Demystifying the US-Australia Tax Treaty
What is the US-Australia Tax Treaty?
An agreement established to prevent individuals and entities operating across borders from being taxed on the same income in both the United States and Australia. It also helps prevent tax evasion.
Double Taxation Relief
The US-Australia Tax Treaty eliminates double taxation by offering tax credits, exemptions or deductions. In some cases, tax paid in one country may be credited against tax payable in the other country. Certain types of income may be exempt from tax in one country or eligible for reduced rates.
Residency Rules
The Treaty outlines specific rules to determine residency for tax purposes. This helps individuals and businesses determine in which country they are liable to pay taxes on their income.
Do all US states recognize the Treaty?
No. Although the US-Australia tax treaty is acknowledged federally, each individual US state has its own rules and regulations concerning international tax treaties and the application of Foreign Tax Credits.
Check if your state recognizes the Tax Treaty or offers Foreign Tax Credits*
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o There is no state income tax in Alaska
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes with limits
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o There is no state income tax in Florida
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? Yes with limits
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes with limits
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? Limited to foreign state or political subdivision
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
There is no state income tax in Nevada
-
o New Hampshire only taxes interest and dividends for individuals
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? Yes
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Yes
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? No
-
There is no state income tax in South Dakota
-
There is no state income tax in Tennessee
-
There is no state income tax in Texas
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? Only for foreign pensions
-
There is no state income tax in Washington except for the new capital gains tax
-
o Recognizes the Tax Treaty? Limited
o Allows Foreign Tax Credits? No
-
o Recognizes the Tax Treaty? No
o Allows Foreign Tax Credits? No
-
There is no state income tax in Wyoming
*Disclaimer: State rules and regulations can change at any time. The information provided should not be used as advice. Please check the appropriate state website or chat to your tax professional if you need more information about a state’s tax rules and regulations.
Concluding Thoughts
Understanding the tax policies of each US state is crucial for Australian expats to make informed decisions and mitigate the risk of double taxation on their Australian income. While the US-Australia Tax Treaty provides federal protection, individual state policies may differ significantly. Seeking guidance from an international tax accountant is highly recommended to navigate the complexities of state tax regulations and ensure a smooth financial transition for Australian expats in the US.