When moving to Australia, you’ve probably researched all the implications of the move and the effects on your finances. One of the most critical factors to keep in mind is that US citizens and Green Card holders are expected to file returns with the American IRS even if they have moved for a short time or permanently. You’re also liable to pay the applicable taxes, and any arrears can result in severe fines and penalties. Juggling returns in two countries can be challenging, which is why it is advisable to work with an expat tax consultant who specializes in taxation laws in the US and Australia.
You’ll Declare Income from All Worldwide Sources.
US laws require you to declare income from all worldwide sources in the forms you submit to various federal departments. Any individual found guilty of ignoring their obligations stands to incur fines and civil penalties of up to $10,000 per form for each year of delinquency. Depending on the particular situation, like wilfully evading taxes, criminal penalties can apply, including fines and a jail term. Read ahead for some of the forms you’re required to complete and submit. Your tax consultant will examine your finances and advise you on all the information you need to declare.
Personal Income Tax Return (Form 1040)
US expats are required to complete and file Form 1040, which includes information of earned income from all sources, domestic or foreign. This rule applies regardless of the location where you reside and whether your income falls within the taxable bracket. Further, even if you pay taxes in your host country, you must file a personal income tax return with the American IRS. With the assistance of a tax specialist, you’ll calculate the number of days you were physically present in the US. This detail can impact the taxes you’re liable to pay.
Foreign Bank and Financial Account Report (FBAR)
The Foreign Bank and Financial Report (FBAR) is essential information that you provide to the U.S. Treasury Department. If you own assets in bank accounts and any other financial instruments or if you have signature authority on any foreign financial accounts, you’re required to complete and file the FinCEN Form 114. This obligation is particularly important if, at any time during the calendar year, the aggregate amount in all the accounts is more than $10,000. Remember to include balances in all accounts, such as mutual funds, insurance policies, brokerage accounts, securities derivatives, and time deposits.
You Can Take Advantage of Exclusions
The IRS has provisions to help US expats avoid or lower their tax burden. The Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and Foreign Housing Exclusion (FHE) allow US expats to avoid paying double taxation on the same income to two different governments. You can also claim exclusions for the housing expenses you incur while living in Australia.
Taxation laws can be complex and confusing, which is why you must rely on the advice of specialist tax consultants. Lower the taxes you pay and avoid the risk of penalties by getting competent direction.