Form 6252: 2025 Guide for Australians with U.S. Investments

If you’re an Australian with investments or business interests in the United States, you may have heard whispers about ‘Form 6252’—the IRS’s tool for reporting installment sales. While this U.S. tax form might seem irrelevant down under, the reality is that more Australians are running afoul of cross-border reporting requirements as global property and business deals rise. Understanding Form 6252 can be crucial for keeping your U.S. filings squeaky clean and your Australian tax obligations in check.

What Is Form 6252 and Who Needs to File It?

Form 6252 is an Internal Revenue Service (IRS) form required for reporting income from installment sales in the United States. An installment sale occurs when you sell property—such as real estate or a business—and receive payments over time, rather than a lump sum. If you’re an Australian tax resident but have sold a U.S. asset using an installment agreement, the IRS expects you to file this form annually until all payments are received.

• Typical scenarios: Selling a U.S. rental property and accepting payments over several years.

• Selling a business interest in the U.S. with a deferred payment plan.

For many Australians, especially those with dual tax obligations, Form 6252 can add a layer of complexity to an already tangled tax web. The Australian Taxation Office (ATO) may also require disclosure of foreign income, so accuracy is paramount.

Key 2025 Changes and Cross-Border Implications

In 2025, the IRS has tightened scrutiny on foreign taxpayers with U.S. source income, including those using installment sales. Several updates are relevant for Australians:

• Increased Information Sharing: The U.S. and Australia continue expanding tax data exchange under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS). Expect closer review of cross-border transactions.

• Updated Form 6252 Instructions: The IRS clarified reporting requirements for non-resident aliens, especially regarding property sales involving U.S. real estate or business assets.

• Capital Gains Withholding: The Foreign Investment in Real Property Tax Act (FIRPTA) still requires withholding on certain sales, but the thresholds and exemptions have been revised for 2025. If you’re selling U.S. real estate, you may face a different withholding rate than in previous years.

Practical example: If you’re an Australian selling a Miami apartment on an installment plan, you must file Form 6252 each year you receive payments. The IRS will share this information with the ATO, so underreporting or omissions can trigger audits or penalties in both countries.

How to Navigate Form 6252 as an Australian Investor

Filing Form 6252 involves reporting the gross profit, contract price, and payments received each year. The challenge for Australians is aligning U.S. and Australian tax years, exchange rates, and disclosure rules. Here’s how to keep your compliance tight in 2025:

• Track All Installment Payments: Meticulous record-keeping is critical. Every payment, interest component, and foreign exchange adjustment should be documented for both IRS and ATO reporting.

• Beware Double Taxation: Australia taxes worldwide income, including foreign capital gains. Ensure you claim any available U.S. tax credits in your Australian return to avoid double taxation. In 2025, the ATO has flagged cross-border real estate as a key audit target.

• Coordinate with Professionals: Cross-border tax professionals can help you correctly file Form 6252, report the income in Australia, and leverage the U.S.-Australia tax treaty. Missteps can lead to significant penalties in both jurisdictions.

Real-world case: A Sydney investor sells a California investment property in 2025 for $1 million USD, to be paid over five years. They must file Form 6252 annually, report the capital gain in both countries, and carefully apply exchange rates to avoid ATO scrutiny.

Common Pitfalls and Pro Tips for 2025

With the IRS and ATO sharing more data than ever, mistakes on Form 6252 can have global repercussions. Here are some common traps—and how to sidestep them:

• Ignoring the Interest Component: The IRS taxes interest on installment sales as ordinary income. Failing to break out interest from principal can inflate your capital gains exposure.

• Currency Conversion Errors: Both tax offices expect accurate AUD-USD conversions. For the 2025 tax year, the ATO has issued updated guidance on acceptable exchange rate sources for foreign income reporting.

• Late or Incomplete Filings: The IRS imposes strict penalties for late or missing Form 6252 filings, and the ATO may view omissions as a red flag for offshore income concealment.

Best practice: Set annual reminders for installment payments, keep all sale and payment documentation, and check both IRS and ATO guidance for the latest cross-border rules.