Filing US Tax in Australia: American Expat Guide

When you move overseas, you still have to let the IRS know where your money is coming from. You must do so by filing an annual tax return, as well as additional information returns.

As an American expatriate living in Australia, you will still have a reporting liability to the IRS. You might also have to pay taxes to the U.S., depending on the size and source of your income. For example, expats can claim the foreign earned income exclusion, enabling them to exclude a significant portion of their income from taxation by the IRS. Expats can also use the foreign tax credit to eliminate instances of double taxation. Depending on the scope of your foreign assets, you might have additional reporting responsibilities to the IRS when living in Australia. Generally, expats must submit all necessary forms and information to the IRS by Tax Day. That said, there is an automatic two-month filing extension for taxpayers living abroad. You might be financially penalized if you do not give the IRS the information it requires within the necessary timeframe.

For help with your taxes while living in Australia, call the tax CPAs for American expatriates of US Tax Help today at (541) 362-9127.

Do American Expats Living in Australia Have to File US Taxes?

Moving across the world to Australia will not erase your tax liability as an American citizen. Because of how the tax system operates in the United States, you will still have to file an annual tax return and give additional information to the IRS each year.

Any American expatriate who retains their U.S. citizenship after moving abroad will still have to keep the IRS informed of their income and certain financial information. Americans are taxed on their worldwide incomes, so you must report any income earned from a U.S. or foreign source.

In addition to your tax liability to the United States, you will likely have one to the Australian government if you have established your residency in that country. If you do not follow all reporting guidelines for expatriates set by the IRS, you might be severely penalized for your non-compliance, whether it was willful or not.

US Tax Exclusions and Credits for American Expats in Australia

Despite having a responsibility to report your income to the IRS each year, you might have a lower tax liability now that you live in Australia instead of the United States. This is because the IRS provides various tax exclusions and credits for expats who reside abroad.

Foreign Earned Income Exclusion

The foreign earned income exclusion (FEIE) is one of the most appealing tax perks available for expats living in Australia. With this exclusion, you can omit a significant portion of your income earned from a foreign source from taxation. For 2024, the FEIE limit is $126,500 per person. If this covers some or all of your income, you might not end up owing any income tax to the IRS as an expat residing in Australia. That said, you still have to report your income and claim the FEIE using IRS Form 2555. Completing this form will require you to provide your foreign employer’s details, your total income, and additional information.

The foreign housing exclusion is calculated according to the foreign earned income exclusion and can be claimed using the same form. This can allow you to exclude income used for housing needs from taxation by the IRS.

Foreign Tax Credit

The foreign tax credit allows expats to apply taxes paid to a foreign country of residence toward their tax liability to the IRS, dollar for dollar. Depending on your existing tax liability before the foreign tax credit is applied, the use of this credit might eliminate your tax liability to the United States for that year. Our tax CPAs for American expatriates will use IRS Form 1116 to use the foreign tax credit. Foreign taxes that qualify for the foreign tax credit include income, war profits, and excess profits taxes.

Passing the Bona Fide Residence and Physical Presence Tests as a US Expat in Australia

To get most of the tax benefits available to expats, like the foreign earned income exclusion and the foreign tax credit, you must prove your eligibility to the IRS. This will require you to pass either the bona fide residence test or the physical presence test.

To pass the bona fide residence test, you must be a resident of Australia for an uninterrupted period that includes a whole tax year. This does not mean you can’t make short trips out of your foreign country of residence; you just have to do so with the intention of returning back to Australia. The IRS will assess various factors when determining if you meet the bona fide residence test, such as if you have paid taxes to Australia and own property there, among other things.

The physical presence test is assessed differently. To pass this test, you must be physically present in Australia for 330 days during a consecutive 12-month period. This gives a bit more leeway to expats living in Australia who might want to travel outside of the country but still need to qualify for the foreign earned income exclusion and the foreign tax credit. Passing either the bona fide residence test or the physical presence test will enable you to lower your tax liability to the IRS as an expat living in Australia, which is why our tax accountants will explore your eligibility for these perks when planning and preparing your U.S. taxes.

International Information Reporting Requirements for US Expats in Australia

The passing of the Foreign Account Tax Compliance Act (FATCA) and the interest in increased oversight of American money overseas has resulted in additional reporting requirements for expatriates living abroad. This means that you might have to report your foreign financial assets and holdings to various agencies if you reside in Australia.

Statement of Specified Foreign Assets

Under FATCA, expats have to report certain specified foreign assets using IRS Form 8938. You must do this if your total specified foreign assets were more than $200,000 on the last day of the tax year or more than $300,000 at any point during the tax year. For joint filers, these reporting thresholds are doubled. Specified foreign financial assets typically include bank accounts, stocks, securities, or other assets managed by foreign financial institutions.

Report of Foreign Bank and Financial Accounts

On top of filing Form 8938, you might also have to complete a Report of Foreign Bank and Financial Accounts, also known as an FBAR. This can be done through the Financial Crimes Enforcement Network’s BSA e-filing system. FBAR reporting is required for any U.S. person who has an aggregate of $10,000 across all foreign bank accounts during the tax year. If you have set up a long-term residence in Australia, you will most likely have to file an FBAR annually.

US Tax Filing Deadlines for American Expats in Australia

Generally speaking, the tax filing deadlines for expats living in Australia are the same as those for citizens residing domestically. That said, there are certain extensions available only to expatriates.

Living on the other side of the world in Australia might cause some delays or confusion when it comes time to file your U.S. taxes. For the most part, all tax forms, schedules, and other information required by the IRS will be due on Tax Day. Generally, this time falls in mid-April but may differ depending on the year.

The IRS does provide an automatic two-month filing extension for expats in Australia and elsewhere. If you need additional time to file your taxes after getting this automatic extension, you can request a six-month extension from the automatic due date. This will likely push your deadline to file back to October. Knowing that the filing deadline is the same for expats, apart from the specific extensions for expats, is important, as otherwise, you might unintentionally miss the deadline. If you do, you could be penalized for non-compliance by the IRS, even if your non-compliance was not intentional.

Preparing Your US Taxes as an American Expat Living in Australia

Planning and preparing your taxes with an experienced tax accountant can enable you to claim all the advantages available to you as an expat living overseas in Australia.

Tax planning and preparation services can make tax season much easier for expats. Through tax planning, our tax CPAs for American expatriates can review your income sources, total income, dependents, expenses, and other financial information to identify all credits and deductions that apply to your situation. While that might include tax perks specific to expats, it might also include those available to American citizens based on criteria unrelated to their domestic residency.

Once such information is organized and assessed, we can begin the process of preparing your U.S. taxes. This can be the challenging part for many tax filers approaching the process independently, as there might be many forms and corresponding schedules involved. This process requires synthesizing information and including all necessary details for the IRS so that you can claim the greatest return available and limit your tax burden as much as possible.

If you are planning on moving abroad to Australia or another country, talk to our tax accountants prior to your move. We can explain the ins and outs of filing taxes from overseas as well as the information we will need to plan and prepare your U.S. taxes so that, come tax season, you do not feel rushed or overwhelmed.

Penalties for American Expats in Australia Who Do Not File Their US Taxes

The fact that you live in Australia will not stop the IRS from penalizing you for tax non-compliance. These penalties are often harsh and might lead to jail time if not promptly addressed by expat taxpayers.

Expats might face financial penalties for failing to file any necessary tax form with the IRS. For example, if you do not adhere to FATCA reporting requirements, you might be fined $10,000. And, for failure to file an FBAR, the initial penalty is $100,000 or 50% of the balance of the foreign account or accounts, whichever amount is greater.

If you fall seriously delinquent on your U.S. taxes while residing in Australia, you might get your passport revoked. There may be additional consequences for failure to file any forms required by the IRS, including Form 1040 and any corresponding schedules. If you do not file your taxes on time, you will likely receive notice from the IRS informing you of your delinquency. Responding to this notice as quickly as possible will be important to lower your chances of receiving additional financial penalties.

If you were unaware of your tax liability to the U.S. as an expatriate before now, our tax accountants can help you file back taxes. If you do not file pass due tax returns within three years of their due dates, you will not be able to claim credits or a refund for those years. If you owe more than you can pay, you should still file, as the IRS might have a payment plan that suits your situation.

Call Our Tax Accountants for Help Filing Your US Taxes While Living in Austrailia

For help with your taxes as an expat living in Australia, call the tax CPAs for American expatriates of US Tax Help today at (541) 362-9127.