Australia is a popular country for U.S. expats: aside from the beautiful beaches and sunshine, Australia has a relatively accessible residency system and provides a welcoming environment for people from around the world. However, living abroad comes with certain tax obligations that U.S. citizens must continue to follow. The expat tax lawyers at Evolution Tax and Legal are breaking down taxes for expats in Australia: tax rates, due dates, and filing your U.S. return.
The Australian equivalent of the IRS is the ATO, Australian Tax Office, and they collect the taxes within the country. Each citizen and resident of Australia is assigned a Tax File Number, TFN, to be used for tax purposes. This number should be safeguarded, as it can be used for identity theft, similar to U.S. social security numbers. A unique tax requirement for married couples is that they cannot file joint tax returns in Australia, but they must declare their partner on their individual tax returns. Australian tax rates are different for residents and non-residents.
Australian Tax Rates
Australia has a tax system similar to the U.S., in that the tax rates increase as income increases. The tax rates for residents are as follows:
- Income Under AUD 18,200 : AUD 0
- Income between AUD 18,201 and AUD 37,000: AUD .19 per dollar above AUD 18,200
- Income between AUD 37,001 and AUD 90,000: AUD 3,572 + AUD 0.325 per dollar above AUD 37,000
- Income between AUD 90,001 and AUD 180,000: AUD 20,797 + AUD 0.37 per dollar above AUD 87,000
- Income above AUD 18,001: AUD 54,097 + AUD 0.45 per dollar above AUD 180,000
There is also a 2% tax that residents must pay for Medicare.
The taxes for nonresidents are as follows:
- Income between AUD 0 and AUD 90,000: AUD 0.325 per dollar
- Income between AUD 90,001 and AUD 180,000: AUD 29,250 + AUD 0.37 per dollar above AUD 87,000
- Income above AUD 180,001: AUD 62,550 + AUD 0.45 per dollar above AUD 180,000
Nonresidents are required to pay the Medicare tax but cannot claim the Medicare benefits.
Who Qualifies as a Resident of Australia?
Residency within Australia differs for tax purposes and citizenship purposes. In order to be considered a resident for tax purposes, an individual must have either always resided in Australia, moved to Australia permanently, have lived within Australia for more than half the tax year, or have lived in Australia for at least six months, living in a single place and holding a single job.
When Are Australian Taxes Due?
Australian taxes are required to be filed by October 31 each year, unless you register as a client of an Australian registered tax agent. You must register as a client by October 31, at which point your tax due date is extended until June 5 of the following year.
U.S.-Australia Tax Treaty
There is a tax treaty between the U.S. and Australia, which helps determine which country taxpayers are residents of. This can help individuals who are unsure of their residency clarify which country they are considered a resident of. Article 22 of the tax treaty sets the rules about residency and double-taxation. The provisions prevent double taxation on pensions, social security income, and income on annuities received while a resident is in their home country. If you are unsure about your tax requirements and residency status, consulting this treaty may help provide clarity on your specific situation.
Self-Employed Americans in Australia
Individuals who are self-employed in Australia must register their business as an entity, similar to an individual in the U.S. The different business structures have different tax requirements, but typically self-employed individuals will pay a flat tax rate of 28.5%. This rate applies to any businesses which earn less than AUD 2 million annually. These taxes are required to be prepaid each quarter based on what is anticipated to be earned throughout the quarter.
Goods and Services Tax in Australia
The Australian Goods and Services tax is applicable to almost all transactions involving a good or service in the country. This is a 10% flat rate, and any business owner with over AUD 75,000 in receipts is required to register and begin collecting GST.
How To File a U.S. Tax Return From Australia
As a U.S. citizen living abroad, you will still have to file your U.S. tax return each year. In addition to the tax return, it may be required of you to file various forms to report on your foreign income and any foreign bank accounts you hold. The U.S.-Australia tax treaty will protect you from dual-taxation, but you are still required to report your income to the IRS. There are ways you can reduce your tax payments, as a U.S. citizen living abroad. The Foreign Earned Income Exclusion allows expats to exclude their wages from U.S. income reporting, provided the individual meets certain time based residency requirements. The Foreign Tax Credit allows citizens to claim tax exemption on income that has been taxed by a foreign government.
Taking advantage of these tax reduction possibilities and filing necessary forms, such as the FBAR, from abroad can be a complicated process, which is why we recommend speaking to an expert before beginning to file your tax return online.
File U.S. Taxes With Evolution Tax and Legal’s U.S. Expat Tax Services
The team at Evolution Tax and Legal provides U.S. Expat Tax Services to help you streamline your tax return process. Not only can our team of experts determine which forms are required to be attached to your U.S. tax return, we can assist you in filing your tax lodge in Australia. For help with your expat taxes, contact the team of experts at Evolution Tax and Legal today.