3.5% US Excise Tax on Remittance Transfers to impact Australian Expats

UPDATE - since writing this blog

The US Senate has now reviewed and amended the Bill, significantly narrowing the scope of the excise tax. It has been reduced from 3.5% to 1% and transfers funded via US bank accounts, debit cards, and credit cards are now exempt.

The excise tax will only apply to remittances made using cash, money orders, or cashier’s checks. This means most electronic transfers, including those made through US bank accounts and popular platforms like Wise and OFX, will not be affected.

The final bill passed the Senate on July 1, the House on July 3, and was signed into law on July 4, 2025.

Although the proposal initially raised concerns, fortunately, the amended version is unlikely to significantly affect Australian expats due to its limited scope.

Introduction

On the 22nd of May 2025, the US House of Representatives passed a new bill named H.R. 1, a budget reconciliation bill known as the “One Big Beautiful Bill Act”. The bill narrowly passed the US House of Representatives, with 215 votes in favour to 214 against, and has now progressed to the Senate for consideration.

The bill includes a host of revenue-raising provisions for individuals and businesses, with a specific provision for a new 3.5% US excise tax on remittance transfers, which has the potential to impact Australian Expats in the US sending funds internationally (e.g. to Australia). In this blog post, we will break down this proposed legislation and the potential implications it could have for Australian Expats living in the US.

What is the new 3.5% US Excise Tax on Remittance Transfers?

As part of the “One Big Beautiful Bill Act”, there is a provision to impose a new 3.5% US excise tax on remittance transfers (i.e. sending money), which would apply to savings in a US account that are transferred outside of the US, irrespective of how those savings were accumulated.

The US Internal Revenue Code currently does not impose an excise tax on remittances. This proposal would introduce a 3.5% excise tax on any remittance transfer, such as the electronic transfer of funds, from a sender located in the US, to a recipient who is located in a non-US country. For example, an individual sending USD 100,000 to Australia may incur USD 3,500 in excise tax.

If enacted, the 3.5% excise tax would be payable by the sender of any US outgoing remittance transfer, collected by the remittance transfer provider (e.g. financial institution) and remitted to the US Treasury. Where the tax is not collected from the sender, it would be owed by the sender to the US Treasury.

Who is affected by the US Excise Tax on Remittance Transfers?

The US excise tax on remittance transfers would apply to individuals who are not US citizens, such as Australian Expats who hold temporary work visas (E-3, L-1) or Green cards, regardless of whether they are US tax residents or non-residents, or whether they are lawfully present in the US.

Are there any Exceptions for Australian Expats?

At this stage, it is unclear whether exceptions will be available to Australian Expats who are not US citizens.

It is possible that a tax credit may be provided to any individual who incurs the excise tax, including non-US citizens. To claim the credit, individuals would be required to have a US Social Security Number (SSN). The credit would be a refundable credit for the total amount of such excise taxes paid during the tax year, and would be claimed on their income tax return.

A general explanation of this Bill, prepared by the Staff of the Joint Committee on Taxation, states that this exception is limited to US citizens and nationals. However, the actual wording of the proposal does not appear to be limited in this way, and it can apply to “any individual” who meets the SSN criteria.

Double Tax Agreement (DTA) Relief

Relief from the excise tax may be available to individuals under the ‘Non-Discrimination’ article of the Australia/US Double Tax Agreement (DTA). This section in the DTA essentially states that the US cannot impose taxation or any requirement that is more burdensome on non-US citizens who are tax residents (such as Australian Expats), than it imposes on US citizens.

Although excise taxes are not typically covered by US income tax treaties, the non-discrimination article in some treaties expands its application to all taxes imposed by a treaty partner. As a result, there are potential grounds for Australian Expats to be protected from the Excise tax under the AU/US tax treaty.

When is the US Excise Tax on Remittance Transfers expected to take effect?

If enacted, the excise tax would be effective for transfers made after December 31, 2025. While the US administration has set a goal for President Trump to sign the bill into law by July 4, 2025, the Senate is expected to review the bill considerably and make several changes to the House-approved bill.

Possible Strategies for Australian Expats

To mitigate potential tax exposure, Australian Expats may consider:

• Sending funds to Australia before December 31, 2025;

• Having a US citizen spouse (if applicable) handle remittance transfers;

• Consulting a cross-border tax advisor to evaluate eligibility for the refundable credit or relief under the DTA.

Conclusion

The proposed 3.5% US Excise Tax on Remittance Transfers has serious implications for Australian Expats living in the US, especially those who regularly send money abroad. While the law is not yet enacted, it’s crucial to understand its potential impact and explore strategies to minimise or recover the cost.

If you’re an Australian Expat residing in the US, now is the time to monitor legislative developments and assess your remittance practices. The evolving nature of this bill means staying informed is your best defence against unexpected tax burdens. We are monitoring the progress of this Bill closely and will provide further updates should any changes come into effect.

You can track the progress of the Bill here.

References:

KPMG Global mobility Tax provisions in “One Big Beautiful Bill Act” as of May 23, 2025

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.