Australia is a nation with a diverse range of people of different religions, languages and cultures. Strange as it may, sound, but, most of the Australians are foreigners. In this context, every year numerous US residents do come to Australia to serve various purposes. Despite this, a US citizen invariably needs to file his/her expat tax return in the proper and expected way. So, given below is a comprehensive guide about expat tax return and how a US citizen files that effectively.
A quick introduction to Expat Tax Return
You need to file an expat tax return indispensably if you are a permanent US resident or citizen. Even if you are staying somewhere like Australia, you need to do that indispensably. You will have to do this every year in assistance of the IRS. Doing this is of utmost importance as it comprises an essential part of US’s taxing protocol. It helps them assess the valuation of all your incomes in a comprehensive manner. In some cases, the taxpayer even becomes subject to double taxation.
Some effective measures
There are a few effective measures which prevent an US taxpayer from becoming subject to double taxation. These include:
- Foreign Housing Exclusion: This offers the facility of an extra exemption on some expenses related to the taxpayer’s household and overseas stay.
- Foreign Tax Credit: The taxpayer will get optimal deductions in his/her tax bill with this particular facility on his/her residual income.
- Foreign Earned Income Exclusion: It allows you to get reasonable deductions in your overall income by $101,300, concerning your expat tax return. Conversely, when it’s about your income of 2017, you will get an exemption of around $102,100 on your expat tax return.
Remember, that the Expat income tax rate in Australia is different for its citizens and non-citizens. Hence, as an US citizen when you are filing your expat tax return from Australia, do ensure your category first. Once, you are certain about your section, you can continue with the rest of the procedure.
Different taxation rates for US citizens in Australia
The taxation rates in Australia, particularly for US citizens vary reasonably according to their diverse income profiles. US citizens who are staying and working in Australia will be considered as residents of the country. On the contrary, if they don’t qualify as residents based on their incomes, then, they will be considered as foreign residents. The different tax rates for each of these categories will be considered below.
For Eligible Residents
The tax rates for some of the US citizens considered taxable Australian residents are:
- $180,001 and more (taxable earning)-45c for each $1 comprising $180,000 and $54,232 (levied tax)
- $87,000 to $180,000 (taxable earning)-37c for each $1 comprising $87,000 and $19,822 (levied tax)
- $37,001 to $80,000 (taxable earning)-32.5c for each $1 comprising 37,000 and $3,572in total (levied tax)
- $18, 201 to $37,000 (taxable earning)-19c for each $1 comprising $18,200 (levied tax) and
- 0 to $18,200 (taxable earning)-NIL (levied tax)
Residents who earn more than $18,000 in Australia will be liable to pay an extra 2% of income tax. This will also be accompanied by an additional 2% of tax applicable to the Medicare of Australia.
For Foreign Residents
The tax rates for US citizens considered as foreign residents of Australia are:
- $180,001 and more ( taxable earning)-45c for each $1 comprising 180, 000 and $62, 685 in total (levied tax)
- $87, 001 to $180, 000 (taxable earning)-37c for each $1 comprising $87, 000 and $28, 275 in total (levied tax)
- 0 to 87,000 (taxable income)-32.5c for $1
So, hopefully, you are aware of the different tax rates for the eligible and foreign residents of Australia. Now, it’s time to move on to some of its other aspects.
Some crucial aspects worth considering about expat tax return
Certain facets are worth considering by any US citizen regarding filing his/her expat tax return in Australia. Firstly, he/she has to file his/her expat tax return within a given time-frame while being in Australia. Actually, the financial year in Australia starts from 1st July and end on 31st October every year. So, the taxpayer needs to file his/her expat tax return within that period of time. You will also get exemptions from US Social Security Taxes merely due to the Australian Totalization Agreement.
US self-employed businesses in Australia with revenues of less than $2 million are subject tax rates of around 28.5%. Besides, the US-Australia tax treaty lets him/her ascertain his/her residency in either of the countries. You also don’t need to show the details of your foreign income to the ATO as a foreign resident. If you hire a Tax Accountant Perth, you will get an additional extension period to file your tax return. This will let you pay your income taxes to the Australian Taxation Office till 15th May of the forthcoming year. Income taxpayers who pay exorbitant duties will get this extension 31st March of the following year.
So, hire a professional Tax Return Agent in Perth today and file your US expat tax return successfully.