Currently, thousands of American expatriates live in Australia. If you fall into that category, you should be aware of a few factors when it comes to filing taxes.

 

For example, were you aware that you needed to file returns for both countries during their respective tax seasons? Knowing what you need to do is critical since not following the laws or missing deadlines can have serious consequences (including fines and other penalties).

 

Here we will discuss the most important parts of individual US and Australian tax policy. Speak with one of our International tax specialists at Bates Cosgrave if you have any additional questions or are unsure about your specific situation, and we will gladly assist you.

 

The Fundamentals

The most important fact is that all US residents and green card holders, regardless of where they live or work, are required to file an annual tax return and pay US taxes on their earnings. As a result, you must still file a US tax return even if you reside and work in Australia and file an Australian tax return on an annual basis.

 

However, you will not be obliged to pay double taxes as a result.

 

The Internal Revenue Service (IRS) has developed specific credits and exclusions that allow you to avoid a double tax bill under the US-Australia tax treaty. You may not have to pay any additional taxes on your US return as a result of these concessions, but you must still file it each year. Unfortunately, it might be complicated and necessitate additional papers, regardless of how long you’ve been living overseas. 

Who is a US expat?

In essence, an expat is any American citizen who lives, works, or studies in Australia. 

 

Some of the tests you can use to be considered a tax resident in Australia include the Resides Test (you are physically present in Australia, your intention and purpose is to live here, and you have family, business, and/or assets here), the Domicile Test (your permanent home is in Australia), and the 183-day Test (you are physically present in Australia for more than half of the tax year).

 

What must United States citizens report?

Your income, which includes any salary or wages received from both US and non-US sources, interest earned, dividends paid, and rental income, is the principal item you must include on your dual return.   Reporting any superannuation payouts is also necessary.

 

You must file an annual Foreign Bank Account Report (FBAR) if the total value of your foreign (non-US) bank accounts, superannuation accounts, and other assets reaches $10,000.  In addition, if your assets reach $200,000, you may be required to report under FATCA (Foreign Account Tax Compliance Act).

 

Even if you live in Australia, you may be obliged to file state tax returns based on where you are registered in the United States if you earned money from that state (such as rental income) or were physically present in that state during the year.   California, New Mexico, North Carolina, New York, Virginia, and Massachusetts are among the American states that require this.

 

What tax treaty does the United States currently have with Australia?

A tax treaty between the United States and Australia establishes tax rules for people who live in both countries, including Americans in Australia and Australians in the United States. Although it may appear difficult at first, this useful framework helps to keep regulations clear for everyone and provides guidance on income taxes, corporation taxes, and capital gains taxes. Above all, it saves you from paying taxes twice!

 

You do not need to be familiar with every aspect of this agreement. Other parts, such as the US Savings Clause, which allows the US to tax its inhabitants as if the treaty never existed, can be complex, so it’s best to seek assistance from an expert if you have any questions or concerns.

 

You should be aware that Australia shares US authorities with tax information on US foreign nationals.   This suggests that they are informed about all aspects of your affairs, so if you fail to file your FBAR or FATCA reports correctly, you may face penalties and fines in the future.

 

Crucial dates for filing taxes in the United States

The fact that the dates for filing US and Australian tax returns differ makes it difficult to file both simultaneously.

 

Every year in Australia, the tax year begins on July 1st and concludes in June. Although US expats receive an automatic extension until June 15th, the US tax year runs from January 1 to December 31.  The US returns are due on April 15th of each year.

 

It is critical to keep up with this every year because failing to file your return on time and pay any past-due taxes may result in a fine. You can also utilise the 1040X form to change your income and deduction information if you make an error while submitting your US tax return.

 

How may foreigners in the US decrease their US tax liability?

Paying your tax payment on an annual basis is critical, but you should not pay more than is necessary.   As a result, it is prudent to take advantage of any available tax benefits.

 

Three important options to be aware of are the Foreign Tax Credit (credit for income taxes paid to a foreign government), the Foreign Earned Income Exclusion (which, as the name implies, allows you to exclude a specific amount of foreign earned income from your US taxes), and the Foreign Housing Exclusion (which allows you to deduct specific housing expenses). 

 

There is also a Child Tax Credit, which allows overseas parents to deduct $2000 for each child in their care from their US tax bill. 

 

Does giving up US citizenship exempt you from paying taxes?

If you have dual citizenship in Australia, you may wish to consider surrendering your US citizenship if all of this seems like a hassle. This may be an option for you if you intend to stay in Australia for an extended period of time and are willing to cut your ties with the United States.

 

However, you should be aware that giving up your US citizenship only relieves you of future tax obligations; you are still liable for any taxes owed prior to that time.   In addition, you must pay $2350 to relinquish your US citizenship, and you may be subject to a departure tax.

 

How can I submit an Australian tax return to the United States?

Completing your US taxes from overseas has never been easier, and our team at Bates Cosgrave is ready to help.

 

You have a choice of options to choose from.

 

1. If you contact our Australia office directly, one of our professional tax consultants will be able to assist you. 
2. Examine your needs and submit your return to the United States.
3. File your US tax return online with professional assistance.

 

Our International tax consultants are specialists with a thorough understanding of the US tax system, so we can ensure that you complete all required documentation and pay the appropriate amount of taxes. 

 

Contact us right away, and we’ll help you tick all of the boxes and file your taxes so you can relax and enjoy living abroad.