American Tax for US Residents Living Australia

A US citizen or Green Card holder residing in any part of the world is required to file a US return, meaning they are required to report their worldwide income and file US returns if they meet the filing requirement for that specific year.

Expats enjoy an automatic extension until June 15th for filing their returns and can also further request an extension until October 15th by requesting an extension which is due June 15th but if there is any tax due it should be paid by April 15th. There is no extension to pay taxes. 

Australia is an incredible place to live for a numbers of reasons warm climate, friendly environment, beaches, good education, etc. and there are a large number of Americans residing in Australia. 

For US expats, due to the US – Australia Tax Treaty and Totalization agreement you will not be subject to double taxation. For those who are self- employed will not have to contribute again in the US social security if they are already contributing to the Australian social security. 

Two ways to prepare expat returns are: 

1. Foreign Earned income exclusion (FEIE): US citizens and green card holders, who live and work outside the US; may be able to exclude part or all of their foreign earned income (wages or income from self-employment) by using Foreign Income Exclusion. To qualify for FEIE, a person needs to work and live outside the US for 330 days out of 365 days. 
2. Foreign Tax Credit (FTC): US citizens working abroad always worry about double taxation but as they are paying taxes in Australia they can take the tax credits and apply it towards the US taxes. As Australian taxes are higher they do not get a refund but the excess credits can be carried over for 10 years. Foreign Tax Credit includes taxes paid to local and provincial governments but not a sales tax, VAT, real estate or luxury taxes paid to the foreign government. Also, FTC does not apply to any taxes paid to countries that the US has sanctioned as supporters of terrorism – North Korea, Syria, etc.

 Accidental Citizens are those individuals who were born in the US but never resided in the US. As they are US citizens or Dual citizens of US- Australia they are also required to file US returns. A lot of individuals were not aware of this, the IRS has a streamlined procedure that allows those individuals to file their last 3 years returns and 6 years of F BAR if they were not aware of the filing requirements. If approved by the IRS they will not be subject to any penalties.