When a U.S. citizen relocates to Australia, the move often comes with significant lifestyle improvements, but your tax obligations to the U.S. don’t disappear. Many Americans wrongly believe that establishing residency abroad frees them from filing with the Internal Revenue Service (IRS). Unfortunately, this misconception can lead to severe financial and legal consequences.
The United States is one of the few countries that enforces citizenship-based taxation. This means U.S. citizens living in Australia or anywhere else in the world are still required to file a U.S. tax return and report their global income, no matter where it's earned.
Yes, you do. Whether you’re employed by an Australian company, freelancing remotely, or running your own business in Sydney, you must report all income to the IRS if you meet the annual filing thresholds. For the 2025 tax year:
- Single filers must file if their gross income exceeds $14,600
- Married filing jointly must file if gross income exceeds $29,200
- Self-employed individuals must file if they earn $400 or more
Even if you pay taxes to the Australian Taxation Office (ATO), you are still expected to file a U.S. tax return annually.
Failing to meet your tax obligations may trigger harsh penalties. Many expats discover this only when they try to renew a passport, apply for a mortgage, or return to the U.S. Here’s what non-filers risk:
- Failure-to-File Penalty: Up to 5% of the unpaid taxes for each month the return is late (maximum 25%)
- Failure-to-Pay Penalty: 0.5% per month of unpaid taxes
- Interest Accrual: Compounded daily on unpaid balances
- Passport Revocation: Under the FAST Act, the IRS may revoke your U.S. passport if your tax debt exceeds $59,000
- FBAR Penalties: Not reporting foreign bank accounts over $10,000 can result in fines of up to $10,000 per violation
The IRS works closely with foreign governments through programs like the Foreign Account Tax Compliance Act (FATCA). In Australia, banks are required to report account information held by U.S. citizens. The IRS also monitors:
- Visa and travel activity via U.S. border control
- International data-sharing treaties
- Foreign bank disclosures
The Streamlined Filing Compliance Procedures were created specifically for expats who were unaware of their U.S. tax obligations and want to get back on track. This IRS-sanctioned amnesty program can help you:
- Avoid failure-to-file and failure-to-pay penalties
- Avoid FBAR penalties
- Protect your passport
- Re-enter U.S. compliance without triggering a full audit
Requirements to Qualify:
- Non-willful failure to file (you didn’t know you had to)
- Reside outside the U.S. for 330+ days in at least one of the three most recent years
- Complete and submit:
- Last 3 years of tax returns
- Last 6 years of FBARs (FinCEN Form 114)
- A signed Certification of Non-Willful Conduct
Living in Australia doesn’t free you from U.S. tax responsibilities. However, with the right guidance and use of IRS-approved amnesty programs, you can regain compliance without severe penalties. Ignoring your tax obligations can jeopardize your financial future—and even your freedom to travel.
Stay proactive, informed, and protected. For more detailed IRS resources, visit IRS.gov.
