What US citizens living in Australia need to know about superannuation

Typically, superannuation provides a great low-tax investment environment to help save for your retirement. Unfortunately, superannuation is not covered under the tax treaty between Australia and the US. This makes superannuation a grey area for US citizens living in Australia. However, it is important to consider the following issues with regards to your superannuation strategy:

1. Contributions

Making additional contributions into your super fund may reduce taxes and allow you to invest in a low-tax environment. For example, funds that are salary sacrificed into superannuation are taxed at 15% rather than your marginal tax rate (so long as you remain under your concessional contribution cap, which is currently $25,000 per annum). However, issues can arise when your personal contributions (salary sacrifice and after-tax contributions) exceed your employer contributions. This may lead to your fund being deemed a “Foreign Grantor Trust” on your US tax return. This treatment leads to earnings within the fund being taxable on your US tax return at your personal tax rate. This may unwind the tax advantages the Australian superannuation system sets out to achieve.

2. Treatment of self-managed super funds for US taxes

It is likely that self-managed superannuation funds (SMSFs) will be considered “Foreign Grantor Trusts” for US citizens on their US tax returns. This means that income will be taxed in the hands of the person who contributes to the SMSF and will likely lead to additional taxes. On top of this, these structures carry additional reporting requirements, which will likely incur costly accounting fees.

3. Consequences of rolling over your superannuation

Superannuation rollover involves transferring your superannuation balance to a new superannuation provider. This can be treated as a US taxable event. This is why it is important to spend some time selecting the right fund from the outset, as it may be costly to change funds later. Whilst most employers will have a default super fund, nearly every employer will allow you to choose whichever super fund you would prefer. If you are under a corporate superannuation scheme through your employer, you should investigate what the fees would be if you leave your employer. Some of the things to consider when deciding which super fund is best for you include: Investment options, fees, and the quality of insurance options available within the fund.

4. Departing Australia super payment

If you are on a temporary visa and you permanently leave Australia, you will be able to apply to have your superannuation paid to you as a departing Australia superannuation payment (DASP). If you leave Australia and your visa has ceased to be in effect, and you have not claimed DASP, your super fund will transfer your super money to the Australian Tax Office as unclaimed super money. The tax rate on this payment is up to 65% of the withdrawn value.

5. Credits and deductions

There are two main options available for US expats to reduce their US tax liability; either Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC). Your choice here is important, as it can lead to a reduction on the taxes applicable to your superannuation contributions.

6. Partner with experts who understand both locations

As you can see, navigating the Australian/US financial system is complex for US expats. Finding an accountant and a financial planner who understand both jurisdictions is essential if you want to maximise your financial position and have a better chance of achieving your financial goals.

General Advice warning


The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your