Tax Tips For U.S. Expats Living in Australia

If you're an American living Down Under, check out these tax tips to help maximize your U.S. tax situation. Find essential, need-to-know tax advice here for Australian U.S. Expats.

  1. Although your Australian taxes are reported on a July to June fiscal year, you will need to report your U.S. taxes on a January to December calendar year. Be sure to maintain records of when you received income and incurred deductible expenses to ensure that any items reported on your tax return can be properly substantiated.

  2. As an U.S. expat living in Australia, you have two main methods by which you can reduce your U.S. taxable income: the foreign earned income exclusion and the foreign tax credit. The foreign tax credit will be better for most taxpayers because Australian tax rates are higher than U.S. tax rates and any excess can be carried forward from one year to another. That being said, the foreign earned income exclusion may be preferable for those who don't want to wait until after their taxes from the following Australian tax year have been filed.

  3. While Australian tax law is similar in many respects to U.S. tax law, the two systems treat certain items differently. Unfortunately, the U.S. tax law frequently disregards the favorable tax treatment afforded to certain kinds of income under the Australian system. For example, any employer contributions to your superannuation fund will be deemed to be taxable income on your U.S. return, though they generally are not on your Australian return. Similarly, while a LAFHA allowance is tax-free in Australia, it is regarded as taxable income on your U.S. return.

Your Australian Superannuation Fund - What do you need to know about your Australian Superannuation Fund and how does it affects your U.S. taxes?

Most expats living in Australia have one or more superannuation fund accounts. As part of their employment, expats living in Australia receive contributions to this account of at least 9.5 percent. Understandably, many taxpayers living abroad don’t consider their superannuation fund’s effect on their U.S. taxes and file returns without taking them into account. However, there are several issues that a superannuation fund can raise on your return.

First, contributions to the superannuation fund should be reported as wage income on your U.S. tax return. Second, superannuation funds are reportable accounts on your FBAR if you have a filing requirement and may need to be reported on several other informational returns depending on your individual facts and circumstances. Finally, when you reach retirement age and receive distributions from your superannuation fund account, those distributions must be reported on your return. However, by appropriately reporting your employer’s contributions to your superannuation, you can limit the portion of your superannuation distributions that are considered taxable for U.S. purposes.