Proposed 3.5 % US Remittance Tax Australian expats

Proposed 3.5 % US Remittance Tax Australian expats

A tax proposal that has already cleared the US House of Representatives would impose a 3.5% US remittance tax for Australian expats on every outbound money transfer made by non‑citizens or non‑nationals. Though the Senate still needs to vote, history shows that once revenue‑raising measures reach this stage they often become law in some form. Australian expats who plan to move money or assets home must treat this as a high‑probability risk, not a distant possibility.

Key Facts at a Glance

• Headline rate? 3.5 % of the gross amount transferred out of the United States
• Who is liable? The sender, unless verified as a US citizen or US national
• Collection agent? Banks, broker‑dealers, fintechs and money‑transfer firms must withhold and remit the tax quarterly
• Proposed start date? 1 January 2026

How the Bill Is Drafted

The measure sits inside the House Budget reconciliation package and creates several new Internal Revenue Code sections:

• IRC § 4475 – Remittance Transfers
• IRC § 36C – Refundable Credit for Remittance Tax
• IRC § 6050BB – Information Reporting
• Qualified Remittance Provider Rules

Together, these provisions place collection and policing responsibilities squarely on the financial‑services industry, meaning the tax will almost certainly be withheld at source.

Why Expats Should Pay Attention

Most Australian expats eventually transfer funds back home, whether to invest, buy property, top up super or simply repatriate savings. Under the 3.5% US remittance tax bill:

• Every dollar sent after 31 December 2025 could attract the levy.
• The tax applies to the full transfer value, including realised gains, so growth earned in the US becomes part of the taxable base.
• The compliance burden on providers makes carve‑outs unlikely for non‑citizens.

Case Studies on the Proposed US Remittance Tax for Australian expats

1) Moving a USD 1 Million Portfolio plus USD 10 000 a Month for 10 Years

Assumptions

• All figures in today’s dollars
• Contributions made at the end of each month for 120 months
• Portfolio compounds at 8 % a year (≈ 0.6434 % a month)
• USD → AUD conversion rate 1 USD = 1.55 AUD
• For simplicity, we assume every USD 10 000 monthly transfer occurs after 1 January 2026 and is therefore subject to the 3.5% levy.

*Future value of the invested portfolio; contributions grow inside the portfolio.
**Tax equals 3.5 % × 120 × USD 10 000 = USD 42 000, applied on each monthly transfer after 1 January 2026.

Outcome for the Aussie expat regarding the 3.5% US remittance tax:

• Scenario A avoids paying tax on the initial USD 1 M and pays a total of USD 42 000 in excise across 10 years on monthly top‑ups.
• Scenario B pays USD 138 606 once at the end of 10 years on the full USD 3.96 M.
• Tax difference is USD 96 606 (≈ AUD 149 740) in favour of investing from day one in Australia.
• Scenario A also keeps growth outside US reach from year 1, slashing legislative and currency risk.

2) Funding an Australian Property from US Income

An Australian expat owns a property in Brisbane that costs USD 2 000 a month (≈ AUD 3 100) to service, such as mortgage, rates, insurance and maintenance. From 1 January 2026:

• Excise on each transfer ⇒ 3.5 % × USD 2 000 = USD 70 (≈ AUD 108)
• Ten‑year total (120 months) ⇒ USD 8 400 (≈ AUD 13 020) lost to tax

A pure, unrecoverable cost that delivers no benefit—and it scales with rising expenses over time.

Practical Steps to Reduce Exposure of the 3.5% US Remittance Tax

1. Act Before 31 December 2025
   1. Shift planned lump sums now while transfers remain tax‑free.
2. Shift Growth Assets Offshore Early
   1. Move US‑held shares via in‑specie transfer to an Australian platform so future gains accrue outside the US remittance net.
3. Build New Wealth in Australia
   1. Direct new savings to Australian accounts, trusts, super or brokerage.
4. Consolidate Transfers and Manage FX
   1. If transfers after 2025 are unavoidable, favour fewer, larger transactions to cut repeated withholding and FX spreads.

Timeline 

• Now – Dec 2025: Planning window; proposal still before the Senate
• 31 Dec 2025: Last day for tax‑free transfers if the bill passes unchanged
• 1 Jan 2026: Proposed start date of the 3.5 % excise tax

Conclusion: Proposed 3.5% US remittance tax

Although not yet law, the detail already drafted makes it clear that the US intends to tax outbound wealth and to make financial institutions its collection arm. Acting now, by moving assets, adjusting transfer behaviour and building wealth in Australia, could save tens or even hundreds of thousands of dollars.

More Information

For more information, please contact your Atlas Wealth Group representative. If you’re an Australian expat based in the U.S. and would like to learn more about our services, feel free to contact us.

Stay up to date and check out our weekly Expat Chat Podcast.