’s main benefit to those US citizens or Green Card Holders living in Australia is that it eliminates double taxation.

It allows us to use mechanisms within the Treaty to optimize the way that income is taxed between Australia and the US, so that we can minimize tax and optimize the outcomes for our clients.

Key points to know about the Australian/US Tax Treaty:

Its purpose is to ensure fairness, but that doesn’t guarantee that you will achieve the lowest outcome by using it.
There’s more than one type of Tax Treaty between the US and Australia. For example, there is a Totalization Agreement between Australia and the US, focusing on the term ‘social security’.
- From a US perspective, the Totalization Agreement determines whether you pay US Social Security tax (6.2%) and Medicare tax (1.45%), or instead contribute only to Australia’s Superannuation system.
- Although the systems don’t exactly match up, the rough equivalent in Australia is superannuation, so the Treaty ensures that you do not have to pay both social security in the US and superannuation in Australia.

The Totalization Agreement is less of an issue for an employee, but something that we see more often with those who have their own businesses or are self-employed in other ways.

What if you do own a business or are self-employed?

In the US, you would be liable to pay self-employment tax as a self-employed person or owner of a business.

Self-employment tax is one of those taxes that cannot be offset by taxes paid in a foreign country.

However, the Totalization Agreement can work in your favour.

As a US citizen or Green Card Holder living in Australia, you are eligible to use the social security Totalization Agreement; this exempts you from paying any US self-employment tax.