IRS Publication 550: A Guide for Australians with US Investments

If you’re an Australian investor with US shares, ETFs, or managed funds, the annual IRS Publication 550 is more than just an obscure American tax document—it’s a roadmap for understanding how your overseas investment income could be taxed and reported. With international investing increasingly popular among Aussies, being across cross-border tax rules has never been more important, especially as 2025 brings fresh regulatory scrutiny and reporting obligations.

What Is IRS Publication 550?

IRS Publication 550 is the official US government guide to investment income and expenses. It covers how Americans—and anyone with US-source investment income—should report and pay tax on interest, dividends, capital gains, and other related income. While it’s designed for US taxpayers, it also matters to Australians who own US-based assets, thanks to global tax treaties and the increasing exchange of financial data between countries.

• Investment income: Includes interest, dividends, capital gains, mutual fund distributions, and royalties.

• Expenses: Covers deductible investment expenses like margin interest and investment advisory fees (though these are less relevant for non-residents).

• Tax reporting: Explains forms and information returns for US tax compliance, such as Form 1042-S for non-residents.

For 2025, the IRS has updated Publication 550 to reflect new reporting requirements and digital asset considerations. While the publication is lengthy, a few sections are especially relevant for Australians.

Why Should Australian Investors Care?

Australian residents with US investments can be subject to US withholding tax on dividends and certain interest income. Even if you don’t live in the US, the IRS expects foreign investors to comply with its rules for US-sourced income. Here’s why Publication 550 matters for Aussies:

• US dividend withholding: The standard US withholding rate on dividends paid to Australian residents is 15% (thanks to the Australia-US tax treaty), but it’s 30% without a valid W-8BEN form on file with your broker.

• Capital gains: Generally, capital gains from selling US shares are not taxed by the US if you’re a non-resident, but there are exceptions—especially for real estate-related investments.

• Reporting obligations: Australian investors must declare global income, including US dividends and interest, on their Australian tax return. Double taxation can usually be avoided by claiming a foreign tax offset.

Example: If you’re an Australian who owns Apple (AAPL) shares through a US broker, dividends will generally be taxed at 15% by the US government. You’ll receive a Form 1042-S at tax time, which you’ll need for your Australian return.

2025 Updates and Trends: What’s New?

The 2025 edition of IRS Publication 550 includes several updates that could impact Australians:

• Digital asset reporting: The IRS now treats certain cryptocurrency transactions as taxable events, and foreign investors in US-based crypto ETFs may see new withholding or reporting requirements.

• Enhanced data sharing: The US and Australia continue to expand automatic exchange of financial account information, making it harder to overlook offshore investment income.

• Real estate and REITs: Australian investors in US real estate investment trusts (REITs) face complex withholding and reporting rules, which the 2025 Publication 550 addresses in greater detail.

The ATO is also stepping up scrutiny of foreign income and assets, so understanding both US and Australian tax rules is essential for compliance and minimising your overall tax bill.

Best Practices for Aussies with US Investments

To stay on the right side of both the IRS and the ATO, follow these practical steps:

• Always submit a W-8BEN form to your US broker to ensure the correct (lower) treaty withholding rate.

• Keep copies of all US tax forms (like Form 1042-S) and report all foreign income in your Australian tax return.

• Claim a foreign income tax offset for any US tax paid on dividends or interest.

• Stay up to date with annual changes in IRS Publication 550 and ATO foreign income guidance.

• Consider professional advice if your US investments are substantial or complex.

International investing brings exciting opportunities—but also greater tax complexity. With the IRS and ATO sharing more data than ever, transparency and good recordkeeping are your best assets.