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Filing US taxes as a dual citizen in Australia

Dual citizenship occurs when an individual is legally recognized as a citizen of two (or more) countries simultaneously. Dual citizenship became legal in Australia in 2002 after the government amended the Australian Citizenship Act of 1948.

This change has allowed Australians to embrace their global roots without renouncing their ties to the country and allow people from different cultures to reside in the country with the same rights as most Australians.

Filing US Tax Return

The US follows a citizenship-based taxation system, so all US citizens must report their worldwide income to the IRS, even if they live and work in Australia. 

If a dual citizen residing in Australia generates income exceeding the minimum filing threshold, they will be required to file a US tax return in Australia.

2025 Filing Threshold

Filing StatusUnder 6565 or Older
SingleUS$14,500US$15,950
Married Filing JointlyUS$29,000US$30,400 (one spouse over 65) 

US$31,850 (both over 65)

Married Filing SeparatelyUS$5 (any age)N/A
Head of HouseholdUS$21,700US$23,150
Qualifying Widow(er)US$24,400US$25,850

 

For self-employed individuals, The cap is US$400 or more (unchanged from previous years), regardless of their age or filing status.

Filing Australian Tax Return

An Australian citizen is required to file a tax return if they earned income above the tax-free threshold of AU$18,200 as of the 2024-2025 tax year.

Australia also taxes their residents on their worldwide income, which includes employment income earned in Australia and overseas, business income, investment income and other income types.

How to Avoid Double Taxation

One of the biggest concerns about becoming a dual citizen is the possibility of being taxed twice—once in the US and once in Australia. Thankfully, the US and Australia have a tax treaty in place and several mechanisms to help taxpayers avoid double taxation.

The US-Australia Tax Treaty provides additional protections against double taxation. It outlines which country has taxing rights over certain types of income, such as pensions or business profits. However, tax treaties do not automatically apply so dual citizens must claim treaty benefits on their US tax return.

Australia’s Foreign Tax Offset is another option to avoid double taxation. If a dual citizen already paid tax to the US on income earned, they may be eligible to claim a foreign tax offset (credit) on their Australian tax return.

Understanding Dual Citizenship in Australia

Living as a US-Australia dual citizen in Australia offers many advantages, such as cultural enrichment, global mobility, and access to rights in two countries. However, it also presents a unique challenge that requires careful management.

Ultimately, being a dual citizen is a journey of balancing two worlds. While it has its hurdles, it also offers unparalleled opportunities to embrace and thrive in both countries. For those who can manage the complexities, it is a rewarding experience that reflects the interconnectedness of a globalized world.

The Benefits of Dual Citizenship in Australia

Dual citizenship offers many advantages, providing individuals with opportunities that extend across borders. Below are some of the key benefits:

  • For Travel and Residency: Dual citizens are able to travel and move with ease between the US and Australia without the need for visas or permits. This freedom is particularly valuable for those with family and cultural ties in both nations.
  • Access to Rights and Benefits: From healthcare, education, and legal security, citizens have access to both rights and benefits depending on where they choose to reside. In Australia, for instance, citizens have access to Medicare, a world-class public healthcare system.
  • Diverse Career Opportunities: It allows individuals to work in two countries without requiring work visas or sponsorship. For professionals and entrepreneurs, this can open up broader markets, networks, and opportunities for collaboration.
  • Cultural and Personal Enrichment: Dual citizens are uniquely positioned to experience the best of both worlds. They can celebrate cultural traditions, learn new languages, and form meaningful connections across borders. 
  • Greater Global Mobility: Holding two passports can significantly enhance international mobility, especially when traveling to countries with differing visa requirements. 

Challenges of Dual Citizenship

While dual citizenship has numerous advantages, it is not without its challenges. Below are some of the potential difficulties faced by dual citizens:

  • Conflicting Obligations: Dual citizens may find themselves navigating conflicting responsibilities, such as tax obligations, military service, or other legal requirements in each country. 
  • Tax Implications: Unlike most countries, the US taxes its citizens on their worldwide income, regardless of where they live. This means that even if a dual citizen resides permanently in Australia and earns income solely in Australia, they are still required to file a US tax return annually.
  • Legal and Political Issues: In some situations, dual citizenship can lead to legal complications. For example, the US may view a dual citizen exclusively as a US citizen while in the US, while Australia might do the same on Australian soil. This can lead to complications in legal disputes, travel issues, or when seeking consular assistance.

While it comes with its hurdles, it also offers unparalleled opportunities to embrace and thrive in both countries. For those who can manage the complexities, it is a rewarding experience that reflects the interconnectedness of a globalized world.

For personalized assistance with your expatriate tax matters, including renunciation procedures, visit Expat Tax Online for expert guidance tailored to your needs.

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