Let’s be honest: living in Australia is great. Sun, beaches, decent healthcare, and coffee that spoils you for life. The tax part? Not as fun. The U.S. still wants a word with you every year, even if you’ve settled in Sydney or Brisbane and pay plenty to the ATO. Two tax systems. Same income. Easy to trip up.
Here are the six mistakes I see all the time, and simple ways to dodge them.
1) Assuming you don’t have to file a U.S. return
This one bites a lot of people. You move, you pay Aussie tax, you think the IRS is out of your life. Nope. If your income clears basic thresholds (and it probably does), you still file a U.S. return every single year.
Quick fix: File anyway, even if you’ll owe nothing. Use the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) to neutralize double tax. Think of filing as a yearly check-in that keeps penalties and stress off your back.
Tiny example: You earn AUD 140k in Melbourne. Aussie tax handles most of it. On the U.S. return, you’ll typically lean on the FTC to wipe out the U.S. liability. But you still have to file to claim it.
2) Forgetting FBAR and FATCA stuff
If, at any point in the year, all your non‑U.S. accounts together top $10,000 USD, you likely owe an FBAR (FinCEN 114). Bigger balances can also trigger FATCA Form 8938. That includes everyday things: checking, savings, brokerage, joint accounts, maybe even that offset account tied to your mortgage.
Quick fix: Keep a simple spreadsheet of every account and its highest balance during the year. Set calendar reminders for FBAR and tax deadlines. The penalties for ignoring FBAR aren’t cute.
Pro tip: Don’t forget accounts you barely touch. FBAR is about aggregate balance, not just one account.
3) Treating superannuation like a U.S. 401(k)
Super looks and feels like a 401(k). Your employer tips in, you can salary‑sacrifice, it grows for retirement. But the IRS doesn’t cleanly slot super into the same box. Depending on your setup, it can be treated like a foreign trust for U.S. purposes, which means extra reporting and potentially U.S. tax on what Aussies think is tax‑favored growth.
Quick fix: Get a cross‑border tax pro to size up your exact fund. You may need Forms 3520/3520‑A, plus FBAR/FATCA. Keep tidy records of contributions, employer amounts, and investment earnings. Don’t assume “tax‑deferred” translates across borders.
Real life: People are often shocked when their super’s internal earnings show up on the U.S. radar. Better to know the rules now than when you’re five years behind.
4) Forgetting the ATO still wants worldwide income
You focus on the IRS, nail the FEIE/FTC, feel good…and then under‑report in Australia. If you’re a tax resident of Australia, you report worldwide income to the ATO: U.S. dividends, rental income from that condo in Denver, capital gains on U.S. stocks, the lot.
Quick fix: Mirror your reporting. If it exists on your U.S. return, assume the ATO wants to see it too (with Aussie currency conversions and local rules). If you pay U.S. tax on the same income, look at the Foreign Income Tax Offset in Australia to avoid double tax.
Heads‑up: The IRS and ATO swap information. Inconsistencies get awkward fast.
5) Using Australian trusts without U.S. homework
Trusts are popular here for investments, family planning, and asset protection. The IRS, however, treats foreign trusts like a high‑maintenance house guest. If you’re a grantor, trustee, or beneficiary, you may have annual U.S. filings and potentially ugly tax if distributions aren’t handled right.
Quick fix: Don’t create or step into an Aussie trust without cross‑border advice. Expect Forms 3520 and 3520‑A at a minimum. Keep distribution statements, minutes, and beneficiary records neat. If a trust already exists, get a pro to map what the IRS thinks it is before money starts moving.
Why it matters: Late or missing trust forms can rack up penalties faster than you can say “family discretionary trust.”
What is a discretionary trust? A discretionary trust (often called a family trust in Australia) is a legal structure used to manage assets, reduce tax, and protect wealth. A trustee controls the assets, and can decide which beneficiaries get distributions and when.
6) Mishandling capital gains across two systems
Here’s where people trip: Australia gives a 50% CGT discount on assets held over 12 months. The U.S. does not recognize that discount. Add currency swings and different acquisition dates, and the numbers don’t match perfectly between the two countries.
Quick fix: Track: purchase date, purchase price, sale date, sale price, and the USD exchange rates used for the U.S. return. Report gains to both countries, then use the FTC to smooth out double taxation. If you’re selling a home, learn Australia’s main‑residence rules vs. the U.S. primary home exclusion, they’re not identical.
Mini example: You buy ASX shares, hold 14 months, sell for a gain. Australia may halve the taxable gain; the U.S. won’t. That doesn’t mean double tax, just that you’ll need the FTC to line things up.
Keep yourself out of the penalty box
A few habits make life way easier:
- Keep receipts and statements (digital is fine). Brokers, super funds, and banks all have end‑of‑year reports—save them.
- Log exchange rates used for U.S. reporting when you buy and sell. Future‑you will be grateful.
- Calendar your deadlines: Australia’s financial year ends June 30; U.S. individual deadlines often fall in April/June/October depending on extensions.
- Work with someone who does this all the time. Not just “a tax person” but a U.S.-Australia specialist. You can find a partner at Expat US Tax.
Bottom line: You don’t have to become a tax expert. You just need a simple system and the right help. File the U.S. return, handle the Aussie return, report the accounts, keep an eye on super, and don’t touch trusts without advice. Do that, and you’ll sleep fine—and your coffee will taste even better.
Not legal or tax advice. General info only. Talk to a qualified professional about your specific situation.