US Essentials Kit: A Guide for Australians Moving to the United States

For Australians moving to the United States, the excitement of an overseas opportunity is often accompanied by a maze of unfamiliar tax and financial rules. The US financial system is complex, and misunderstanding your obligations can result in unexpected tax bills that may erode the financial benefits of working abroad.

This US Essentials Kit is designed to provide Australians moving to the United States with a practical overview of the key tax and financial issues you need to be aware of before and during your time in the US. While the topics covered here are high-level and complex, understanding the fundamentals will help you identify risks early and seek the right professional advice.

For your convenience, this guide is also available as a downloadable, print-friendly PDF.

US Tax Residency and the Substantial Presence Test

For Australians moving to the United States, determining your US tax residency status is one of the most important steps in understanding your obligations. Australian Expats are generally classified as US residents for tax purposes if they satisfy the Substantial Presence Test.

The Substantial Presence Test is met if a person is physically present in the US for:

• At least 31 days during the current calendar year; and

• A total of 183 days over the current year and the two preceding years (calculated using a weighted formula).

If you satisfy the Substantial Presence Test, you are classified as a US resident for tax purposes. US tax residents are taxed on their worldwide income, not just income earned in the US.

US Filing Requirements

Australians moving to the United States who are classified as US tax residents are required to file a US tax return (Form 1040) if their income exceeds certain thresholds, which vary depending on filing status.

It is important to note that the US tax year runs from 1 January to 31 December, which differs from the Australian tax year of 1 July to 30 June.

In addition to your tax return, Australians moving to the United States with foreign financial assets in Australia exceeding certain thresholds must lodge additional disclosure forms, including:

• Form 8938 (Statement of Specified Foreign Financial Assets); and

• FinCEN Form 114 (also known as the FBAR) if the combined balance of foreign bank accounts exceeds USD 10,000 at any point during the year.

US tax filings may be required at both the federal and State level, with State taxes varying significantly depending on where you live. You should always confirm your State obligations and seek advice from a US tax professional.

Review Your Australian Investments: PFIC Rules

For Australians moving to the United States, existing Australian investments can create unexpected tax issues under the Passive Foreign Investment Company (PFIC) rules contained in Section 1297 of the US Internal Revenue Code.

Common Australian investments that may be classified as PFICs include:

• Australian managed funds

• Exchange Traded Funds (ETFs)

• Listed Investment Companies (LICs)

• Stapled securities listed on the ASX

Income and capital gains from PFICs are taxed by the IRS at punitive rates, often with additional interest charges. Reporting is also onerous, requiring Form 8621 to be lodged for each PFIC held.

The cost of compliance can be significant, with US tax accountants often charging USD 300–500 per PFIC each year. Given the complexity and potential tax exposure, Australians moving to the United States are generally best advised to avoid PFIC investments where possible.

There are alternative investment options still available, and Australian Expats should seek guidance from an Expat Financial Adviser to explore more tax-effective investment structures.

Managing Australian Superannuation While in the US

For Australians moving to the United States, Australian superannuation does not receive the same tax treatment as it does in Australia. Your super fund is generally reported on your US tax return as either an employee benefits trust or a foreign grantor trust, depending on your level of control and contribution history.

Contributions made to an Australian super while you are a US tax resident are generally treated as taxable income in the US, reducing or eliminating the tax benefits you may expect from contributing. As a result, careful consideration should be given to whether ongoing contributions are appropriate.

Self-Managed Super Funds (SMSFs)

SMSFs are typically classified as foreign grantor trusts due to the control members have over the fund. This can result in:

• Annual US tax on unrealised gains; and

• Extensive and costly reporting requirements.

For this reason, maintaining an SMSF is generally not suitable for Australians moving to the United States.

Employer 401(k) Retirement Accounts

A 401(k) is a US employer-sponsored retirement savings plan that allows employees to make pre-tax contributions, reducing their taxable income in the year of contribution. Investment earnings grow on a tax-deferred basis until withdrawal, typically in retirement.

Many US employers offer matching contributions, which can significantly enhance long-term retirement savings.

Australians moving to the United States should determine whether their employer offers a 401(k), particularly where employer matching is available. However, careful planning is required when withdrawing or transferring these funds upon returning to Australia, as Australian tax consequences may apply.

US Exit Taxes

Australians moving to the United States should be aware of potential US exit taxes under the HEART Act of 2008. These rules may apply if, in the future, you:

• Have held a US Green Card for 8 of the last 15 tax years and later abandon it; or

• Applied for and subsequently renounced US citizenship.

The exit tax functions as a deemed capital gains tax on your worldwide assets at the time of expatriation, payable to the Internal Revenue Service (IRS). It’s important to understand these rules early, particularly if you plan to return to Australia in the future.

Conclusion

For Australians moving to the United States, proactive planning is essential. US tax residency, reporting obligations, investment structures, superannuation, and retirement planning all interact in ways that can materially affect your financial position.

The key takeaway is that decisions that make sense in Australia may have unintended consequences in the US. Seeking advice from professionals who understand both Australian and US financial systems can help you avoid costly mistakes and ensure your time overseas supports your long-term financial goals. If you are an Australian Expat or planning a move to the US, tailored advice can make all the difference.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the below link:

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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.