Expat taxes in Australia
As an American or green card holder living in Australia, taking care of your U.S. taxes can feel like a complicated task. Knowing which tax rules affect you and understanding your options is a lot to stay on top of.
With H&R Block, you can rest easy knowing you’ve found the right expertise for your U.S. expat taxes in Australia—and for your Australian return. We make it easy to get your taxes from both countries done all in one place, so you can get back to what matters to you.
What U.S. expats in Australia should know
For starters, Americans and U.S. green card holders living in Australia should continue to file a U.S. tax return each year. However, filing while abroad comes with new considerations and questions. “Do I have additional information to report to the IRS? How do my Australian financial accounts affect my filing? Do I report using the U.S. or Australian tax year? What options do I have to reduce my tax bill?”
We’ve outlined a few considerations for Americans living in Australia, so you know what affects the tax you pay and which forms you need to file. Of course, tax rules for U.S. expats go beyond what we’ve listed below.
Need help? With H&R Block’s tax services, you’ll get expert tax guidance with a comprehensive view of your American and Australian taxes and the convenience of working with one company.
U.S. Expat Tax Filing Considerations
Working in Australia can affect your taxes even if you don’t live there for very long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in Australia, you’ll have more considerations for your American tax filing.
You may need to report your foreign financial accounts and assets. Generally, U.S. taxpayers in Australia with more than $10,000 in foreign bank or financial accounts (including superannuation accounts) are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have assets valued at $200,000 and higher.
You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.
- The foreign earned income exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
- The foreign tax credit lets you claim a credit for income taxes paid to a foreign government.
Due to the higher Australian tax rates, it’s generally more favorable for Americans living in Australia to use the foreign tax credit. However, your H&R block tax advisor can confirm the best path for you.
Your Australian pension isn’t tax free for your U.S. taxes. While a superannuation fund provides tax benefits on your Australian taxes, it won’t be treated the same on the U.S. side.
Depending on your personal circumstances, your account may be considered a foreign grantor trust or employee benefit trust. That in turn affects what you’re taxed on and which U.S. tax forms you need to file.
You can rely on the expertise of our tax advisors to help you accurately complete your tax filing.
Australian Tax Filing Considerations
Your Australian income taxes are based on your residency and domicile status. Where Australian taxes are concerned, your domicile is generally where you have your permanent home and your residency is where you spend most of your time. You can be a resident in more than one country, but you can only have one domicile.
You qualify as an Australian resident if you’re domiciled in Australia or you’ve spent more than half of the tax year there without a permanent home elsewhere. Additionally, you may be a resident if you’re an “eligible employee” of a superannuation fund.
How does being a resident affect your taxes?
- Australian residents are taxed on all income over $18,200, regardless of where it’s earned.
- Nonresidents are taxed on all Australian source income with some exceptions.
The income tax rates are different for residents vs. nonresidents. Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases. However, the rate ranges are steeper for nonresidents as shown below.
Resident tax rates 2019-2020
|A$3,572 plus 32.5%||A$37,001-A$90,000|
|A$20,797 plus 37%||A$90,001-A$180,000|
|A$54,097 plus 45%||A$180,001 and up|
Nonresident tax rates 2019-2020
|A$29,250 plus 37%||A$90,001-A$180,000|
|A$62,550 plus 45%||A$180,001 and up|
Resident shareholders in foreign companies can get credits on distributions. If you own shares in an Australian company and receive a grossed-up dividend of profits, the company has already paid taxes on a portion of those dividends (currently the rate is 30%). Australian residents may receive a rebate — called a franking or imputation credit —on the tax that has already been paid and distributed by the company. Depending on your Australian tax bracket, you may be able to receive the full credit or a portion of the credit.
The tax year is different than in the United States. The Australian tax year starts on July 1 each year and ends the next year on June 30. You must lodge (file) your taxes by October 31.
As your U.S. tax documentation and reporting generally follows a calendar year, you may need to combine your Australian pay stubs and other payment records to reflect a full U.S. tax year.
Want to make filing taxes in the U.S. and Australia easier? We can help you file a U.S. tax extension until October 15, giving you more time to gather documents for your U.S. and Australian taxes.
How H&R Block can help expats in Australia
Our highly trained experts have helped thousands of Americans as they file their U.S. expat and Australian taxes in Australia. You can trust our expertise and guidance to help you determine the best tax strategies for you.
Start your U.S. and Australian taxes for free today!