Superannuation and US tax: the 12% guarantee, the IRS gray zone and your forms

Superannuation is Australia's version of a 401(k), but the IRS doesn't treat it like one, and it has never issued clear guidance on how it should be taxed.

The short version

• Your employer must pay 12% of your earnings into super in 2025–26, up from 11.5% in 2024–25 [1].
• The US–Australia tax treaty doesn't shelter super the way the UK treaty shelters UK pensions. There's no clause that lets US citizens defer US tax on contributions or growth [2].
• The IRS hasn't said how super should be classified. Preparers disagree, and the choice affects whether employer contributions and growth are taxed each year.
• Reporting is the safer bet: most preparers include super on the FBAR and Form 8938, and some file Form 3520 or 3520-A unless an exemption applies [3][4].
• Leaving Australia on a temporary visa? You can claim your super as a Departing Australia Superannuation Payment, taxed at 35% to 65% in Australia [5].

USD conversions in this guide use the Federal Reserve H.10 rate of October 30, 2026 (USD 0.7038 per AUD), rounded. This is general information on a contested topic; a US expat tax preparer who knows Australian super can check your situation.

How super works in Australia

Super is compulsory. If you're an employee in Sydney, your employer has to pay the super guarantee (SG) into a super fund for you, on top of your salary. You can usually pick the fund; if you don't, your employer uses its default fund or your existing "stapled" fund.

Payday Super started on July 1, 2026. Employers now have to pay SG with each pay run instead of quarterly, and the base shifts to "qualifying earnings" [1]. In practice, you'll see contributions land in your fund much faster.

The money is locked away until you reach preservation age and retire. For anyone born after June 30, 1964, that age is 60. You can also add your own money through salary sacrifice or after-tax contributions, which Australia taxes at concessional rates within annual caps.

How the IRS might see super

Here's the uncomfortable part. A 401(k) gets special treatment because the Internal Revenue Code says so. A foreign retirement plan gets that treatment only if a treaty says so, and the US–Australia treaty doesn't.

What the treaty does and doesn't do

The 1982 US–Australia income tax treaty has a pensions article. Article 18(1) says private pensions are taxable only in the country where you live [2]. But the treaty's "saving clause" in Article 1(3) lets the US tax its citizens as if the treaty didn't exist, and Article 18(1) isn't one of the listed exceptions [2]. The exceptions for pensions cover only social security payments and alimony and child support (Article 18(2) and 18(6)) [2].

The upshot: unlike the UK treaty, there's no clause letting a US citizen exclude employer contributions or defer tax on growth inside super [2]. Article 18(1) only decides where pensions are taxed once you draw them, not how contributions are treated.

The competing views

Because the IRS hasn't ruled on super, preparers use different frameworks. These are the main ones, in general terms:

1. Employees' trust (Section 402(b)). Employer SG contributions are treated as taxable compensation when they vest, which for SG is immediately. Growth is generally not taxed until distribution for most participants. This is a common, conservative approach for regular APRA-regulated funds.
2. Foreign grantor trust. Some argue that a fund you control, especially a self-managed super fund (SMSF), is a grantor trust, so you're taxed on its income every year and owe Forms 3520 and 3520-A.
3. Foreign social security. A minority argue that SG super is so tied to Australia's public retirement system that it should be treated like Social Security. The US–Australia totalization agreement does cover SG contributions for coverage purposes [6], but the agreement's benefit provisions don't apply to SG [6], and the IRS hasn't endorsed this view.

Your own contributions are another wrinkle. Salary sacrifice reduces your Australian taxable income, but the IRS generally still sees that salary as income. If your fund holds Australian managed funds, PFIC questions can come up too, depending on which framework your preparer uses.

None of this means you'll owe much US tax. If you claim foreign tax credits for Australian income tax on your salary, Australia's rates are high enough that the credits often cover the extra income from employer contributions. But the framework you pick should be consistent year to year, and documented.

Reporting: the forms Americans in Sydney file

Does Rev. Proc. 2020-17 cover super?

In 2020, the IRS exempted certain foreign retirement trusts from Forms 3520 and 3520-A. The exemption covers trusts "established and operated exclusively or almost exclusively to provide pension or retirement benefits," and it comes with conditions set out in section 5 of the revenue procedure, such as limits on contributions and withdrawals [4]. Many preparers conclude that large APRA-regulated funds qualify. SMSFs are less clear-cut. The exemption doesn't touch your FBAR or Form 8938 obligations [4].

A practical checklist

1. Log in to your super fund each January and save the June 30 and December 31 balances. The Australian tax year ends June 30, but your US return runs on the calendar year.
2. Keep the annual member statement showing employer contributions, your own contributions, fees and insurance premiums.
3. Report the fund on your FBAR and, if you're over the threshold, Form 8938.
4. Decide with your preparer which framework applies, and stick with it.
5. If you have an SMSF, assume Forms 3520 and 3520-A are in play until a preparer tells you otherwise.

Leaving Australia: DASP

If you worked in Australia on a temporary visa and leave for good, you can usually claim your super as a Departing Australia Superannuation Payment (DASP). You qualify once your visa has ceased, you've left Australia and you're not an Australian or New Zealand citizen or permanent resident [5]. Funds may transfer unclaimed super to the ATO six months after you leave and your visa ends [5].

DASP is taxed in Australia before it's paid [5]:

The working holiday maker rate applies if you held a subclass 417 or 462 visa [5]. On the US side, a DASP is generally reportable income in the year you receive it, and the Australian tax withheld may be creditable. How much is taxable depends on how you treated contributions in earlier years, which is one more reason to get the framework right from the start.

If you stay and get permanent residence, you can't claim DASP. Your super stays put until retirement, and the questions above follow you for decades.

If your partner is Australian, our sister site ExpatCooee explains what happens to super while living overseas, which helps if you're weighing a move back to the States together.

Super is one of the most-asked tax questions in our community group for Americans in Australia, but the answer depends on your fund, your visa and your filing history. A cross-border tax preparer who handles both Australian and US returns is worth the fee here.

Sources

1. Super guarantee: key superannuation rates and thresholds, Australian Taxation Office
2. Technical explanation of the US–Australia income tax convention, IRS
3. Comparison of Form 8938 and FBAR requirements, IRS
4. Instructions for Form 3520-A, IRS
5. Super information for temporary residents departing Australia, Australian Taxation Office
6. US–Australia totalization agreement, Social Security Administration

Keep reading

• Australian taxes for Americans: how they fit with your US return
• Tax file number and the Medicare levy
• 401(k) and IRA when you live abroad
• FBAR: reporting your foreign bank accounts