File US taxes from Australia
US citizens and Green Card holders living in Australia are generally required to file an annual US tax return with the IRS if they meet the applicable filing thresholds. The US taxes its citizens and resident aliens on worldwide income, so your Australian salary, self-employment income, superannuation, investment income, rental income, and other earnings may still need to be reported on Form 1040 even if you already pay tax to the ATO.
Filing a US tax return does not automatically mean you will pay tax twice. Many Americans in Australia can reduce or eliminate double taxation by using the Foreign Tax Credit, the Foreign Earned Income Exclusion, or treaty-based positions where applicable. However, the obligation to file may remain even when no US tax is ultimately due.
If you need to file US taxes from Australia, you may also have additional US reporting requirements depending on your financial situation. Common examples include the FBAR for Australian bank accounts, Form 8938 for specified foreign financial assets, and specialist reporting for Australian superannuation, managed funds, trusts, companies, or large gifts. These forms are often informational, but missing them can lead to penalties, so it’s important to check which rules apply before filing.
Last updated May 20, 2026
Written by: Takouhi Trpceski
In this article
|
Topic |
Key facts for tax year 2025 (filed in 2026) |
|
Who must file |
US citizens, including dual nationals and Green Card holders, with worldwide income over the filing threshold |
|
Filing thresholds for Tax Year 2025 |
Single (under 65): US$15,750 Head of Household: US$23,625 Married Filing Jointly: US$31,500 Married Filing Separately: US$5 |
|
Self-employment rule |
File if net earnings exceed US$400 |
|
Expats’ filing deadline |
June 15, 2026 (with auto 2-month extension) Tax due is April 15, 2026 |
|
Main tax benefits |
• FEIE: Exclude up to US$130,000 of earned income • Foreign Tax Credit (FTC): Credit for Australian income tax paid • Child Tax Credit: Up to US$2,200 per child (refundable up to US$1,700) |
|
Treaty & totalization |
The Australia-US tax treaty prevents double taxation, and the Totalization agreement prevents duplication of Social Security payments |
|
Key reporting |
FBAR (>US$10,000 in foreign accounts) FATCA (Form 8938) Form 5471 (Australian company) Form 3520/3520-A (Superannuation) Form 8858 (Self-employed in Australia) |
Do US citizens in Australia need to file US taxes?
Yes. If you’re a US citizen or Green Card holder living in Australia, you generally must file a US tax return if your income exceeds IRS thresholds. Start by checking your filing status and comparing your total income to the 2025 limits below.
What’s new for Americans in Australia this 2026?
For Americans living in Australia, the biggest US tax developments in 2026 are about shifting reporting risks, higher IRS thresholds, Australian tax rule changes, and growing scrutiny around foreign structures, superannuation, and investments.
Here are the updates that matter most for tax year 2025 returns filed in 2026:
- The Foreign Earned Income Exclusion (FEIE) increased to US$130,000
- April 15, 2026: The IRS still expects payment by this date
- June 15, 2026: Automatic expat extension
- October 15, 2026: Final extension deadline
- Australian superannuation scrutiny continues increasing
- FTC is becoming more valuable than FEIE for many Australians
- Australian company owners are facing more Form 5471 exposure
- More IRS focus on digital payments and electronic refunds
Australia tax rates 2025–26
If you’re a US expat in Australia, Australian tax rates affect both your ATO liability and the Foreign Tax Credit you may be able to claim on your US return.
Australian resident tax rates
Australian tax residents receive a tax-free threshold of the first AUD$18,200. For 2025–26, resident rates are:
| Taxable income | Tax on this income |
| AUD$0-AUD$18,200 | No tax |
| AUD$18,20-AUD$45,000 | 16% per AUD$1 over AUD$18,200 |
| AUD$45,00-AUD$135,000 | AUD$4,288 + 30% per AUD$1 over AUD$45,000 |
| AUD$135,00-AUD$190,000 | AUD$31,288 + 37% per AUD$1 over AUD$135,000 |
| Over AUD$190,000 | AUD$51,638 + 45% per AUD$1 over AUD$190,000 |
Most residents also pay the 2% Medicare levy. Low-income earners may qualify for the Low Income Tax Offset, worth up to AUD $700.
Non-resident tax rates
Non-residents in Australia do not receive the tax-free threshold and generally do not pay the Medicare levy:
| Taxable income | Tax on this income |
| AUD$0-AUD$135,000 | 30% per AUD$1 |
| AUD$135,001-AUD$190,000 | AUD$40,500 + 37% per AUD$1 over AUD$135,000 |
| Over AUD$190,000 | AUD$60,850 + 45% per AUD$1 over AUD$190,000 |
Your Australian tax residency is separate from your visa status and is based on ATO residency tests. The difference can be significant: on AUD $80,000, a non-resident pays about AUD $24,000, compared with roughly AUD $16,400 for a resident before offsets and levies.
Stage 3 tax cuts
These rates reflect the Stage 3 tax cuts from July 1, 2024, including lower 16% and 30% rates and a higher 37% threshold. Using older tax tables can materially affect both your Australian tax calculation and your US Foreign Tax Credit.
Source: Australian Taxation Office
Why this matters for your US return: The Foreign Tax Credit is calculated on the Australian tax you actually paid. Lower Australian rates under Stage 3 mean slightly less credit available to offset US tax. For most expats in Australia, the rates are still high enough to eliminate US liability, but higher earners close to the threshold should recalculate rather than assume last year’s result still holds.
Also read: Australia income tax rates
Are you an Australian tax resident? The four ATO tests
Your Australian tax residency status determines which tax rates apply, whether you receive the AUD$18,200 tax-free threshold, and whether Australia taxes your worldwide income or only Australian-sourced income.
The ATO uses four tests. You only need to meet one to be treated as a resident.
1. Resides test
This is the main test. You may be a resident if you live in Australia on a settled, ongoing basis. The ATO looks at your home, length of stay, family and financial ties, belongings, and intention to remain.
2. Domicile test
If your permanent legal home is in Australia, you are generally a resident unless your permanent place of abode is outside Australia. This can also affect Australians who move overseas but keep strong ties to Australia.
3. 183-day test
If you are in Australia for 183 days or more in an income year, you are generally treated as a resident unless your usual home is outside Australia and you do not intend to take up residency.
4. Commonwealth superannuation test
Australian government employees contributing to the PSS or CSS are automatically treated as residents. This rarely applies to US expats in the private sector.
Why it matters
| Status | Tax treatment |
|---|---|
| Resident | Tax-free threshold, progressive rates, Medicare levy, and tax on worldwide income |
| Non-resident | No tax-free threshold, 30% tax from the first dollar, no Medicare levy, and tax generally only on Australian-sourced income |
Residency test examples
Resident for tax purposes: Sarah moves from Chicago to Sydney for an indefinite role with an Australian employer. She ships her belongings, signs a 12-month lease in her own name, opens an Australian bank account, and closes her US storage unit. Her husband joins her and enrolls their children in a local school. Sarah passes the residency test. She is an Australian tax resident from the date of her arrival, pays ATO rates on her worldwide income, and can claim the AUD$18,200 threshold.
Non-resident for tax purposes: James relocates to Melbourne on a two-year work assignment from his US employer. He keeps his apartment in New York, maintains his US bank accounts, and leaves his family behind in the US, visiting them every six weeks. He stays in a furnished corporate apartment in Melbourne with no lease in his name. Even though James is in Australia for more than 183 days, he can demonstrate that his usual place of abode remains outside Australia and he has no intention of taking up residency. He is treated as a non-resident and pays ATO tax only on his Australian-sourced income at non-resident rates.
Who must file US taxes from Australia?
You must file a US tax return if your income exceeds IRS thresholds. Start by checking your filing status and comparing your total income to the 2025 limits below.
For the 2025 tax year, filed in 2026:
| Filing status | Minimum income |
| Single | US$15,750 |
| Married filing jointly | US$31,500 |
| Married filing separately | US$5 |
| Head of household | US$23,625 |
| Self-employed | US$400 |
US tax deadlines for Americans in Australia
Most US expats in Australia get an automatic extension to June 15, 2026, but interest still starts from April 15.
Here’s how the timeline works:
- April 15, 2026: Standard US tax filing deadline
- June 15, 2026: Automatic extension on tax filing for US expats
- October 15, 2026: Additional extension with Form 4868
US expat capital gains tax in Australia
When you sell an asset in Australia, both countries tax the gain. Australia adds it to your ordinary income at your marginal rate, but gives Australian tax residents a 50% CGT discount on assets held for more than 12 months, so only half the gain is taxable. Non-residents do not get the discount.
The IRS taxes the full gain regardless. The 50% Australian discount does not apply to your US return, which means Australia’s effective tax on the discounted amount may be too low to fully cover your US liability through the Foreign Tax Credit.
You report the sale on both returns in the same year, converting the gain to USD using the exchange rate at the date of sale.
Key takeaway: The 50% CGT discount applies to your Australian bill but not to your US one. If you are selling Australian property or shares, model both returns before transacting your residency status at the point of sale, as it affects which rules apply.
How to file US taxes from Australia (step-by-step guide)
Filing US taxes from Australia involves reporting worldwide income, applying tax relief, and submitting required forms such as Form 1040 and the FBAR.
Step-by-step guide to filing US taxes from Australia
Step 1: Gather your income
The IRS requires you to report global income, which includes:
- Australian salary or wages
- Business income
- Investment income (dividends, capital gains)
This also includes any income from other countries, even if it was already taxed locally.
Step 2: Convert income to US dollars
All US tax reporting must be in USD. You can typically use:
- An annual average exchange rate (common for salary)
- A spot rate (for one-time transactions)
In practice, most expats use an average rate for simplicity.
Step 3: Choose your tax strategy
You’ll generally choose between:
Many expats assume FEIE is the default option. In Australia, that’s often not the case. The FTC often works better in Australia because local tax rates are higher. This usually allows you to fully offset your US tax, and in many cases reduces it to zero
Step 4: Complete your US return
Once your income and strategy are set, you prepare your US return and attach the necessary forms. This usually includes:
Step 5: Report foreign accounts
If you have financial accounts in Australia, you may need to report them separately from your tax return, which includes:
- FinCEN Form 114
- Form 8938 (if applicable)
Step 6: File before the deadline
Submit your return by the applicable deadline, taking advantage of expat extensions if needed.
- Automatic extension to June 15
- Optional extension to October 15
Key takeaway: If your only income is from Australia and you have no major investments, you likely won’t owe the IRS, but you still must file annually.
How to avoid double taxation between the US and Australia
Most US expats in Australia avoid double taxation using either the Foreign Earned Income Exclusion or the Foreign Tax Credit.
Foreign earned income exclusion (FEIE)
FEIE allows you to exclude up to US$130,000 of foreign earned income for 2025.
- Filed using Form 2555
- Applies to earned income only
- Requires residency or presence tests
Good for:
- Lower to mid-income earners
- Those with minimal foreign tax paid
Foreign tax credit (FTC)
FTC lets you claim a credit for Australian taxes paid, often reducing your US tax to zero.
- Filed using Form 1116
- Applies to more income types
- Can be carried forward
FEIE vs FTC: which is better in Australia?
In Australia, most US expats end up using the Foreign Tax Credit because Australian taxes are often higher than US taxes, but the right choice depends on your income type and long-term situation.
|
Factor |
FEIE |
FTC |
|
Covers |
Earned income only |
Most income |
|
Best for |
Lower income |
Higher-tax countries |
|
Australia relevance |
Limited |
Often preferred |
How to decide
Instead of thinking in theory, here’s how most expats approach it:
Use FEIE if:
- Your income is below the exclusion limit (US$130,000 for 2025)
- You want a simpler filing structure
- You don’t have much Australian tax paid
Use FTC if:
- You’re paying significant Australian tax
- You have investment income (dividends, capital gains)
- Your income exceeds the FEIE limit
- You want to preserve credits for future years
You’re also not limited to choosing just one. In some cases, you can use both FEIE and FTC, but on different types of income. That said, it requires careful allocation.
Using both without a clear structure can lead to overlap or reduce the benefit of each.
Also read: How to avoid double taxation?
Franked dividends and the US tax trap most expats miss
Many US expats cannot fully use Australian franking credits on their US tax return because the IRS generally does not treat Australian corporate tax paid by the company as a creditable foreign tax paid personally by the shareholder.
If you hold Australian shares, this mismatch between the Australian and US tax systems can create unexpected double taxation.
How franked dividends work in Australia
Australian companies pay corporate tax before distributing profits. When they pay a dividend, they attach a franking credit, a certificate that the tax has already been paid at the corporate level.
For Australian tax purposes, you include the grossed-up dividend in your income and offset your personal tax bill with that credit. If the credit exceeds your liability, the ATO refunds the difference.
Why the IRS treats franked dividends differently
The IRS does not recognize the Australian franking credit system in the same way.
Under US Foreign Tax Credit rules, Americans can generally claim credits only for foreign taxes they personally paid. Because the Australian corporate tax was paid by the company rather than directly by the shareholder, the IRS usually does not treat the franking credit itself as a creditable foreign tax on a US return
This creates a problem: if the franking credit fully offsets your Australian personal income tax on a dividend, you may end up with no foreign tax credit to claim on your US return. The IRS then taxes you on the full grossed-up dividend with nothing to offset it.
Partial relief for US expats
Australian corporations are generally treated as qualified foreign corporations under US tax rules. That means many franked dividends qualify for the lower US qualified dividend tax rates of 0%, 15%, or 20%, depending on income level, rather than being taxed at ordinary income rates.
This can reduce the overall US tax burden, but it does not fully eliminate the mismatch.
Unfranked dividends are actually simpler for US expats in this respect: you pay the full ATO tax personally, and that amount is available as a Foreign Tax Credit, typically covering any US liability.
Key takeaway: Review your Australian share holdings before filing. Fully franked dividends from Australian blue-chips may produce a US tax bill that would not arise with unfranked or international dividends, because the franking credit belongs to the company, not to you.
US vs Australia tax year
The US and Australia use different tax years, which can make timing your income and tax credits more complicated than they first appear.
- The US tax year starts on January 1 to December 31
- Australian tax year starts on July 1 to June 30
This mismatch affects how you claim the Foreign Tax Credit. You may need to estimate Australian tax for your US return because the reporting periods do not fully align.
For example:
- Your US return (2025) uses calendar-year income
- Your Australian tax paid may span two tax years
This creates a timing gap when claiming the Foreign Tax Credit.
Most expats deal with this in one of two ways.
- Some use reasonable estimates. They estimate the Australian tax paid for the US reporting period. If needed, they adjust the figures later.
- Others use actual amounts paid. They rely on taxes paid during the calendar year. If there are unused credits, they carry them forward.
Both approaches can work. The key is to stay consistent.
US-Australia totalization agreement
The US-Australia totalization agreement helps ensure you don’t pay social security taxes to both countries on the same income. It determines whether you contribute to the US Social Security or the Australian Superannuation.
This is separate from income tax. It applies specifically to social contributions, not your main tax return.
The 5-year rule
Which system you contribute to depends primarily on how long you have been working in Australia:
- Under 5 years: If you are temporarily assigned to Australia by a US employer, you generally continue paying into US Social Security. Your employer should obtain a Certificate of Coverage from the SSA confirming your exemption from Australian contributions.
- Over 5 years: Once your assignment exceeds five years, the exemption no longer applies. You contribute to the Australian system instead.
- Employed by an Australian employer: If you are hired locally by an Australian employer — regardless of assignment length — you generally contribute to Australian Superannuation and are not subject to US Social Security on that employment income.
The five-year threshold is a hard line. If you are approaching it on an extended assignment, it is worth reviewing your coverage position before the deadline rather than after.
What about self-employed individuals?
This is where things get more complex. Under the totalization agreement, self-employed US citizens residing in Australia are generally exempt from US self-employment tax (the Social Security portion) on their self-employment income. This can be a significant saving, as self-employment tax covers both the employer and employee portions, totalling 15.3% on net earnings.
However, the exemption is not automatic. It depends on your residency status and the structure of your work. Some situations where the US self-employment tax may still apply:
- You are not considered an Australian resident for social security purposes
- Your business structure means you are treated as a US-based operation with Australian activities
- You have not established sufficient ties to the Australian system
If you are self-employed, review whether the exemption applies to your specific setup before filing. Claiming it incorrectly or missing it when it does apply are both common and costly errors.
Combining credits for benefits
The agreement also allows work credits earned in both countries to be combined when determining eligibility for retirement, disability, or survivor benefits. This matters if you have split your working life between the US and Australia and may not have enough credits in either country alone to qualify. You generally need at least six US quarters of coverage (1.5 years) before totalization credits can be applied.
Key takeaway: The 5-year rule determines which social security system covers you on assignment. Self-employed Americans in Australia are generally exempt from US self-employment tax under the agreement, but the exemption depends on your setup and is not applied automatically; confirm your position before filing.
Converting Australian income to US dollars
You must report all income in US dollars, so your first step is converting your Australian income into USD using a consistent method. Most expats use one of two approaches:
- Annual average exchange rate: This works well for salary or regular income. It keeps things simple and consistent across the year.
- Spot rate: This is more precise and is usually used for one-off transactions, such as selling shares or receiving a lump sum.
In practice, most people use the average rate for income and reserve spot rates for specific events.
If you switch methods without a clear reason, it can create discrepancies in your reporting. A practical way to handle this is to choose a method early. Then apply it across all income types where appropriate. Keep a record of the rate you used in case you need to explain it later.
Reporting foreign accounts
If you hold financial accounts in Australia, you may need to report them separately under FBAR and FATCA rules, even if no tax is owed.
FBAR (foreign bank account report)
You must file an FBAR if your aggregate total foreign account balances exceed US$10,000 at any point during the year.
This includes:
- Bank accounts
- Savings accounts
- Some investment accounts
Add the highest balance of all your foreign accounts during the year. If the total exceeds US$10,000 at any point, you must file an FBAR. The FBAR is filed separately from your tax return using FinCEN Form 114.
FATCA (Form 8938)
FATCA requires reporting of foreign financial assets, but only if you exceed higher thresholds.
This is filed with your tax return using Form 8938. The thresholds are much higher than FBAR. So not everyone needs to file it.
The safest approach is to check both thresholds early. Don’t assume one replaces the other. They serve different purposes.
US tax forms for Americans living in Australia
Most US expats in Australia file Form 1040, but the additional forms depend on how your income and assets are structured.
From there, you add forms based on your situation.
- If you are excluding income, you use Form 2555
- If you are claiming credits, you use Form 1116
- If you hold foreign accounts, you may need to file an FBAR or Form 8938 for FATCA reporting
- If you invest in non-US funds, you may need Form 8621
- If you are reporting ownership in a foreign company, you use Form 5471
Net investment income tax (NIIT)
Some US expats may owe an additional 3.8% tax on investment income if their total income exceeds certain thresholds.
This applies to:
- Dividends
- Interest
- Capital gains
The thresholds are:
- US$200,000 for single filers
- US$250,000 for married couples
This is often missed because many expats focus only on earned income.
There are two key points to keep in mind.
First, the FEIE does not reduce exposure to NIIT. Even if your salary is excluded, your investment income can still be taxed.
Second, the Foreign Tax Credit may help offset it. But that depends on how your foreign taxes are categorized.
What you should do:
If your income is approaching these thresholds, look at your investment income separately. Don’t assume it is covered by your main tax strategy.
Superannuation Funds
Superannuation is not treated the same as a US retirement account. The tax treatment depends on the type of fund and the level of control you have over it.
From July 1, 2025, the Superannuation Guarantee rate increased to 12%, completing the scheduled phase-in that began at 9.5% in 2014. For US expats, this increase means larger employer contributions and potentially a larger US tax exposure than in prior years.
Retail and industry super funds
Retail and industry super funds are often treated as foreign employee benefit trusts for US tax purposes. In many cases:
- Employer contributions (now 12% of your base wages) may be taxable in the US in the year they are made, unlike Australian treatment, where they are not counted as your income
- Salary-sacrifice contributions are generally taxable as earned income on your US return
- Annual earnings inside the fund may also be taxable, even if not distributed to you
Self-managed super funds (SMSFs)
SMSFs are more likely to be treated as foreign grantor trusts. This can mean:
- Contributions and annual earnings are taxable in the US
- Additional reporting, including Forms 3520 and 3520-A, may apply
- The account may also need to be reported on the FBAR and Form 8938
Because the rules are complex and penalties can be high, professional cross-border advice is strongly recommended.
Note on the 12% rate: If your employer is contributing 12% of your salary into super from July 2025 onward, that full amount may be treated as taxable income on your US return in the year it is contributed, not when you eventually access the funds. Factor this into your US tax planning for the 2025 tax year.
Australian investments (PFIC rules)
Many Australian-managed funds are classified as PFICs under US tax rules. This triggers additional reporting using Form 8621.
PFIC rules are complex and often unfavorable from a US tax perspective. This is why some expats rethink how they invest after moving abroad.
Can you include a non-US spouse on your US tax return?
You can elect to treat a non-US spouse as a US resident and file a joint return, but this decision has trade-offs.
Filing jointly can increase your standard deduction. It may also reduce your tax liability in some cases. However, it also means your spouse’s worldwide income becomes subject to US taxation.
This election is optional and not always beneficial. It depends heavily on income levels and structure. A practical way to approach this is to compare both scenarios. Run the numbers with and without the election before deciding.
Example: filing US taxes from Australia
Many US expats in Australia end up owing little or no US tax after applying the Foreign Tax Credit.
Consider a simple scenario:
A US citizen works in Sydney and earns US$90,000. They pay Australian income tax on that salary.
When they file their US return, they claim the Foreign Tax Credit. The Australian tax paid offsets the US tax liability. In many cases, this reduces the US tax owed to zero or close to it.
This is a common outcome because Australian tax is often high enough to offset US tax. However, the result depends on your income type and how credits are applied.
Common mistakes Americans in Australia make when filing US taxes
- Most issues are not caused by unpaid tax. They come from missed reporting, especially FBAR, foreign assets, and investment disclosures.
- Some expats assume they don’t need to file because they already pay tax in Australia.
- Others miss FBAR reporting because they don’t realize the threshold is based on combined balances.
- Some rely too heavily on FEIE and overlook FTC or investment income.
- Others invest in non-US funds without understanding PFIC rules.
- Many misunderstand how superannuation is treated under US tax law.
Frequently Asked Questions
Do I need to file US taxes if I earn below the threshold in Australia?
Not always, but it depends on your situation, especially if you are self-employed or have foreign accounts.
If your income is below the filing threshold, you may not need to file a return. However, if you are self-employed, the US$400 rule still applies. You may also still need to file an FBAR if your accounts exceed the reporting threshold.
A practical approach is to check both your income level and your account balances before deciding not to file.
Can I file US taxes before completing my Australian tax return?
What happens if I haven’t filed US taxes while living in Australia?
Do I need to file US taxes if I only earn income in Australia?
Does the US-Australia tax treaty eliminate double taxation completely?
Should I use an accountant or file on my own?
Further reading
File US Taxes from Australia Guide for American Expats
Download your free copy of the 40-page guide that covers everything Americans in Australia need to know about US tax filing.
Takouhi Trpceski brings 16 years of expat tax expertise in US tax preparation, planning, and advisory for Americans and Green Card holders living in Australia. Takouhi is a Certified Public Accountant (CPA) licensed in New York and a Chartered Accountant (CA) in Australia and New Zealand.
Takouhi has counseled ultra-high-net-worth families, including multi-generational groups managing assets in excess of USD $500 million, on matters spanning trusts, family investment partnerships, cross-border tax planning, and global compliance.
Takouhi specializes in: Foreign Asset Reporting & Compliance, Cross-Border Tax Planning (US-Australia), and Streamlined Offshore Procedures.