Investing in Australia as a U.S. Citizen: Property, Superannuation, and Trusts

Tax obligations of U.S. expats in Australia

As a U.S. citizen or a Green Card holder, you're required to file and pay taxes to the IRS—even if you now live in Australia. This includes reporting income from jobs, pensions, and even investments. In fact, filing US taxes in Australia can be one of the most complex parts of expat life because both countries tax worldwide income.

Reporting your investment and income can include a lot of work depending on your chosen investment. You will also need to be careful and accurate because one missed tax form could cost you as much as USD $10,000.

Let's go through the basics so you can make smart investments and stay out of trouble with the IRS.

Purchasing Property in Australia

Yes, Americans can purchase property in Australia, but there are guidelines to abide by:

Approval First

If you're not an Australian permanent resident, you'll probably need approval from the Foreign Investment Review Board (FIRB) prior to buying residential property. This is a typical procedure for foreign buyers.

Tax Implications

1. In Australia: You will pay capital gains tax when you sell and income tax if you are renting it out.
2. In the U.S.: The IRS wants you to report rental income and capital gains even if you have already paid tax in Australia.

And this is a catch: Australia might not charge you capital gains tax on your principal residence, but the U.S. could. If you make more than $250,000 (single) or $500,000 (married filing jointly), you may have to pay U.S. tax.

Superannuation: Australia's Retirement System

The Australia's Super or Superannuation is equivalent of a retirement system. It's an excellent method of saving for the future, but for American citizens, it's not as easy as it appears.

How It Works

Your employer puts money into your super fund, and you can put in extra voluntarily. It accrues tax-free in Australia and is normally tax-free when you take it out.

What the IRS Thinks

This is where the problem comes in: the IRS doesn't treat super as a 401(k). Rather, it commonly views it as a foreign trust, which results in:

• You might have to report Form 3520 and 3520-A annually.
• If your super holds investments like ETFs or managed funds, you might also need to file Form 8621 for each one.

And if you roll over your super to a new account, the IRS may treat it as two separate transactions: a withdrawal and a new contribution. That could trigger unexpected taxes.

What You Can Do

• Know what type of super fund you have (corporate vs. self-managed).
• Report correctly and growth contributions.
• Seek assistance from a tax professional familiar with both U.S. and Australian regulations—such as the experts at Expat US Tax.

Australia's Trusts: A Tax Minefield for U.S. Expats

Trusts are frequent in Australia, particularly among families and small companies. But for American citizens, they can prove to be a minefield.

IRS Perspective

The vast majority of Australian trusts are considered to be foreign grantor trusts by the IRS. That implies:

• All the income in the trust is taxed to the person who benefits from it.
• You'll need to report annually on Forms 3520 and 3520-A.

If the trust has foreign mutual funds or unit trusts, they could be treated as PFICs, which have additional reporting and possibly draconian tax treatment.

Common Pitfalls

1. Double taxation: You could end up paying tax twice if you're not careful.
2. Missed filings: Failing to report a trust can result in more than $10,000 in penalties.

Pro Tip

Consult a cross-border tax professional before establishing or investing in a trust. Guessing isn't worth the risk when there's the IRS involved.

U.S. Tax Reporting for Australian Investments

Here's a brief checklist of forms you may need:

• Form 1040 – Your principal U.S. tax return.
• Schedule E – For rental income.
• Form 8938 – For foreign assets above specific thresholds.
• FBAR (FinCEN Form 114) – In case your foreign accounts exceed $10,000.
• Form 3520/3520-A – For foreign trusts and superannuation.
• Form 8621 – For PFICs such as managed funds or unit trusts.

Final Thoughts

Investing in Australia as a U.S. citizen can be rewarding—but it's not without its challenges. From property to superannuation to trusts, each investment comes with its own set of tax rules. And the IRS wants to know about all of them.

The best part? You don't need to do it on your own. Expat US Tax offers expertise in keeping Americans abroad compliant and making the most of their financial opportunities. Whether you are beginning or already well into your investment career, expert advice can save you time, money, and stress.