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Navigating the superannuation system in Australia is complex to begin with but can be particularly challenging for Australian/American dual citizens or US Permanent Residents. While superannuation is a cornerstone of the Australian retirement system, providing a tax-advantaged environment for saving, its interaction with U.S. tax laws introduces a layer of complexity that requires careful consideration. As an American in Australia, understanding whether to make additional contributions to your superannuation account and the tax implications of such a decision is crucial.
This post explores the factors influencing this decision, including legal residency status, the potential tax benefits and drawbacks, and strategies to manage your superannuation effectively while complying with both Australian and U.S. tax regulations. Whether you're a US temporary resident, permanent resident or a dual citizen, this guide will help you make informed choices about the tax treatment of your Australian retirement savings.
The answer lies in the tax treaty between Australia and the U.S., which includes a clause known as the "savings clause." This clause essentially states that the U.S. can tax its citizens as if the tax treaty had not entered into force.
Therefore, if you're a U.S. citizen living outside of the U.S., you will still be assessed for U.S. taxation. This is particularly relevant when discussing superannuation, Australia's primary retirement savings system.
Superannuation, often referred to as "Super," is the primary pillar of the Australian retirement income system. It includes both mandatory employer contributions and voluntary individual contributions. The Australian retirement system also includes the Aged Pension. Superannuation provides a tax-advantaged environment for saving and accumulating funds specifically for retirement. Australian Superannuation is not intended to be a vehicle for wealth accumulation which explains why there are lifetime limits on the amount of money that may be saved into one’s Superannuation account.
Superannuation contributions in Australia are classified into two main types: Concessional Contributions (CCs) and Non-Concessional Contributions (NCCs). Each type has specific rules and tax treatments that individuals need to be aware of to maximize their retirement savings efficiently.
Annual Contribution Limit
The annual cap for concessional contributions is $30,000 AUD for the financial year 25/26, with no additional catch-up contributions allowed for those over age 50. The five-year carry-forward rule allows account holders with balances less than $500,000 AUD as of 30 June in the previous financial year to carry forward any unused concessional contributions cap for up to five years. The maximum you could presently contribute (as of FY25/26), as a concessional contribution including the carry-forward amount, is $167,500 AUD. Concessional contributions are made from pre-tax income and are subject to specific tax treatments. They include:
1. Compulsory Superannuation Guarantee (SG) Contributions:
These are mandatory contributions that your employer must make into your super fund under the superannuation guarantee if you are eligible. For the financial year 2025/26, the SG rate is 12%.
The Maximum Super Contribution Base (MSCB) is $250,000 AUD per annum in gross salary, resulting in a maximum SG contribution of $30,000 AUD per annum.
2. Salary Sacrifice Contributions:
These are additional contributions that you can arrange for your employer to pay into your super fund from your before-tax income. This is a voluntary arrangement where you can increase your retirement savings by reducing your taxable income. You will only be able to contribute the difference between what your employer pays as a SG contribution and your annual concessional cap of $30K.
3. Tax-Deductible Contributions:
These are voluntary contributions that you can make to your super fund and then claim a tax deduction for. They can be made by self-employed individuals, employees, and, in some cases, those who are not working or have retired. These contributions are personally tax-deductible, similar to contributions to a 401(k) or Traditional IRA in the U.S.
However, they are subject to a 15% contribution tax when deposited into the super fund if your income is less than $250,000 AUD, or 30% if it exceeds $250,000 AUD (under Division 293).
The only real difference between this contribution type and the Salary Sacrifice contribution type is that you're making the contribution from personal funds compared with it being made via employer payroll deductions.
Concessional contributions can generally be made until age 75. From age 67 to 74, a work test (40 hours in 30 consecutive days in the financial year) applies only to the ability to claim a tax deduction for personal contributions, not to employer SG or salary‑sacrifice amounts.
Non-concessional contributions are made from after-tax income and also have specific rules and tax treatments. They include:
1. Annual Contribution Limit:
The annual cap for non-concessional contributions is $120,000 AUD for the financial year 2025/26, increased from the previous limit of $110,000 AUD prior to FY24/25. Individuals aged under 75 are eligible to make non-concessional contributions, even if they are not currently working.
2. Three-Year Bring Forward Rule:
This rule allows individuals to make up to $360,000 AUD in non-concessional contributions in a given year, effectively 'bringing forward' two years of additional non-concessional contributions at once.
However, this amount may be reduced if you are approaching age 75 or the Transfer Balance Cap, which is currently $2 million AUD.
Types of NCCs:
Accessing your superannuation benefits involves understanding the specific conditions and age requirements set by the Australian government. These rules are designed to ensure that superannuation funds are used primarily for retirement purposes.
The preservation age is the minimum age at which you can access your superannuation benefits, provided you meet certain conditions of release.
It is important to note that the preservation age is different from the Age Pension eligibility age, which is currently 67. Your preservation age is not necessarily your retirement age, although it can coincide if you choose to retire at that time. Historically, preservation age was on a sliding scale (55–60) depending on date of birth, but that transition has completed, so everyone who has not already met an earlier preservation age is now effectively subject to a preservation age of 60.
To access some or all of your super benefits, you must reach your preservation age and meet one of the following conditions of release (this is not an exhaustive list):
In the context of U.S. tax law, non-U.S. retirement plans, such as Australian superannuation, are not recognized as "qualified retirement plans" unless specifically covered by a tax treaty. Some tax treaties, like those with Germany and the UK, provide provisions where current contributions are deductible or excludable, and income within the retirement plan is not taxed until withdrawal. Unfortunately, this is not the case with the U.S.-Australia Double Taxation Agreement. Therefore, Australian superannuation plans do not receive the same favorable treatment under U.S. tax law.
Australian superannuation can be classified under U.S. tax law in several ways which are to some degree dictated by the degree of ‘control’ the account holder is deemed to have.
Aspects of Control:
The key principle is that if a US person has "substantial dominion and control" over the trust property, they are treated as the owner of the trust assets for US tax purposes.
Thus, depending on the degree of control one is deemed to have of their Australian Superannuation account, the account may be treated as either;
An Employee Trust under IRC §402(b) typically involves employer contributions and is exempt from certain punitive U.S. tax treatments. Specifically, it avoids the punitive Passive Foreign Investment Company (PFIC) rules.
Employer and Employee Contributions: Contributions to the superannuation fund are included in the employee's gross income in the year they are made if the benefits are substantially vested. This means they are taxable as compensation under U.S. tax law.
Growth: The growth within the superannuation fund, such as interest, dividends, and capital gains, is generally not taxed annually. Instead, these earnings are taxed when they are distributed or made available to the individual.
Distribution: When distributions are made from the superannuation fund, they are taxed as ordinary income under §72 of the Internal Revenue Code. This means that the portion of the distribution representing earnings is taxable, while the portion representing the return of contributions (basis) is not.
Employee Benefit Trust treatment is generally the preferred treatment for Australians in the U.S. on temporary visas who intend on returning to Australia. The reason is that there will be little to no contributions going into the account and growth is not taxable prior to retirement age. The challenge for Australian expatriates with this tax treatment will be in determining the U.S. taxable basis of their Superannuation account.
A trust is considered a Foreign Grantor Trust if the grantor has the ability to revoke the trust or has broad authority to "re-vest title to the trust assets," and if distributions are solely for the grantor and their spouse. It is generally agreed that Self-Managed Super Funds (SMSFs) or accounts with non-employer contributions may fall under this definition.
Under U.S. law, a trust is considered a foreign trust unless it satisfies both of the following conditions:
Contributions: Contributions to a Foreign Grantor Trust are considered U.S. taxable income from the time the account holder became a U.S. citizen or permanent resident. However, due to Foreign Tax Credits (FTC), this may not always result in taxable income. These contributions are recorded on line 7 of a 1040 as taxable wages and do not qualify as foreign earnings, thus one cannot use the Foreign Earned Income Exclusion (FEIE). Contributions and earnings are taxed at U.S. marginal rates rather than trust rates.
Growth: The character of the income is preserved; thus income retains its character when attributed to the grantor. Capital gains remain capital gains, dividends remain dividends, and interest remains interest. This matters for determining applicable tax rates and potential preferential treatment of long-term capital gains.
Reporting Requirements
Foreign Grantor Trust treatment is typically less preferred than Employee Benefit Trust treatment given the Mark to Market taxation on growth. The growth of such an account is likely occurring during the account holder’s peak income earning years, and thus would be subject to higher marginal tax rates.
The advantage of Foreign Grantor Trust treatment is that the tax basis is stepped up annually so distributions effectively become a non-taxable return of capital.
For Australian tax residents, rolling over your superannuation funds from one account to another is a common and straightforward process. The ATO does not treat this rollover as a taxable event because the funds remain within the superannuation system, retaining their tax-advantaged status.
Most individuals will seek to retain Employee Benefits Trust tax treatment of their Superannuation account and thus will want to avoid rolling over their superannuation account while a U.S. tax resident. Doing so can be viewed as taking “constructive receipt” of the account and thus the rollover could be viewed as a distribution, subject to U.S. income tax and the absence of treaty protections. The IRS has not issued public rulings specifically addressing superannuation rollovers, leading to uncertainty. Private rulings and informal guidance exist but cannot be used as precedent.
The same treatment would not apply however, to those who have taken a Foreign Grantor Trust approach to their account where rollovers between superannuation accounts are not treated as taxable events. This is because the funds being rolled over have already been taxed in the US, making them post-tax money. A rollover between foreign grantor trusts is treated as a transfer of already-taxed amounts that should not trigger additional taxation.
The short answer is: Yes, you can contribute to Australian superannuation while living in the US, but it's generally not advisable for US tax residents. The reasons are significant and complex.
From an Australian law perspective, there is no residency requirement to contribute to superannuation. Australian expats living anywhere—including the US—can continue to contribute to their existing superannuation funds voluntarily.
You may make either Concessional or Non-concessional contributions. Concessional contributions (taxed at 15% within the fund) are capped at $30,000 annually for 2025–26, with a carry-forward mechanism if you've had unused capacity in prior years. Non-concessional contributions (post-tax dollars) are capped at $120,000 annually, with a bring-forward rule allowing up to three years' contributions ($360,000) in a single year if your total super balance is below $2 million.
If you make personal contributions to your superannuation account—particularly voluntary, discretionary contributions—you create a situation where your contributions may exceed 50% of your total superannuation balance. When this threshold is breached, your superannuation is classified as a foreign grantor trust for US tax purposes. Under foreign grantor trust treatment, as we discussed previously, all income and growth are taxed to you currently on an annual basis, regardless of whether you can access the funds.
This means:
Even contributing non-concessional funds (post-tax dollars where you've already paid US tax) creates the same problem. The contribution is still counted toward the foreign grantor trust threshold, and growth on those funds remains subject to current US taxation.
Despite the possibility of an Australian tax deduction for a Concessional contribution, any Superannuation contribution made while a US tax resident would be treated as taxable US income at the state and federal level.
Contributions to Australian superannuation while US tax-resident are advisable only in limited scenarios:
Figure 1.0 - 2025/26 Australian Individual Tax Rates and Medicare Surcharges
As you can see above in Figure 1.0, the Australian tax rates for non-residents in FY 24/25 start at 30% and make their way up to 45% with $190,000 AUD of income.
For a Concessional Contribution (CC) to provide an overall tax benefit, the American taxpayer must be in a tax bracket below 32%, including State taxes^.
^ Remember, Australian sourced income is likely state assessable income if you live in a state with an state income tax, making the CC window even smaller.
A single filer must have a taxable income < $197,301 or for a Married Filing Joint tax filer, a taxable income of <$394,601 to be below the 32% Federal rate. Why 32%? Remember, the Australian sourced income is taxable US income regardless of its contribution type. Thus, it is adding to US taxable income at one’s prevailing marginal rate, and if the US income tax rate exceeds the Australian income tax rate, then one is simply paying the higher of the two. One doesn’t want to be paying US tax at a rate higher than what you’d otherwise be paying in Australia, otherwise making a CC would result in an additional tax payment. There’s also no foreign tax credit generated for a concessional contribution, despite the 15% Superannuation contribution tax such types incur.
Figure 2.0 - 2024 US Federal Tax Rate (Single)
Figure 2.0 - 2024 US Federal Tax Rate (Married Filing Joint)
Example: James and Janice
James and Janice are U.S. tax residents living in Florida who own an Australian investment property in Janice’s name. The investment property, after all expenses produces income of $30K AUD / $20K USD. As Married Filing Joint taxpayers, James and Janice make $74,000 USD between them, putting them in the 12% US Federal bracket. With Australian sourced income taxed at 30%, if they made a Concessional Contribution of $30K AUD / $20K USD (the FY25/26 annual maximum), they would still owe US tax on the income, thus bringing their US assessable income up to $94K but still staying within the 12% bracket. They would save 18% on their overall tax bill given the difference between the US and Australian rates. While an 18% difference sounds pretty large, we need to consider the 15% contributions tax that apply to Concessional Contributions. This ultimately results in only a 3% net tax savings. Ongoing contributions, either Concessional or Non-Concessional however, could tip the scales to the superannuation account becoming a Foreign Grantor Trust. Given how narrow the set of circumstances are that must apply for a CC to provide even a nominal benefit, it is rare we ever recommend making a CC.
Should I consider making a Non-Concessional Contribution Instead?
If you’re planning to relinquish U.S. Tax Residency in the short to medium term, you might consider making Non-Concessional Contributions (NCCs) to your Superannuation account, assuming one keeps their personal contribution to less than 50% of the account balance. Non-Concessional Contributions are not subject to a contributions tax yet the account still grows on a tax advantaged manner. Assuming one has reached your preservation age and are retired or are over age 65, distributions are tax free.
Once you are no longer a U.S. tax resident, you will not be subject to U.S. taxes on your superannuation. Note that if you are a Covered Expatriate subject to the HEART Act Exit Tax, special rules apply in determining whether your Superannuation account would be subject to the exit tax or not.
Superannuation is mandatory for Australian tax residents, so if you’re a both a US citizen and an Australian tax resident, you’ll be required to regardless of the tax impact to you. However, making personal concessional contributions as an American tax resident may not always be beneficial due to U.S. tax implications.
Your legal residency status in Australia significantly impacts the advisability of making personal concessional contributions to your superannuation:
If you are a US citizen or permanent resident in Australia on temporary stay (max of 5 years), it’s possible you could effectively opt out of Superannuation. How? Assuming your facts and circumstances point to the center of your vital interests remaining in the U.S., you could opt to retain your primary U.S. tax residency by way of the tie-breaker provision in the US/Australia Double Income tax treaty. This would mean you need not become an Australian tax resident, and thus not contribute to Superannuation in the first place.
If you've lost track of your superannuation accounts, you can search for lost super through the Australian Taxation Office (ATO) using your myGov login. This is similar to searching for lost money in the U.S. by checking with individual state databases.
Navigating the complexities of superannuation as an American in Australia requires a nuanced understanding of both Australian and U.S. tax laws. While superannuation offers significant tax advantages for retirement savings, the interplay between these two tax systems can impact the benefits you receive. Your legal residency status, the potential classification of your super account as a Foreign Grantor Trust, and the implications of concessional and non-concessional contributions all play crucial roles in determining the best strategy for your retirement savings.
Temporary residents must weigh the heavy tax implications of making concessional contributions against the more favorable treatment of non-concessional contributions. U.S. citizens and permanent residents with dual status need to consider the foreign tax credit and the risk of their super account being deemed a Foreign Grantor Trust. Additionally, understanding how residency status impacts mandatory contributions can help you avoid unnecessary tax liabilities.
At Areté Wealth Strategists, we have years of experience helping individuals and families successfully make the most of their financial lives between Australia and the U.S.
Visit our website to learn more about how we can help you. When you’re ready to reach out, get started with your free consultation
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