U.S. taxes for Americans in Australia: what to file, and how to catch up.
Americans in Australia still file a U.S. return every year, but Australian tax rates are high enough that most owe the IRS little once foreign tax credits are applied. The hard parts are superannuation, Australian funds, and a tax year that runs July to June. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- You've lodged with the ATO for years but never filed with the IRS.
- Your super fund has grown and you've no idea how the U.S. treats it.
- You hold Australian managed funds or ETFs.
- You became an Australian citizen and assumed that ended your U.S. obligations.
How does the IRS treat super and other Australian accounts?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| Superannuation | The treaty doesn't clearly cover it. Depending on the fund and contributions, it may be treated as a foreign trust or an employee trust, and contributions and growth could be taxable for the U.S. as they build. | Complex |
| Self-managed super fund | All of the above, plus more reporting: an SMSF could be treated as a foreign trust, with trust forms each year. | Watch out |
| Australian managed funds & ETFs | Usually PFICs: Form 8621 and unfavorable tax rules. | Watch out |
| Australian shares (direct) | Taxable like U.S. shares. Dividends are reported, and franking credits need careful handling. | Reportable |
| Bank and term deposits | Interest is taxable. Accounts go on the FBAR. | Taxable |
| Rental property | Rent goes on your U.S. return with U.S. depreciation, usually over 30 years for a foreign home, and U.S. rules can limit the losses you deduct. | Taxable |
| Selling your home | Australia's main residence exemption is unlimited; the U.S. excludes $250,000 of gain ($500,000 for couples). | Plan ahead |
Which Australian investments are PFICs?
Australian managed funds, ETFs listed on the ASX, and listed investment companies (LICs). For U.S. tax they’re passive foreign investment companies, or PFICs, with their own reporting and harsh default tax rules.
- Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- Not PFICs: shares of individual Australian companies, government bonds, term deposits and bank accounts.
- Inside super, whether the investment options count as PFICs depends on how the fund itself is treated, which is an unsettled area.
Before selling to tidy up, look at the cost both ways: a sale has Australian capital gains tax consequences as well as U.S. ones.
What does the U.S.–Australia tax treaty actually say?
The treaty was signed in 1982 and updated by a protocol in 2001. For Americans living in Australia, a few parts matter most:
- The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists. Most treaty benefits don’t reduce U.S. tax for a U.S. citizen living in Australia.
- Relief from double tax. The U.S. gives a credit for Australian income tax on the same income, which is why most Americans in Australia owe little U.S. tax on their salary.
- Superannuation. The treaty doesn’t clearly say how the U.S. treats super while it builds. That’s why super is the most debated part of an Australian filing.
Social security is covered by a separate U.S.–Australia agreement, which generally means you pay into one system, not both. Read the U.S.–Australia tax treaty on IRS.gov.
Two Aussie tax years, one U.S. return
U.S. returns run January to December, and the Australian tax year runs 1 July to 30 June. So each U.S. return covers part of two Aussie tax years, and we work out which income and which tax belong to which U.S. year, using your payslips and income statements.
| Australia | United States | |
|---|---|---|
| Tax year | 1 July to 30 June | January to December |
| Annual return | 31 October if you lodge it yourself, or later through a registered tax agent | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | Withheld from your pay, with any balance due on your notice of assessment | April 15, even if you file later |
| Foreign accounts | No separate report | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Australia?
Usually the foreign tax credit. Australian tax on a middle income, with the 2% Medicare levy, is normally more than the U.S. tax on the same salary, so the credit wipes out the U.S. tax, and the unused credit carries forward for up to 10 years.
- The exclusion covers up to $130,000 of earned income for 2025 and can suit lower incomes, but it gives up the refundable child tax credit, up to $1,700 per child for 2025.
- Income Australia taxes lightly can leave a U.S. bill. A home sale is the classic case: tax-free in Australia, but only partly excluded in the U.S.
- The split tax year matters for the credit. Australian tax has to be matched to the U.S. year it belongs to, which we do from your payslips and notices of assessment.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: selling a home in Sydney
Mia and Ben, both U.S. citizens, bought their Sydney home in 2014 for A$900,000 and sold it in 2025 for A$1,700,000. Australia doesn’t tax the gain. The U.S. measures it in dollars, at the exchange rates when they bought and sold. With rounded rates, for illustration:
| In Australian dollars | In U.S. dollars | |
|---|---|---|
| Bought, 2014 (A$1 = US$0.90) | A$900,000 | $810,000 |
| Sold, 2025 (A$1 = US$0.65) | A$1,700,000 | $1,105,000 |
| Gain | A$800,000, exempt in Australia | $295,000 |
| U.S. home sale exclusion | — | $500,000 for a married couple |
| U.S. tax | — | $0 |
Because the Australian dollar fell, their gain in U.S. dollars is much smaller than in Australian dollars, and the couple’s exclusion covers it. If Mia owned the home alone, her exclusion would be $250,000, leaving $45,000 taxable in the U.S., with no Australian tax to credit. And paying off an Australian-dollar mortgage after the dollar fell can create a separate, taxable currency gain.
How we catch you up
- 1
Free consultation
We confirm you qualify for Streamlined and look at your super and fund holdings.
You: answer 3 quick questions.
- 2
Your Australian papers
Notices of assessment, income statements from myGov, and super and bank statements.
You: upload what you have.
- 3
We prepare everything
Three U.S. returns split across the July tax year, six FBARs, and your certification.
You: review, then print, sign and mail. We e‑file your FBARs.
Catching up from Australia
Most Americans in Australia who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Does becoming an Australian citizen end my U.S. tax obligations?
No. Taking another citizenship doesn't end U.S. citizenship. You'd need to formally renounce, and even then, past years stay. More on renouncing.
Is my super taxed every year by the U.S.?
It depends on how it's classified, which is a genuinely unsettled area. We explain the options and the reporting that comes with each before you file.
Does my super go on the FBAR?
Yes. Super accounts count as foreign financial accounts for the FBAR, and may need to go on Form 8938 too.
How do you handle the July tax year?
We split your Australian income and tax between the two U.S. years using your payslips, income statements and notices of assessment. It's routine for us.
Do I pay U.S. Social Security tax in Australia?
Usually not. The U.S.-Australia totalization agreement generally means you pay into only one system for the same work.
Should I sell my Australian ETFs?
Not before looking at the numbers. Selling can trigger Australian capital gains tax and U.S. PFIC tax at once. We'll show you the cost of keeping versus selling.
American in Australia? Let's get you caught up.
Answer 3 quick questions and our tax team will review your situation for free.
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