Does a US Citizen Living in Australia need to Pay Taxes?

 If you are a US citizen but living and working in Australia, Then you have to pay US taxes. When it comes to individual income tax filing, the United States takes a relatively unique approach. For nations that do tax income don't tax income at all. Also, there are two used systems: 1) territorial based and 2) residence based. In the territorial based taxation system, countries like Singapore tax individuals only on income from sources inside borders of the country. On the other hand side, countries like France and Germany tax their local residents on all income earned from both overseas and local sources under the residence based taxation system. For non residents in these countries, income earned locally only is taxed similar to the territorial based system.

Do you know that about 244 sovereign territories employ territorial, residence or non income taxation at all? But there are only two countries that have citizenship based taxation systems: the US and Eritrea. 

Do all US citizens living in Australia have to file income tax return?

If you are an American living In Australia, it means as a US citizen; you have to file a US tax return and pay US taxes. You are subject to the same rules about income taxation as people living stateside. Also, Americans living and working in Australia must report all their overseas income based on US tax law. Remember, this can be complicated than preparing and filling taxes for US citizens living in Australia  by filing an IRS form 1040. This is because there are often calculations and disclosures in an expatriate tax return that national tax accountants might unfamiliar with that. These are: you have to mention amounts you report on your tax return in dollars. If you receive all your income or a part of it or even pay some or all your expenses in overseas currency, you should translate the overseas currency in to the US dollars.

Why you might not have to pay US tax for US citizens living in Australia?

    • The foreign earned income exclusion rule

Average income receivers who are US citizens living abroad take heart. But, you still have to undertake the administratively burdensome job of filing every year with the internal revenue system, you likely will not have to pay a fine in most cases exclude from your income for US expat tax return purposes upto a certain amount of overseas income  and in many cases exclude or even deduct income that comes in the form of overseas housing. To qualify for this exclusion, you must have a tax income in a country other than the US, you must receive income that qualifies as overseas earned income and you must be either a bona fide resident of a country  other than US for an uninterrupted period that includes a whole tax year. Or have been physically present in a nation or nations other the US for at least 330 days during and any period of 12 consecutive months.

How to Save Money on US Expat Taxes Return Filing While Living in Australia

 

If you are a US citizen and living in Australia  then filing  Federal tax for non residents is a necessity. It doesn't matter where you are living in the world, but you can save money on your expat taxes. Here are all the details you need so you can save the most money on your US expatriate taxes.

The foreign earned income exclusion

When it comes to reducing American tax for US citizens living Australia,   the most common way US expats reduce their US tax liability. It lets you exclude the first $99,200 of foreign earned income from US taxation. This exclusion is not automatic, but you need to both qualify for and elect it using form 2555 or 2555 EZ as well. You have to pass one of the two residency test to be eligible for the FEIE. 

1) the physical presence test and 

2) the bona fide residence test. Under the first one, you have to physically present inside a overseas country for at least 330 of any 365 day period. But anytime you spend travelling to or from the US can't be included in those 330 days. Track your time very carefully as spending one day too many in the US can cost you big amount.

The foreign housing exclusion

It works in conjunction with the first one ( FEIE) to reduce your income by using your housing expenses you have paid to increase your FEIE for the year while reducing your income. Also, qualify for and claim the FEIE. Have to qualifying foreign housing expenses such as house rent, insurance, furniture rentals and certain utilities. Have paid your housing expenses from employer provided funds that can be designated as housing funds or part of your regular wages. Have housing expenses that exceed the base amount is 16 percent of the FEIE.

The foreign tax credit (FTC)

There are a few of amazing reasons to use the foreign tax credit. The FTC does not need you to have overseas earned income and you don't need to qualify to use it. Thus, if you don't qualify as a US expat and pay taxes on overseas income than you use FTC as a dollar for dollar credit on those taxes you paid to overseas country. Those residing in high tax countries may find that using the FTC can save them more. This is because you may pay more in overseas taxes than you would owe in US taxes that leaves you with additional foreign credits. Also, one can use those additional credits to offset future taxes or could carry back the credits and amend last year's return to potentially get a refund from the internal revenue system.

Those who qualify for the FEIE could use the FTC in conjunction with the FEIE if income exceeds the $99,200 thresholds. In this case you may be able to offset the US taxes on the money of unexcluded income.

These tips will help you save on your expatriate taxes and filing as close to the first deadline as possible. They can also help you save big if you will owe taxes to the IRS.