For many individuals born to American parents while living abroad—particularly in countries like Australia—the reality of being labeled a U.S. citizen to U.S. Taxes can come as a surprise later in life. This unexpected tie to the United States brings with it certain obligations, especially concerning tax compliance. The topic of US expat tax in Australia is not only nuanced but deeply consequential for dual citizens and accidental Americans.
So, what happens when someone discovers they’re technically a U.S. citizen—despite never having lived there—and the IRS expects them to file taxes? Let’s break down the complexities, processes, and even some strategies that Australian-based U.S. expats (or accidental citizens) need to know.
Being a Non-Resident in the U.S. But Still Required to File Taxes
The United States is one of the very few countries in the world that enforces citizenship-based taxation. That means if you are a U.S. citizen—even if you’ve never lived in the U.S.—you are legally obligated to file an annual U.S. tax return if your income exceeds the IRS minimum thresholds.
This applies whether you’re living in Sydney, Perth, or the outback. Even if your income is entirely sourced from Australian employers and taxed locally by the Australian Taxation Office (ATO), the IRS still wants a copy of your financial records.
And yes, this rule applies to:
- Accidental Americans born in Australia to U.S. parents
- Dual nationals who have never lived in the United States
- Green card holders who moved back to Australia without formally surrendering their status
One Brisbane-based software consultant, Sarah M., shared:
“I was born in Australia but had an American mother. I never held a U.S. passport or voted. Then I got a job in London, and suddenly my accountant told me I had to deal with the IRS. It was shocking.”
The Process of Filing U.S. Taxes While Living in Australia
Filing US expat tax in Australia involves more than just submitting a standard 1040 form. It’s an entirely different experience from what U.S.-based taxpayers deal with. Here’s a typical process:
- Determine Filing Requirements:
If your global income exceeds $12,950 (single) or $25,900 (married filing jointly) for 2024, you must file. - Claim Exclusions and Credits:
To avoid double taxation, expats can apply for:- Foreign Earned Income Exclusion (FEIE): Excludes up to $120,000+ in foreign-earned income.
- Foreign Tax Credit (FTC): Credits for taxes paid to the ATO.
- Foreign Housing Exclusion: For high-cost housing markets like Sydney or Melbourne.
- File FATCA and FBAR if Necessary:
If your foreign bank accounts exceed $10,000 combined at any point in the year, you must file an FBAR (FinCEN Form 114) and possibly FATCA (Form 8938). - Choose a Tax Professional Familiar with Expat Issues:
Reviews from users on expat tax forums consistently recommend firms like Expat US Tax for their experience in Australian-U.S. treaties.
One user review read:
“I filed through Expat US Tax. They explained the tax treaty benefits between the U.S. and Australia and helped me reduce my liability to zero legally. It felt like a burden was lifted.”
How Can I Avoid Paying U.S. Taxes While Living in Australia?
Avoiding taxes doesn’t mean breaking the law—it means applying the right tax treaties and exclusions legally available to you. Here’s how many Australians with U.S. citizenship avoid paying actual tax to the IRS:
- Utilize the U.S.–Australia Tax Treaty:
This agreement prevents double taxation and recognizes Australian tax residency. - Maximize the Foreign Earned Income Exclusion (FEIE):
In 2025, you can exclude approximately $126,500 USD of foreign-earned income if you meet the Physical Presence Test or Bona Fide Residence Test. - Foreign Tax Credits:
Since Australia has higher tax rates than the U.S., most expats pay more in Australian taxes and can often claim back those payments as credits, neutralizing their U.S. tax bill.
However, the filing requirement still stands, even if your final tax liability is $0. Failure to file can lead to steep penalties.
I Never Paid Taxes at All. What Now?
If you’ve never filed U.S. taxes—either because you didn’t know you had to or you believed you weren’t a “real” U.S. citizen—you’re not alone. There is a safe path to compliance through the IRS Streamlined Foreign Offshore Procedures.
This amnesty program allows eligible taxpayers to:
- File the last 3 years of tax returns
- Submit 6 years of FBARs
- Avoid penalties if non-compliance was non-willful
Thousands of expats in Australia have used this method to catch up without facing penalties. A Reddit commenter from Melbourne wrote:
“I used the streamlined procedure after learning I had to file. The accountant did everything, and I only owed a few hundred in taxes. No penalties. I now sleep better at night.”
Final Thoughts
Being an American citizen—whether by birth, descent, or green card—comes with financial obligations to the IRS, even while living in Australia. The US expat tax in Australia isn’t just about paperwork; it’s about navigating dual tax systems, understanding complex treaties, and using exclusions to avoid double taxation.
For many Australians who happen to be U.S. citizens, the shock of discovering these obligations is real. But with expert help, knowledge of the U.S.–Australia tax treaty, and options like the Streamlined Procedures, compliance is not only possible—it’s often less painful than expected.
If you’re unsure where to begin, consider consulting a specialist or visiting IRS.gov for guidance.
People Also Ask (PAA)
1. Do I have to pay U.S. taxes if I was born in Australia but have American citizenship?
Yes. If you are a U.S. citizen, you’re required to file annual tax returns, even if you’ve never lived in the U.S.
2. What happens if I never filed U.S. taxes while living in Australia?
You may qualify for the IRS Streamlined Program, which allows you to file retroactively without penalties.
3. Can I renounce my U.S. citizenship to avoid taxes?
Yes, but it’s a complex and costly process, often involving an exit tax and a $2,350 fee.
4. Are U.S. tax credits available for Australians with dual citizenship?
Yes. The Foreign Tax Credit and the FEIE can help reduce or eliminate your U.S. tax liability.
