US Tax FAQ for Australian Expats: The Filing Questions People Actually Ask

If you’re an Australian living and working in the United States, the US tax system arrives like a surprise houseguest: loud, demanding, and apparently planning to stay. It runs on rules that feel alien to anyone raised on the Australian system, and the paperwork has a vocabulary all of its own. So here are straight answers to the questions Australians in the US ask us most often.

One honest note up front, because it matters. We’re Australian registered tax agents. We don’t lodge US returns; those are filed with the IRS under US law, and for the actual US filing you’ll want a qualified US preparer. What we do, and what genuinely saves Australians money, is handle the Australian side and make the two systems talk to each other, so you’re not tripping over the same dollar twice or missing something on one side that bites you on the other. With that said, here’s how the US side works.

Which US tax returns and forms do I actually have to file?

Start with the rule that catches Australians off guard: the US taxes based on citizenship and residency, not just where you live. So US citizens and green card holders generally have to file a US federal return every year on their worldwide income, no matter where on earth they are. If you’re an Australian on a US visa, you’re generally in the net once you become a US tax resident (which, broadly, happens through the substantial presence day-count or by holding a green card). Living in Sydney rather than San Diego doesn’t switch it off if you’re a US person.

The core return for US citizens and resident aliens is Form 1040, the US equivalent of your Australian individual return. But not every Australian in the US starts there: if you’re a non-resident alien for US tax purposes, you may instead be filing Form 1040-NR, and in a year you move into or out of US residency, dual-status filing can complicate things further. Same country, different forms, naturally. Whether you’re required to file at all generally depends on your gross income against a threshold tied to your filing status (for the 2025 tax year, broadly around US$15,750 for a single filer and US$31,500 for a married couple filing jointly), with a much lower trigger (around US$400 of net earnings) if you’re self-employed. On top of the return, two reporting obligations trip people up constantly because they’re about disclosure, not tax, and they’re easy to forget:

• The FBAR (FinCEN Form 114). If the aggregate high-water value of your foreign financial accounts tops US$10,000 at any point in the calendar year, you may need to report them. That includes ordinary Australian bank accounts, and Australian superannuation should be specifically considered rather than waved away. The threshold is aggregate, so a couple of modest accounts can cross it between them. Critically, the FBAR is not filed with the IRS or attached to your tax return; it’s lodged separately through the US Treasury’s FinCEN e-filing system.
• Form 8938 (the FATCA form). This is a separate disclosure of “specified foreign financial assets,” filed with your US tax return, and its thresholds depend on your filing status and, crucially, on whether you’re treated as living in the US or abroad. This matters enormously for Australians actually living in the US, because the in-US thresholds are much lower: for an unmarried taxpayer living in the US, Form 8938 generally kicks in at more than US$50,000 of such assets on the last day of the year (or more than US$75,000 at any point during it), and more than US$100,000 / US$150,000 for a married couple filing jointly. The higher overseas thresholds (US$200,000 / US$300,000 single, US$400,000 / US$600,000 joint) apply only where you genuinely meet the living-abroad requirements. Filing the FBAR does not satisfy Form 8938, or vice versa; plenty of people have to file both, because they cover different things through different systems.

The penalties for getting the disclosure forms wrong are eye-watering, running into many thousands of dollars per unfiled form even where no tax was owed, so this is not the corner to cut. If you’ve already fallen behind, there are catch-up pathways (the IRS Streamlined Filing Compliance Procedures, for non-wilful cases), which a US specialist can walk you through.

What is the US tax year, and when is everything due?

The US tax year is the calendar year, January to December, which already puts it out of step with Australia’s July-to-June year. That mismatch quietly complicates everything, because income and foreign tax don’t line up neatly between the two systems.

The standard individual filing deadline is 15 April. If you’re a US citizen or resident alien and, on that date, you’re living outside the US and Puerto Rico with your main place of business or post of duty also outside the US and Puerto Rico, you generally receive an automatic two-month extension to 15 June. But interest still runs on any unpaid tax from the April deadline. The IRS gives you more time to file; it doesn’t give your money a free holiday.

If you need still more time, you can request an extension to October using Form 4868, but that too is an extension to file, not to pay. Assuming “I’m an expat, so I’ve got until October” without actually requesting it is a classic and expensive mistake.

How do I avoid being taxed twice, by the IRS and the ATO?

This is the heart of it, and the good news is the system is designed so you generally shouldn’t pay full tax twice on the same income. There are two main tools, and they work very differently.

The first is the Foreign Earned Income Exclusion (the FEIE, claimed on Form 2555). It lets a qualifying person exclude a chunk of foreign earned income (think salary and wages for work performed overseas) from US tax. The amount is indexed each year: for the 2025 tax year it’s up to US$130,000 per qualifying person, rising to US$132,900 for 2026. Note the words “earned income”, it’s for income from working, not investment income, and it doesn’t wipe out US self-employment tax. You qualify by meeting either the bona-fide-residence test or the physical-presence test (broadly, being genuinely settled abroad, or being outside the US for at least 330 full days in a 12-month period), not simply by declaring yourself an Australian resident. If you’re an Australian in the US, by the way, the FEIE often won’t be your tool at all, because you’re working in the US, not outside it; which neatly illustrates why the mechanics matter more than the slogans.

The second is the Foreign Tax Credit (the FTC, on Form 1116). This gives you a credit against your US tax for income tax you’ve paid to another country (for many Australians, that’s the more relevant one). It’s often described as “a dollar for every dollar paid overseas,” but that’s too generous: the credit is limited by category (the rules sort income into “baskets”) and capped at the US tax attributable to that foreign income, so it doesn’t simply hand you the lower of the two countries’ rates. Unused credit can sometimes be carried back a year or forward for ten. And you can’t double-dip: you can’t claim both the FEIE and the FTC on the very same slice of income, though you can use the FTC on income above the exclusion.

The single most important thing to understand: these reliefs only work if you file. The exclusion and the credit are claimed on a return; skip the return and you don’t get them automatically, you just get exposure. Filing and paying are two separate questions, and “I’ll owe nothing, so I won’t bother filing” is precisely the thinking that lands people in trouble.

Where does the Australia-US tax treaty fit in?

Underneath all of this sits the Australia-US tax treaty, which allocates taxing rights between the two countries and contains a residency “tie-breaker” for people who count as residents of both at once. But there’s a sting, and it lands differently depending on who you are. For US citizens, the treaty’s “saving clause” generally lets the US keep taxing them as if the treaty weren’t there (subject to specific exceptions), so a US citizen usually can’t simply treaty their way out of US worldwide tax. Green card holders are a different problem: they’re generally US tax residents under domestic law, but in some cases they may be able to claim treaty residence in Australia, which is specialist territory involving US forms and possible long-term-resident consequences. Don’t treat a green card as “citizenship-lite” for tax; it’s its own little beast. Because residency is the foundation that decides almost everything else here, we’ve written a focused guide on exactly that: working out whether you’re a US or Australian tax resident, and how the treaty tie-breaker works.

What about my Australian tax while I’m over there?

This is where we come in, and where Australians most often trip. Moving to the US doesn’t automatically end your Australian tax residency; that’s decided by Australia’s own residency tests, on the facts of your situation. If you remain an Australian resident, you’re generally still assessed here on your worldwide income, and you’ll be coordinating two returns on two different year-ends with two sets of rules. If you’ve genuinely become a non-resident, Australia steps back to taxing mainly your Australian-source income, but ceasing residency has its own consequences (including a potential capital gains “exit” event on departure). Getting the Australian side right, and dovetailing it with the US side so the credits and timing actually work, is the bit we handle. There’s more in our broader guide to the top US tax issues for Australian expats.

One more Australian trap deserves a flag: your former home. If you keep your Australian house, rent it out while you’re living in the US, and later sell while you’re a foreign resident, the main residence exemption is generally denied unless the narrow life-events test applies. The old six-year absence rule can still help in the right case, but it’s not the force field many expats assume. The contract date matters, and your residency on that date matters; your fond memories of the backyard barbecue do not do the tax return.

What happens to my Australian superannuation under US tax?

Brace yourself, because this is the single messiest issue for Australians in the US, and it catches almost everyone. The United States does not recognise superannuation as a tax-favoured retirement account the way it treats a 401(k) or an IRA. There’s no neat treaty provision that fixes this either; the IRS has never issued definitive guidance on how Australian super should be treated, which means tax professionals take different defensible positions and the area carries genuine uncertainty.

The difficulty is that the IRS has never issued definitive, Australia-specific guidance giving one clean answer for every fund. In practice, super is commonly analysed under foreign-trust, foreign grantor trust, non-exempt employee trust or employee-benefit principles, with the outcome depending heavily on the type of fund, the contribution history, and how much control you have. SMSFs are especially sensitive, because member control is sitting right there in the front row: depending on the facts, an SMSF can bring foreign grantor trust analysis, Forms 3520 and 3520-A, and annual income inclusion into play. Large industry or retail funds may be simpler, though “simpler” isn’t the same as “ignore it.” Layered on top, PFIC issues may also need to be considered, depending on how the fund and its underlying investments are classified for US purposes. There’s a narrow IRS concession (Revenue Procedure 2020-17) that can remove the Forms 3520 and 3520-A for some qualifying tax-favoured foreign retirement trusts, but whether a given fund qualifies is debated, it doesn’t settle the underlying income-tax treatment, and it never removes your FBAR or Form 8938 reporting. The honest bottom line: this is the one area where you genuinely need a US adviser with specific Australian-super experience, not a general preparer with confidence and a printer. We cover the Australian-side detail in our guide to whether your superannuation is assessable in your US tax return.

Why is everyone so frightened of “PFICs”?

Because the PFIC rules are brutal, and Australians walk into them without realising. PFIC stands for Passive Foreign Investment Company, and the US uses it to describe most pooled foreign investments: Australian managed funds, listed investment companies, and exchange-traded funds (ETFs) generally fall in the net. The everyday Australian investment, an Aussie ETF in your brokerage account or inside your super, is very often a PFIC in American eyes.

The problem is the tax treatment. Left on the default setting, PFIC gains and certain distributions are taxed under a punitive “excess distribution” regime, with tax calculated as if the gain built up evenly over the years you held it, plus an interest charge, often at the highest rates. There are elections that can soften it (the mark-to-market and qualified electing fund elections), but they have conditions and need to be made properly and on time. A US person who owns a PFIC may need to file Form 8621, including where they receive certain distributions, dispose of PFIC stock, make a QEF or mark-to-market election, or fall within other direct or indirect ownership rules; in practice the reporting can become annual, repetitive and wildly disproportionate to the size of the investment (tiny ETF, large sigh). The practical lesson most cross-border advisers preach: think very carefully before buying Australian managed funds or ETFs once you’re a US taxpayer, and get advice on what you already hold before you move, because options like a timely election are far easier to arrange before you become a US resident than after.

Will I have to pay Social Security in both countries?

Generally not on the same earnings, thanks to the US-Australia Social Security Totalization Agreement, which exists precisely to stop you paying into both countries’ systems at once. The direction of the move matters. If an Australian employer sends you temporarily to the US, an Australian certificate of coverage may keep you in the Australian system and exempt you from US Social Security contributions for that work; if you’re locally hired in the US, the answer is usually different. For the self-employed the agreement has its own rules (and US citizens living in Australia are treated differently again from self-employed US residents). The agreement can also let you combine credits from both countries to qualify for a benefit you might otherwise miss. It’s genuinely useful machinery, but the right outcome turns on the work arrangement, the employer, where you live, and whether the right certificate or exemption evidence exists, so it’s worth confirming rather than assuming.

Do I have to pay US state taxes as well?

Quite possibly, and this surprises Australians who think of “US tax” as one thing. The federal return is only one layer. Most US states levy their own income tax on top, with their own rules, their own rates and their own definition of who’s a resident, and some cities pile on a local tax as well. A handful of states (Florida and Texas among them) have no state income tax at all, while others (California, for instance) tax heavily and can be notably sticky about deciding you’re still a resident even after you’ve left.

Two things matter here. First, the Australia-US tax treaty is a deal between national governments; states are not bound by it in the same way, so a state may tax income the treaty would otherwise have sheltered. Second, breaking state residency when you eventually leave can take real effort, much like Australian residency, you need to genuinely cut your ties to the state, not just change your postal address. Where you live in the US can materially change your total tax bill, so it pays to factor it in.

Does my US filing wipe out my Medicare levy or other Australian obligations?

No, and this is a common tangle. The two systems run in parallel and answer to different masters. Your US filing has no effect on your Australian obligations, which are driven by your Australian residency. If you’ve remained an Australian tax resident, you may still face the Medicare levy and have to lodge an Australian return on your worldwide income; if you’ve become a non-resident, different Australian rules apply (including to things like the Medicare levy, the CGT main-residence rules and withholding on Australian income). The point is that paying tax or filing in the US doesn’t switch any of that off. The two returns have to be prepared with each other in mind, which (you’ll have spotted the theme by now) is exactly the coordination we handle on the Australian side.

What if I’m years behind on my US filing? Am I doomed?

Almost certainly not, so don’t panic, and definitely don’t keep ignoring it. A great many Australians genuinely had no idea the US expected a return from them while they were living and earning abroad, and the IRS has formal catch-up pathways built for exactly that situation. The main one for people whose failure was genuinely non-wilful is the Streamlined Filing Compliance Procedures. For taxpayers residing outside the US, this generally involves filing the most recent three delinquent or amended US returns, filing six years of delinquent FBARs, paying any tax and interest due, and certifying that the failure was non-wilful. Used properly, it’s designed to bring you back into compliance without the worst of the penalties.

The key is to come forward deliberately and correctly, rather than quietly slipping a few late returns in and hoping nobody notices (a so-called “quiet disclosure,” which can backfire badly). Get a US specialist to steer the catch-up, because choosing the right pathway is half the battle. The one thing that reliably makes it worse is doing nothing.

The bottom line

The US system is demanding, indexed, and unforgiving of missed forms, but it’s navigable once you understand the shape of it. First, work out your US status, because citizens, green card holders, resident aliens, non-resident aliens and dual-status taxpayers don’t all file the same way. Then check the forms: Form 1040 or 1040-NR, the FBAR and Form 8938 if your accounts and assets cross the (residency-dependent) thresholds, and possibly Form 8621 or Forms 3520 and 3520-A depending on your super and investments.

Respect the deadlines: April to pay, June to file if you qualify for the automatic overseas extension, and October only if you actually request it. Use the right relief: the FEIE is for qualifying foreign earned income and often isn’t the tool for Australians physically working in the US, while the Foreign Tax Credit is frequently more relevant but limited and category-based. Then square away the Australian side: residency, the CGT exit event, your former home, Australian-source income and the year-end mismatch all need to be coordinated with the US return. The forms are annoying; the lack of coordination is what’s actually expensive.

Sorting out the Australian side?

That’s our patch. We help Australians in the US get their Australian residency and returns right and coordinate them with the US side, working alongside your US preparer so the two systems line up and you’re not paying more than you should. We work remotely with expats all over the world, and our fee is always an upfront quote.

Book an appointment with our specialist team today. Far cheaper than learning it the hard way.

General information only. This article doesn’t consider your personal circumstances and isn’t tax or financial advice. We’re Australian registered tax agents and we don’t prepare US tax returns; the US rules, forms, thresholds and deadlines described above are administered by the IRS under US law, are indexed or amended over time, and should be confirmed with a qualified US tax adviser. Your outcome depends on your specific circumstances and your residency on both sides. Speak to our specialist expatriate tax team today, or to another registered tax agent, before acting.