Tax guide for Americans living in Australia (2026)

Australia, with its beautiful beaches, sunny weather, and laid-back lifestyle, is a top choice for US expats. However, the excitement of living Down Under also brings the challenge of navigating both US and Australian taxes in 2025–26.

Whether you're figuring out how taxes work in your new home or managing your US tax obligations in Australia, this guide is here to simplify the process for you. The goal is to explain the steps that make the US tax in Australia feel less stressful and more predictable for American expats in Australia.

Tax summary

Who qualifies as a tax resident in Australia?

You qualify as an Australian tax resident if you meet any of 4 tests:

• Resides test (permanent home in Australia),
• Domicile test (Australia is the primary home),
• 183-day test (183+ days in country), or
• Commonwealth Super Fund test (government employee).

Residency status determines tax rates and obligations.

Determining your tax residency status in Australia is key to understanding your tax obligations.

NOTE! Tax residency is different from general residency – the latter refers to your status as a legal resident, while tax residency specifically impacts how you’re taxed by the Australian government.

Your status largely depends on your individual situation, but there are four tests to guide you. If you meet the criteria for any of them, you’ll be considered a tax resident:

1. Residence test: If you live permanently or for a significant duration in Australia and have a settled or usual home in the country, you are considered a resident.
2. Domicile test: You are deemed a resident if your primary permanent domicile or home is in Australia.
3. 183-day test: Being in Australia for at least 183 days qualifies you as a resident. However, an exception exists if you can prove that your usual place of residence is outside Australia and you have no intention of settling in Australia.
4. Commonwealth Superannuation Fund test: If you are employed by the Australian government or an Australian company and are eligible to contribute to specific superannuation schemes, you are considered a resident.

If you don't meet any of these criteria, you are generally considered a non-resident for tax purposes.

Many US expats working in Australia get caught out when it comes to determining whether they’re considered a “resident” or “non-resident” for tax purposes, and it’s different for everyone. It is recommended that you always get the advice of a local tax accountant, like Etax, to help determine your Australian residency status.

For 2025–26, being an Australian tax resident can also unlock the tax-free threshold of $18,200, which changes the early part of the tax bill.

Here are a few practical examples that commonly apply to US citizens working in Australia, as suggested and explained by Simone Gielis, general manager of Tax and QA at Etax Accountants:

• Resident for tax purposes: John moves to Australia, intending to stay long-term. He brings his wife and children with him, rents a house (his name is on the lease), and opens an Australian bank account. He also sells his car in the US and vacates his US property. John passes the residency test as he can demonstrate his residency is more closely tied to Australia than the US.
• Non-resident for tax purposes: Marco moves to Australia as part of a career break. He keeps his US bank account open and does not sell his home or belongings in the US. He doesn’t sign a lease or purchase property in Australia. Instead, he spends 8 months living in hostels and picking up bar work as he goes. Even though Marco was in Australia for more than 183 days, his usual residence is the US, and he made no permanent connections to tie him to Australia while he was here. Marco would therefore fail residency tests.

Incorrectly claiming to be a resident or a non-resident on your Australian tax return could cost thousands of dollars in incorrect tax. Always check with an accountant if you’re not sure.

Australian tax residency benefits

Residents access the $18,200 tax-free threshold, Medicare, lower tax rates (16–45% vs non-resident 30–45%), government benefits, easier property purchases, and tax-deferred super contributions.

Becoming a tax resident in Australia comes with several benefits that can make day-to-day life easier.

Here are some of the key advantages of being a tax resident in Australia:

• Medicare: Australian tax residents are generally liable for the 2% Medicare levy unless an exemption applies. Medicare eligibility depends on your residency/visa status and related rules, not just tax residency.
• Tax-free threshold: The first $18,200 of annual income is not taxed. This can be a big help.
• Benefits: Some people may qualify for government benefits and welfare programs.
• Tax rate: Rates can be lower than non-resident rates on the same income (16–45% vs non-resident 30–45%).
• Property: Fewer limits can apply when buying property.
• Superannuation: Employers usually pay into superannuation (a retirement fund). These contributions are not taxed at the time they are made, which can help long-term savings.

Advantages of being a non-resident for tax purposes in Australia

Non-residents pay tax only on Australian-sourced income, avoid the 2% Medicare levy, have no tax on foreign investments, and have no mandatory super contributions. Flexibility for part-year residents.

Being a non-resident for tax purposes lets you live in Australia for part of the year without being taxed by Australia on worldwide income. This can feel simpler when life is split between Australia and the US.

Other advantages of being a non-resident:

• Taxed only on Australian-sourced income: Income earned outside Australia is generally not taxed by Australia.
• No Medicare levy: Non-residents generally do not pay the Medicare levy, the 2% tax on taxable income.
• Foreign investments taxation: Some taxes tied to overseas investments may not apply.
• Non-resident status doesn’t automatically stop employer super contributions. Employers generally must pay Super Guarantee for eligible employees, and the rate is 12% from July 1, 2025.

Moving to Australia? Your tax plan should go with you

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What types of taxes do US expats pay in Australia?

US expats in Australia commonly face personal income tax (progressive 16–45%), the Medicare levy (2%), capital gains taxed as ordinary income, GST at 10%, superannuation (12% employer contribution), and sometimes stamp duty on property, depending on the state.

Australia has a progressive tax system for individuals and taxes its residents on their worldwide income. This means that any income earned outside of Australia, including employment income, business income, and investment income, must be declared on the Australian tax return. Green card holders and Americans in Australia must file US taxes annually, reporting their worldwide income.

Personal income tax (PIT) rates

Australia uses progressive tax rates of 16–45% for residents with the $18,200 tax-free threshold. Non-residents start at 30% from the first dollar (no threshold), then 37% above $135,000, and 45% above $190,000. Plus the 2% Medicare levy for residents.

The income tax rates for Australian residents are as follows (all amounts in AUD) – the table applies to fiscal years 2025–26 (July 1, 2025 to June 30, 2026):

Australia income tax rates for residents (2025–26)

Source: Australian Taxation Office (ATO). These Australian tax rates 2025–26 do not include the Medicare levy.

Starting on July 1, 2026, personal income tax rates in Australia will be revised.

For foreign residents, the tax rates are:

Australia income tax rates for foreign residents (2025–26)

Source: Australian Taxation Office (ATO). Foreign residents do not pay the Medicare levy.

Resident vs non-resident (2025–26)

Key insight: The resident vs non-resident gap is biggest under six figures because the tax-free threshold and lower entry rate matter more. Higher incomes still often benefit from resident status, with the levy funding Medicare access.

NOTE! 2025–26 reflects Stage 3 tax cuts from July 2024 – the 19% bracket became 16% and 32.5% became 30%.

Capital gains tax (CGT)

Capital gains tax in Australia treats gains as ordinary income at marginal rates (16–45% for residents, 30–45% for non-residents). Residents pay CGT on worldwide assets; non-residents usually only on certain Australian assets. A 50% discount can apply after 12+ months for eligible residents.

Capital gains tax (CGT) in Australia applies to the sale of a capital asset, such as real estate or shares. It's the difference between what it cost you to acquire the asset and what you received when you disposed of it.

These gains are taxed as part of your income tax and not as a separate tax, meaning the rate will depend on your overall taxable income. Residents are subject to CGT on their worldwide assets, while non-residents are only subject to CGT on Australian assets.

Dividend, interest & rental income tax

Franked dividends include tax credits preventing double taxation. Interest income is taxed at marginal rates (16-45%). Rental income is taxable with deductible expenses (repairs, interest, depreciation). Non-residents: withholding tax on unfranked dividends and interest.

In Australia, dividends paid to shareholders by Australian companies are often accompanied by franking credits. These credits represent the tax the company has already paid. This system prevents double taxation, as shareholders can use these credits to offset their personal tax liabilities.

For Australian tax residents, franked dividends are added to their taxable income, and the franking credits are applied against their tax liabilities. Non-residents are not taxed on franked dividends, but unfranked dividends are subject to withholding tax.

• Interest income is considered taxable income in Australia. For tax residents, this income is taxed at their marginal tax rate. Non-residents are subject to a final withholding tax on their Australian-sourced interest income.
• Rental income derived from property located in Australia is taxable. Expenses related to the property, such as mortgage interest or repairs, can be deducted from the rental income to reduce the taxable amount. Non-residents earning rental income from Australian property are taxed at non-resident rates.

Superannuation and retirement taxation

Superannuation is mandatory 12% employer contribution (2025-26, increased from 11.5%). For US tax purposes, most Australian super funds are treated as foreign trusts or PFICs requiring complex reporting (Forms 3520/8621).

Superannuation in Australia is akin to a mandatory 401(k) program. While employee contributions are voluntary, employers are required to contribute 12% of base wages for eligible employees.

From the US tax perspective, most Australian retirement funds are classified as foreign trusts or PFICs – which means they’re subject to complex rules, reporting requirements, and often unfavorable tax treatment.

The super guarantee rate increased to 12% in July 2025, completing the scheduled phase-in that began at 9.5% in 2014.

Corporate tax

Corporations operating in Australia are subject to a flat corporate tax rate. Companies with an annual revenue of under AUD 2 million are taxed at 28.5%. These taxes must be prepaid quarterly based on estimated liabilities.

A company doesn’t need to be incorporated within Australia to be classified as an Australian company for tax purposes. If a company conducts business in Australia and is owned or controlled by an Australian entity, it is subject to Australian corporate tax.

For 2025–26, many companies use a small business rate of 25% (base rate entities, turnover under $50M) and a standard rate of 30% above that. (Keyword fit: corporate tax Australia)

Other taxes: GST, stamp duty, property, and inheritance

GST at 10% on most goods/services. No inheritance or estate tax in Australia (abolished 1979). State land taxes are based on property value. Stamp duty on property varies by state (2-7%). Foreign buyers face additional surcharges.

Australian GST

The federal government in Australia levies a goods and services tax (GST) at a rate of 10%. This GST is a value-added tax (VAT) applied at each level in the manufacturing and marketing chain. It covers most goods and services, with registered suppliers receiving credits for GST on inputs acquired to make taxable supplies.

Some supplies, such as food (with exceptions), exports, health, and educational supplies, are GST-free. Residential rents and the second or subsequent supply of residential premises are not subject to GST.

Inheritance, estate, and gift tax

Australia does not impose inheritance, estate, or gift taxes. However, there are special tax rules for the transfer of assets to a beneficiary from a deceased estate for capital gains tax purposes and the transfer of superannuation entitlements to beneficiaries of a deceased person.

Property taxes

All states and territories in Australia impose land taxes based on the unimproved value of the land, with certain exemptions. Municipal councils also levy rates and charges on land within their jurisdictions.

Some Australian states also impose a duty or land tax surcharge on certain Australian real estate holdings of a foreign person.

Additionally, there's an annual vacancy fee at the federal level for foreign owners of Australian residential property that remains vacant for at least half a year.

Before you purchase an Australian property as an American, check this guide

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Stamp duty

All states and territories in Australia impose stamp duty on various transactions or documents, such as real property conveyances, motor vehicles, and insurance policies. The imposition of duty on share transfers involving unlisted entities varies from state to state.

For instance, the New South Wales government has exempted purchases of new or used battery electric and hydrogen fuel cell vehicles that cost up to AUD 78,000 from stamp duty. Certain types of income are exempt from tax in Australia.

Common examples include certain government pensions and payments, some scholarships, and payments from specific disability trusts for care and accommodation.

What tax deductions can I claim in Australia?

Claim work-related expenses directly tied to employment (uniforms, tools, travel), self-education costs for current job, tax agent fees, charitable donations $2+ to registered charities (DGR). Keep receipts for all deductions claimed.

As a US expat in Australia, you can claim various tax deductions to reduce your taxable income. For work-related expenses, you can deduct costs directly tied to your job. If you undertake self-education related to your current job, you can claim course fees and travel costs for education.

Fees paid to tax agents for preparing and lodging your tax return are also deductible. Donations to registered Australian charities of $2 or more can be claimed as deductions.

NOTE! Work-from-home expenses can also be deductible under ATO rules. The older 52-cent method ended in 2022. In recent years use of a fixed rate method with updated rates, plus an actual cost method.

When are Australian and US tax returns due?

Australian returns are due October 31 (or later when using a tax agent schedule). US returns are due June 15 for expats under the automatic extension from April 15, with a further extension to October 15. Two different tax years can make timing tricky.

You are required to file or lodge your Australian tax return by October 31. If you use a registered tax agent, your due date is set under the agent lodgment program and can be later than October 31. The exact date depends on your situation and your agent’s lodgment schedule.

Some of the most common tax forms you may need to file your Australian tax return include:

• NAT 2541: Individual tax return for residents.
• NAT 1040: Lodgement form for non-residents, if applicable.
• NAT 2679: Business activity statement (BAS) for self-employed individuals.

NOTE! Australian tax year: July 1, 2025 – June 30, 2026 (returns due October 31, 2026). US tax year: January 1, 2026 – December 31, 2026 (expat deadline: June 15, 2027).

What are my US tax filing requirements in Australia?

US citizens must file Form 1040 reporting worldwide income annually, regardless of Australian residence. 2025 filing threshold: $15,750 or more (single). Automatic June 15 extension for expats (from April 15). Use the Foreign Tax Credit or FEIE to prevent double taxation.

Before you file, run your numbers in our FEIE calculator

Calculate FEIE today

The tax filing threshold for US citizens abroad generally depends on income level and filing status. For example, single filers commonly start at $15,750 or more of gross income for the 2025 tax year.

The tax filing deadline is April 15, but if you live abroad, you get an automatic two-month extension to June 15 (in 2026). If you need even more time, you can request an extension until October 15.

NOTE! The US tax year follows the calendar year (January 1 to December 31), while Australia’s financial year runs from July 1 to June 30. This discrepancy can create challenges when filing taxes in both countries.

US expats in Australia may need to file the following tax forms:

• Form 1040 – US returns are normally due April 15. If you’re living abroad on the regular due date, you generally get an automatic 2-month extension to June 15 (for calendar-year filers), and you can request to file by October 15.
• Form 8938 (FATCA report) – Required if foreign assets exceed $200,000 on the last day of the tax year or $300,000 at any point ($400,000 and $600,000 for married taxpayers filing jointly).
• Form 2555 (Foreign Earned Income Exclusion – FEIE) – For the 2025 tax year, the maximum exclusion is $130,000 per qualifying person (amounts adjust annually).
• FBAR (FinCEN Form 114) – Required if the combined value of foreign bank accounts exceeds $10,000 on any day during the tax year. It must be filed separately from your tax return.

NOTE! For tax year 2025, the SALT itemized deduction limit is $40,000 ($20,000 if married filing separately), with a MAGI-based reduction that won’t drop it below $10,000 ($5,000 if MFS).

Does the US have a tax treaty with Australia?

Yes. The US–Australia tax treaty (1982, updated 2019) prevents double taxation by establishing which country has primary taxing rights. It provides foreign tax credits, reduces withholding rates on dividends, interest, and royalties, and covers employment income, pensions, and capital gains.

To claim these benefits, you’ll need to file specific forms like Form 8833 for treaty-based claims and Form 1116 for the Foreign Tax Credit.

Does the US have a totalization agreement with Australia?

Yes. The US–Australia Social Security Totalization Agreement (effective 2002) prevents dual social security taxation and helps qualify for benefits in both countries by combining work credits. The agreement includes a five-year rule for temporary assignments.

Australia has a social security system in place, similar to the US, to provide for its citizens and residents. For US expats living in Australia, there might be confusion regarding which social security system they should contribute to.

To address this, the US–Australia totalization agreement has been established to set rules for social security contributions:

1. If a US company assigns an individual to work in Australia for less than five years, the individual will contribute to the US social security system.
2. If the assignment in Australia exceeds five years, the individual will contribute to the Australian social security system.
3. If a US expat is employed by an Australian employer in Australia, they will contribute to the Australian social security system.
4. Under the US–Australia totalization agreement, self-employed workers generally pay social security taxes to the country where they reside. A US citizen who is self-employed and resides in Australia is generally exempt from US self-employment (Social Security) tax.

NOTE! Five-year rule: assignments under five years usually stay in US Social Security coverage, while longer assignments shift to the Australian side. The exact outcome depends on coverage certificates and employer setup.

Conclusion

The 2025–26 year works best when residency is correct, the right Australian tax rates 2025–26 are used, and US forms match the same income. Clear records help, and the right method usually prevents paying tax twice.

If you're an American expat in Australia or planning to move there, managing your US tax obligations can be overwhelming. Let Taxes for Expats take the stress out of the process. With over 20 years of experience preparing taxes for Americans in Australia, we provide personalized guidance to keep you compliant.

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