A Guide For Dual Citizens, Americans Abroad, And U.S. Residents With Heirs Overseas

Plenty of families live comfortably across two or three countries. Their estate plans usually don’t. Most were drafted with a single legal system in mind, and the gaps tend to show up only after someone dies. A surviving spouse learns the marital deduction she was counting on doesn’t apply. A child living overseas inherits an account that comes with U.S. filing obligations nobody mentioned. An executor discovers that a second will, signed abroad, quietly revoked the first.

Saving estate tax matters, but it isn’t the whole job. A good plan gets the right assets to the right people, in a form they can actually own and manage, without unnecessary tax, missed filings, or a clash between legal systems. If a plan cuts tax in one country but leaves an heir unable to get into the account, it hasn’t worked.

It helps to break the problem into three questions.

• Who has the right to tax the transfer?
• Whose law decides who inherits?
• What happens once the beneficiary receives the property and owns it going forward?

These overlap, but they are not the same question. U.S. estate tax depends largely on the deceased person’s citizenship and domicile. Succession rules can hinge on different connections entirely. The recipient’s own status also brings a separate set of income tax and reporting consequences. 

This guide covers the U.S. federal rules in effect for 2026 and the decisions that need input from advisers in other countries. It’s written for dual citizens, Americans living abroad, noncitizens living in the United States, mixed-nationality couples, and U.S. families leaving assets to heirs overseas. Foreign tax and succession outcomes always need a country-by-country analysis. No single international estate plan works everywhere.

1. Start With A Map Of Your Family And Your Assets

Before anyone drafts a trust, take inventory. You need each person’s legal connections and each asset’s ownership details. A list of passports isn’t enough, and the country printed on a bank statement doesn’t necessarily tell you where an asset is located for estate tax purposes.

For each spouse, child, beneficiary, executor, and proposed trustee, note the following.

• Every citizenship they hold, including U.S. citizenship held by someone who has never lived in the United States
• Where they live now, their immigration status, and any significant past moves
• Facts that bear on domicile, such as where they consider their permanent home and where they expect to stay
• Whether they have ever given up U.S. citizenship or ended long-term green card status
• Where they expect to be living when they inherit
• Whether they are realistically able and willing to serve as executor, trustee, or financial decision-maker

For each asset, record the legal owner, how it was acquired, any co-owners, beneficiary designations, approximate value, basis records, and governing documents. Keep property you own directly separate from property held through a company or trust. Don’t forget retirement accounts, insurance, private businesses, foreign accounts, real estate, loans, and valuable personal items.

U.S. estate tax treats a citizen’s or domiciliary’s worldwide estate very differently from a nonresident noncitizen’s U.S.-situated property. For a nonresident noncitizen, shares of a U.S. corporation are generally U.S.-situated even when they sit in a foreign brokerage account. Your inventory needs to show both where the account is and what’s actually in it. 

The finished map should trace each asset all the way from today’s owner to its final beneficiary. For example, an account you own individually might pass to your spouse, then into a continuing trust, and eventually to children living in different countries. Check every step. A structure that works for the first recipient may not work for the next generation.

2. Citizenship, Income Tax Residence, And Estate Tax Domicile Are Three Different Things

One of the most costly mistakes in cross-border planning is assuming that your income tax residence also settles your estate tax residence. It doesn’t. For U.S. estate tax, a “resident” is generally someone domiciled in the United States at death. The regulations describe domicile as living somewhere with no definite present intention of leaving later. Where you actually live and what you intend both count. 

So a green card, a day count, or the type of income tax return you file is not a complete estate tax answer. Immigration records are important evidence, but the real question is domicile. Document your actual circumstances rather than relying on labels like “temporary resident,” “expat,” or “permanent resident.”

U.S. Citizens Living Abroad

Moving overseas doesn’t, by itself, take your foreign property out of your U.S. gross estate. The worldwide inclusion rules reach foreign real estate and other covered property. A second citizenship doesn’t switch off your U.S. citizenship either. A dual citizen living permanently abroad still needs a U.S. estate tax review. 

Take an American who has lived overseas for most of her adult life, owns a home there, and keeps only a modest U.S. investment account. Her U.S. review starts with her worldwide estate, not just the U.S. account. Whether any tax is actually owed is a separate question that depends on exclusions, deductions, prior taxable gifts, and any available treaty relief.

Noncitizens Living In The United States

A noncitizen domiciled in the United States is generally taxed on a worldwide basis, even without a U.S. passport. A noncitizen who isn’t domiciled here falls under a separate nonresident framework. Pin down which one applies before relying on an exemption or deciding how assets should be owned.

Keep A Record That Reflects Your Real Intentions

A useful domicile file explains major moves, homeownership, where family members live, business responsibilities, immigration plans, and what your legal documents say. The point is an honest, consistent record of your actual life, not a checklist designed to manufacture a result. Revisit it after retirement, a major relocation, or any change in where you consider home.

3. What The 2026 Exclusion Does, And Doesn’t, Solve

For 2026, the federal basic estate and gift tax exclusion is $15 million per person, and current law provides for inflation adjustments after 2026. The generation-skipping transfer (GST) tax exemption is also $15 million for 2026. The annual gift tax exclusion is $19,000 per recipient for qualifying present-interest gifts. 

These numbers do different jobs. The lifetime exclusion is not one allowance for gifts plus a fresh, separate allowance at death. Taxable gifts you make during life count against it. For a U.S. citizen or domiciliary who dies in 2026, Form 706 is generally required when the gross estate plus adjusted taxable gifts and the specified historical exemption exceeds $15 million. A return is also needed to elect portability, even if the estate is below the normal filing threshold. 

The annual exclusion works per recipient, per year, not across your lifetime. A gift above the annual limit doesn’t automatically mean a tax bill, because an available lifetime exclusion may cover it. But a reportable gift can still require a gift tax return even when no tax is due. Check the filing rules directly instead of assuming that no payment means no return. 

A Bigger Exclusion Is Not A Cross-Border Plan

Estates below the federal threshold still face real questions. Does the surviving spouse qualify for the marital deduction? Can the beneficiary hold the intended assets? Will the trust stay domestic for U.S. tax purposes? What will a U.S. heir need to know about a foreign inheritance? Which country will administer the property?

Federal exclusion amounts also say nothing about state or foreign tax. State death taxes are handled separately within the federal return’s deduction rules, and foreign death taxes have their own credit provisions. No federal tax does not mean no tax anywhere. 

It helps to separate three different outcomes. No federal estate tax. No federal estate tax return. No other filing or tax obligation at all. These are not the same, so ask your advisers which one actually applies to you.

4. Mixed-Nationality Couples Need A Deliberate Marital Plan

For estate tax, what matters is the surviving spouse’s citizenship, not simply whether they live in the United States. If the surviving spouse isn’t a U.S. citizen, the ordinary estate tax marital deduction is generally unavailable unless an exception, a qualifying trust, or a treaty provides relief. 

That’s why a standard will leaving everything outright to a spouse needs a close look when the spouse isn’t a citizen. A green card does not satisfy the citizenship requirement. Having a noncitizen spouse doesn’t mean every estate owes tax, though. The deceased spouse’s available exclusion and other deductions still count.

Lifetime Gifts To A Noncitizen Spouse

The gift tax marital deduction is also generally unavailable for gifts to a noncitizen spouse. Instead, for 2026 there is a special annual exclusion of $194,000 for qualifying gifts to that spouse. It replaces the ordinary $19,000 exclusion for those gifts rather than adding to it. Gifts of future interests don’t qualify.

Regular lifetime gifts can help balance ownership and give the noncitizen spouse resources of their own. But look beyond the U.S. gift tax treatment. The donor’s basis, the recipient’s future estate tax position, the receiving country’s rules, and who controls the property all belong in the decision.

Also keep in mind that adding your spouse as a signer on an account is not the same as making a completed gift. Access doesn’t document the ownership result your estate plan depends on. Get an ownership analysis before retitling or moving substantial assets.

Joint Ownership Doesn’t Automatically Mean A 50/50 Split

When the surviving spouse isn’t a citizen, the special rule that includes only half of a qualifying spousal joint interest generally doesn’t apply. Contribution-based rules take over instead, which means you need evidence of what each owner put in and where that money came from. 

Joint ownership can make access easier while making the tax analysis harder. Keep purchase records, mortgage records, and proof of later contributions. The deed alone may not show how much is excluded from the first spouse’s gross estate.

Plan Around Naturalization, Don’t Assume It

There is a statutory exception if the surviving spouse becomes a U.S. citizen before the estate tax return is filed and has been a continuous U.S. resident from the date of death until citizenship. Both conditions actually have to be met. A pending application isn’t citizenship, and the family shouldn’t build its cash plan around an expected approval date. 

5. Consider A QDOT When Deferral Fits The Family

A qualified domestic trust, or QDOT, is the main statutory route to an estate tax marital deduction for property going to a noncitizen surviving spouse. Think of it as a way to defer estate tax, not to eliminate it. 

A QDOT generally needs at least one trustee who is an individual U.S. citizen or a domestic corporation. That U.S. trustee must have the right to withhold QDOT tax from distributions other than income. The trust also has to meet collection-security requirements, and the executor has to elect QDOT treatment. 

The trust also has to satisfy the marital interest requirements on their own terms. QDOT qualification and the ordinary marital deduction rules are separate parts of the analysis. A trust meant to qualify as qualified terminable interest property, for example, must meet those requirements too. 

Know The Distribution Rules Before Funding

Principal distributions to the spouse during life generally trigger the special QDOT estate tax. Distributions that qualify as income under the QDOT rules are exempt from that tax, as are qualifying hardship distributions. Capital gains generally do not count as income for this purpose. Whatever remains in the trust at the spouse’s death is generally subject to QDOT tax as well. Escaping QDOT estate tax does not make a distribution income-tax-free; the usual income tax rules still apply.

The hardship exception is narrow. It covers an immediate, substantial need for health, maintenance, education, or support, and generally is not available if the spouse can meet that need from other reasonably available resources.

This matters most when the family’s wealth is largely illiquid or the spouse expects to need significant principal. Before funding, put together a realistic spending and cash plan. Know which resources sit outside the QDOT and which expenses would force a principal distribution from it.

Security Rules Affect Who Can Serve And What Goes In

For QDOTs over $2 million, the regulations generally require a qualifying bank trustee or a prescribed bond or letter of credit. QDOTs of $2 million or less generally must keep foreign real estate to no more than 35% of trust value, measured under the regulations, or use the larger-trust security options. Aggregation and special valuation rules apply.

These rules can affect whether your chosen trustee will accept the role and whether it’s practical to put particular foreign property into the trust. Work this out while you can still adjust the plan. Don’t count on your executor finding a willing institution after the fact.

Make The Election And Fund On Time

The QDOT election is made on the estate tax return and can’t be undone. The regulations generally place it on the last timely filed return, including extensions, or on the first late return. It can’t be made on a return filed more than one year after the due date, including extensions. Property passing outright can sometimes be transferred or irrevocably assigned to a QDOT before the return is filed. Those rules can rescue a deduction, but they’re no reason to delay a planned election. 

6. Preserve Portability, And Know Its Limits

Portability lets a surviving spouse use the deceased spouse’s unused estate and gift exclusion, as long as the statutory requirements are met. It requires an election on the deceased spouse’s estate tax return. The unused amount doesn’t carry over automatically just because you were married or because no tax was due at the first death. 

Form 706 is generally due nine months after death, and a timely Form 4768 requests an automatic six-month extension to file. The executor should consider portability before the original deadline, even when the estate is well below the filing threshold. Keep in mind that more time to file doesn’t necessarily mean more time to pay.

Certain estates that weren’t otherwise required to file can use the simplified relief in Revenue Procedure 2022-32. The deceased person must have been a U.S. citizen or domiciliary, must have died after 2010 and left a surviving spouse, and no estate tax return can have been filed by the original or extended deadline. The executor must file a complete, properly prepared Form 706 by the fifth anniversary of death, with the required portability statement at the top. This relief doesn’t cover a missed deadline on a return that was required anyway.

International couples need to watch two more things. First, when property passes to a QDOT, the deceased spouse’s unused exclusion is subject to later adjustment and generally is not available for immediate use. Special rules apply if the surviving spouse becomes a U.S. citizen. Second, the estate of a surviving spouse who is a nonresident noncitizen generally can’t use the deceased spouse’s unused exclusion unless a treaty allows it. The familiar domestic shorthand about portability doesn’t fully hold in an international marriage. 

One more limit: portability does not transfer the deceased spouse’s unused GST exemption. Trusts intended to benefit grandchildren or later generations need their own exemption planning.

7. A Foreign Heir’s Inheritance And Later Ownership Are Separate Events

You can leave property to someone living abroad, and their address alone won’t determine how the estate is taxed. Federal estate tax is imposed on the taxable estate as a whole, not as a separate inheritance tax on each beneficiary’s share. Inherited property is generally excluded from the recipient’s income. Income earned by the estate or the property, and certain unpaid income the deceased person was entitled to receive, can still be taxable. 

“Foreign heir” also needs defining. An American child living overseas is still a U.S. citizen. A child who isn’t a citizen may still be a U.S. tax resident. A true nonresident alien beneficiary raises different withholding and ownership questions. Find out the heir’s actual status, not just their mailing address or the passport they travel on.

Leave It Outright, Or In A Continuing Trust?

An outright inheritance gives the beneficiary full control and avoids ongoing trust administration. A trust offers structured distributions and professional oversight. Before choosing either, check how the arrangement will be treated in the country where the beneficiary lives.

For a foreign beneficiary, the executor should work through the practical questions. Can the beneficiary keep the existing investment account? Will a local institution accept the assets? Is cash better than transferring the assets as they are? Who will provide the beneficiary’s tax information? Answer these before making a distribution that can’t be reversed.

Income Distributions May Require Withholding

A U.S. trust generally must withhold on income included in a foreign beneficiary’s gross income, to the extent its distributable net income is made up of amounts subject to withholding. U.S.-source income under the ordinary nonresident withholding rules generally carries a 30% rate unless an exemption or a properly documented treaty reduction applies. Applying 30% to the entire inheritance just because the beneficiary lives abroad is wrong. 

The executor or trustee should collect proper foreign-status documentation, usually Form W-8BEN for an individual, and separate income from principal under the applicable tax rules. Forms 1042 and 1042-S are generally due March 15 after the reporting year, subject to adjustments and special timing rules. A reduced withholding rate doesn’t necessarily eliminate the reporting. 

U.S. real property needs extra attention. An estate or trust generally must withhold 21% on a distribution to a foreign beneficiary to the extent it is attributable to the balance in its U.S. real property interest account. That account tracks gains and losses from U.S. real property sales. This is not a blanket 21% tax on an inherited home or on every payment to an overseas heir.

8. A Foreign Beneficiary Doesn’t Automatically Make A Trust Foreign

For U.S. tax purposes, a trust is domestic only if it passes both a court test and a control test. A U.S. court must be able to exercise primary supervision over its administration, and one or more U.S. persons must control all substantial decisions. A trust that fails either test is generally foreign. 

Where the beneficiary lives doesn’t decide the question. What matters is who holds decision-making power. Substantial decisions include distributions, choosing beneficiaries, investments, termination, and certain powers to replace trustees. A foreign person’s veto right can matter even when a U.S. trustee appears to be in charge. Review the actual powers of every trustee, protector, adviser, and anyone else with authority. 

Successor Provisions Can Move A Trust Offshore By Accident

Say a U.S. parent sets up a trust and names an adult child who isn’t a U.S. person as sole successor trustee. To the parent, that feels like a natural family choice. But when that child takes over, the control test has to be checked again, and the answer depends on the child’s U.S. tax status and actual powers, not on the family relationship.

If a domestic trust becomes foreign, section 684 can treat its assets as transferred to a foreign trust, triggering tax on unrealized gains unless an exception applies. That is a lot more than a change of address or one extra form. Well-drafted succession provisions should anticipate each future trustee’s status and spell out how U.S. administration and control will be maintained, if that’s the goal. 

Offshore Doesn’t Mean Outside U.S. Income Tax

A U.S. person who transfers property to a foreign trust with a U.S. beneficiary is generally treated as owning that portion of the trust under section 679, subject to statutory exceptions. Transfers made because of the transferor’s death are an important exception. A special rule can also reach certain transfers made within five years before a foreign grantor becomes a U.S. resident. If someone is planning a move to the United States, any existing trust should be reviewed first. 

Review trust residence when the document is signed, when a trustee changes, when a decision-maker moves, and when a beneficiary’s status changes. Build that into routine administration instead of waiting for the annual tax return to surface a problem.

9. Coordinate Wills, Marital Property, And Succession Law

A U.S. estate tax opinion doesn’t tell you whether a foreign court will carry out your will as written. Cross-border estates can run into forced heirship rights, marital property rights, and conflict-of-law rules that point to another country’s law. Sometimes the first question isn’t who inherits an asset, but how much of it the deceased person actually owned. 

Having more than one will can help local administration run more efficiently. But each will needs a clearly defined scope. A broad revocation clause can cancel another will by accident, and overlapping descriptions can leave the same asset subject to conflicting instructions. Even with several local documents, you need one coordinated plan. 

Have your advisers review all the documents together, including residuary clauses, property definitions, tax allocation clauses, and executor provisions. Identify assets that pass by beneficiary designation, joint survivorship, company documents, or retirement plan rules, so no one assumes everything passes under the will. The EU Succession Regulation itself treats many of these arrangements as outside its scope.

The EU Succession Regulation Isn’t An Estate Tax Treaty

The EU Succession Regulation applies in participating EU countries, not in Ireland or Denmark; the United Kingdom does not participate either. Where it applies, EU Regulation 650/2012 generally looks to the deceased person’s last habitual residence to decide which law governs succession, with some exceptions. It also lets a person choose the law of a country of nationality to govern their succession as a whole. Someone with more than one nationality can choose among them. 

This can be especially valuable for dual citizens, but the election has to be drafted carefully. Choosing U.S. law means working out which state’s law, because succession law varies from state to state. Article 36 deals with countries that have more than one territorial legal system. A casual line saying “American law applies” is not a substitute for that analysis. 

Most important, the Regulation doesn’t cover tax. It also leaves out marital property questions and the creation, administration, and dissolution of trusts. Choosing a succession law doesn’t opt you out of inheritance tax, settle spouses’ ownership rights, or guarantee that every feature of a trust will be recognized.

10. Weigh Lifetime Gifts Against The Basis Rules For Inherited Property

Giving assets away during life can shift ownership and future growth to the next generation. But gifts and inheritances generally get different income tax basis treatment. Under section 1015, gifted property generally keeps the donor’s basis, with a special fair-market-value limit for figuring a loss. Under section 1014, qualifying inherited property generally takes a basis equal to fair market value at death, or another applicable valuation date. 

That adjustment isn’t always a step up. If the value has dropped, the basis goes down. And not every asset or trust interest qualifies the same way. Know exactly how the property will pass before promising anyone a basis adjustment.

For a family below the estate tax threshold, giving away a highly appreciated asset during life can create a future income tax cost with no offsetting estate tax benefit. That doesn’t make lifetime gifts a bad idea. It means the estate tax goal should be weighed against the beneficiary’s likely income tax position.

Cross-border families have one more question. Will the beneficiary’s country use the same basis? A U.S. basis adjustment is a U.S. tax result. It doesn’t bind another country’s tax authority. Ask for a side-by-side model of the gift and the inheritance, including when the asset is likely to be sold and who will own it at that point.

Retirement And Deferred-Income Assets Need Their Own Review

Section 1014 doesn’t apply to income in respect of a decedent. Section 691 governs how that income is later taxed to the estate or the recipient. So don’t assume retirement accounts or other deferred-income assets become tax-free just because they pass at death. 

For these assets, review beneficiary designations, distribution requirements, withholding, and treaty treatment on their own. The general basis rule for inherited property doesn’t answer a retirement account question.

Keep Valuation And Basis Records

Hold on to purchase records, improvement costs, gift documents, estate appraisals, and the valuation information given to beneficiaries. The tax code also imposes basis consistency requirements in certain estate tax situations. Records are far easier to gather while the owner is alive than to reconstruct after several generations of transfers. 

11. Nonresident Noncitizens Should Review Their U.S. Investments Now

The U.S. estate tax rules for a nonresident noncitizen are very different from those for a citizen or U.S. domiciliary. Form 706-NA is generally required when U.S.-situated assets, plus adjusted taxable gifts and the specified historical gift exemption, exceed $60,000. Treat that as a filing threshold, not a promise that the first $60,000 is always tax-free under every set of facts.

For these estates, situs has to be examined asset by asset. U.S. real estate and tangible property physically located in the United States are generally U.S.-situated. So are shares of U.S. corporations, no matter where the certificates are kept or which broker holds them. A parent living overseas who owns U.S. stock through a foreign broker can have U.S. estate tax exposure. 

Certain bank deposits not effectively connected with a U.S. trade or business are treated as located outside the United States, as are proceeds of insurance on the deceased person’s life. Other debt instruments have their own rules. Not every cash-like investment counts as a qualifying bank deposit. 

Lifetime gifts work differently. For a typical nonresident noncitizen, gifts of intangible property such as U.S. stock are generally outside U.S. gift tax, subject to special rules and exceptions. That can create a legitimate planning opportunity, but it isn’t an automatic recommendation. First check the donor’s classification, the recipient’s status, basis consequences, foreign law, and any expatriation history.

Treaties can change the result, and claiming treaty relief may require information about the worldwide estate. Form 706-NA is generally due nine months after death, with an automatic six-month extension available on Form 4768. 

12. U.S. Heirs Of Foreign Estates Need A Reporting Plan

When a U.S. person inherits outright from abroad, the inheritance itself generally isn’t subject to income tax. That does not necessarily cover income paid out by the foreign estate or unpaid income inherited from the deceased person. Reporting still applies, though. Form 3520 is generally required when a U.S. person receives more than $100,000 in a year in gifts or bequests from a nonresident alien individual or a foreign estate, counting amounts from related foreign persons under the aggregation rules. 

The threshold doesn’t shelter future earnings. Interest, dividends, rent, and other income from inherited property are treated separately. The threshold also isn’t applied to each installment from the same estate. Identify the source and add up the relevant amounts before deciding whether you need to file.

Don’t Confuse A Foreign Estate With A Foreign Trust

A payment from a foreign trust is a trust distribution, even if the family calls it an inheritance, and it doesn’t belong in the foreign gift category. Foreign trust distributions reported on Form 3520 don’t get the $100,000 threshold. The instructions send them to Part III, not Part IV. 

Foreign trust distributions can also produce taxable income, plus accumulation distribution tax and interest. Good trust records and beneficiary statements are essential. Section 6048 imposes unfavorable treatment when the records needed to characterize a distribution aren’t provided. Get the trust deed, accounts, distribution history, and a U.S. tax analysis before accepting anyone’s word that the payment is all tax-free capital. 

Put Each Information Return On Its Own Calendar

For a calendar-year individual, Form 3520 is generally due April 15. Qualifying individuals living abroad get the June 15 deadline described in the instructions, with the required statement. An income tax extension generally extends Form 3520 to no later than October 15. Form 3520 is its own filing, and filing your income tax return doesn’t replace it. 

Foreign trusts with U.S. owners have a separate Form 3520-A requirement, generally due on the 15th day of the third month after the trust’s year ends. An income tax extension doesn’t extend it. Form 7004 is the correct extension request. If the foreign trust doesn’t file, the U.S. owner needs to look at the substitute Form 3520-A procedures and their separate timing. 

Failing to report a covered foreign gift can carry a penalty of 5% per month, up to 25%, unless there is reasonable cause. 

Inherited Foreign Accounts Bring More Reporting

An FBAR generally applies once your reportable foreign financial accounts exceed $10,000 in total at any point during the year, under the applicable financial-interest and signature-authority rules. It’s due April 15, with an automatic extension to October 15. Form 8938 covers different assets with different thresholds, and it doesn’t replace the FBAR. 

13. Expatriation Can Change How The Next Generation Is Taxed

Living abroad as a U.S. citizen is not the same as giving up citizenship. A family considering expatriation needs to look past the individual’s own position on the way out and think about future gifts and bequests to U.S. relatives.

Section 2801 imposes a separate tax on U.S. citizens and residents who receive covered gifts and bequests from covered expatriates, and the recipient generally pays it. For this tax, residence means U.S. domicile under the estate and gift tax rules, not simply income tax residence. Under the current Form 708 instructions, the rate is 40% on net covered gifts and bequests above the annual exclusion, reduced for qualifying foreign gift or estate tax. For 2026, the annual exclusion for this purpose is $19,000, not the lifetime estate and gift exclusion. 

Not every former citizen is a covered expatriate, and there are exceptions for certain transfers, including qualifying marital and charitable transfers and certain property properly reported under the regular gift or estate tax rules. But the family needs records showing the expatriate’s status and how specific transfers were treated. Don’t assume a later foreign inheritance escapes U.S. transfer tax. 

The final regulations took effect in January 2025 and apply to covered gifts and bequests received on or after January 1, 2025. The current Form 708 instructions set out the reporting mechanics. Form 708 is generally due on the 15th day of the 18th month after the end of the year the gift or bequest was received. The instructions give June 15, 2027, as the deadline in the ordinary 2025 receipt-year example. Certain bequests and trust situations have special timing. Form 708 and Form 3520 are not interchangeable. 

The Goal Is One Coordinated Plan

The strongest global estate plans tie together tax classification, legal ownership, succession rights, beneficiary needs, and administration. They don’t assume that an American abroad has left the U.S. estate tax system, that a noncitizen spouse gets every domestic marital benefit, or that a “tax-free” inheritance comes with no reporting.

Start by documenting your family and your assets. Decide what each beneficiary should receive and how they will hold it. Then coordinate the U.S. federal analysis with state and foreign advice, and choose trusts and other tools only once the intended results are clear.

A well-designed plan leaves your family with more than signed documents. It gives them a clear path for every asset, a realistic plan for cash and liquidity, clear filing responsibilities, and records the next generation can actually use.

The U.S. Incentives Playbook: How Australian Businesses Can Turn Expansion Into Advantage

For many Australian companies, the United States looks deceptively simple, one country, one flag, one massive consumer market. 

However, the reality is far from that. Apart from culture and the use of words two other things are highly diverse as businesses move from US state to US state. The first is tax law, the second is incentives provided by governments.

America is not one market but rather a federation of federal rules, state tax systems, city-level economic development offices, local workforce programmes, utility incentives, property tax negotiations and industry-specific credits.

That complexity can often overwhelm newcomers. However, with the right planning, businesses can benefit.

The question for an Australian company should not simply be, “Where should we incorporate?” or “Which state has the lowest tax?” 

The better question is – where will our U.S. activities create the most value – jobs, investment, research, manufacturing, training, clean energy or exports – and which government wants that activity enough to support it?

America Does Not Hand Out Incentives Automatically

The United States has a deep incentives ecosystem, but it is rarely automatic. 

A business that signs a lease, hires staff and announces a location before speaking to the relevant economic development agencies may have already given away much of its negotiating leverage.

At the federal level, SelectUSA is a useful starting point for foreign investors. 

It is led by the U.S. Department of Commerce and is designed to facilitate job-creating business investment into the United States. 

It has helped facilitate more than US$400 billion in investment and supported more than 270,000 U.S. jobs, according to the Department of Commerce. 

It is important to note though that SelectUSA is a gateway, not a open cheque book. While it helps investors understand the market, access data and connect with federal, state and local stakeholders – it does not itself award most state or local incentives. 

This distinction matters. 

In the U.S., the most valuable incentive package for an expanding business is often not a single federal grant. 

It may be a carefully negotiated combination of state tax credits, local property tax abatements, workforce training support, infrastructure assistance, energy incentives and federal tax credits.

State Incentives: Where The Real Competition Begins

The U.S. states compete fiercely for investment, but they do so in different ways. 

Some states emphasize low headline tax rates. 

Others offer targeted credits for job creation, capital investment, research and development, advanced manufacturing, life sciences, clean energy or workforce training.

That means the “best” state is rarely the one with the lowest headline tax rate. 

It is the state where the company’s operating model, workforce needs, customer base, supply chain and tax profile align.

Let’s look at New York as an example.

Its Excelsior Jobs Program can provide fully refundable tax credits over a benefit period of up to 10 years, but only where businesses meet and maintain specified job and investment thresholds. 

The programme can cover credits linked to jobs, investment, research and development, real property and childcare-related expenditure. 

It is attractive, but it is not automatic. 

It is a performance-based programme with accountability built in. 

Georgia offers a different kind of advantage through Georgia Quick Start, which provides customised workforce training free of charge to qualified new, expanding and existing businesses. 

For labour-intensive or technical operations, that support can be more valuable than a headline tax credit because it directly reduces the cost and friction of building a workforce. 

California’s Employment Training Panel is another example. 

It provides funding to employers to assist with training that leads to long-term, well-paid jobs. 

Importantly, it is a funding agency, not a training provider, so companies must still design and manage their own training strategy. 

The lesson is simple – incentives follow facts. 

A software company, a sports-tech platform, a medical device business and a manufacturing group may all need different states, different agencies and different applications.

Do Not Confuse “Low Tax” With “No Tax”

Australian businesses often hear that Texas and Florida are “no tax” states. 

That is too simplistic.

Texas does not impose a traditional corporate income tax, but it does impose a franchise tax on taxable entities formed or organised in Texas or doing business there. 

For 2026 and 2027, the Texas Comptroller lists a no-tax-due threshold of US$2.65 million and franchise tax rates of 0.375% for retail or wholesale businesses and 0.75% for other businesses, subject to the applicable rules. 

Florida has no personal income tax, but that does not mean corporations operate free of state income tax. 

Florida’s corporate income/franchise tax rate is 5.5% for taxable years beginning on or after 1 January 2022. 

For an expanding Australian group, the state comparison should include corporate tax, franchise or gross receipts taxes, sales tax, payroll taxes, property tax, apportionment, local business taxes, employment law, labour costs, logistics, customer proximity and available incentives. 

A low-tax state can still be expensive if it is the wrong commercial fit.

Zones Can Help – But Know What Kind Of Zone You Are In

Location-based incentives are common in the United States, but the terminology can be misleading. “Enterprise zone,” “opportunity zone,” “empowerment zone,” “development zone” and “distressed area” do not mean the same thing.

Opportunity Zones, for example, are frequently misunderstood. 

They are primarily investor-side tax incentives. 

A taxpayer may be able to defer eligible gains by investing through a Qualified Opportunity Fund, but the benefit does not operate like a direct grant to a business merely because it opens an office in a designated area. 

Under current legacy rules, eligible gains invested into a Qualified Opportunity Fund may be deferred until an inclusion event or 31 December 2026, whichever is earlier. 

The programme is also evolving. 

IRS guidance states that the 2025 federal legislation commonly referred to as the One Big Beautiful Bill Act makes the Qualified Opportunity Zone incentive permanent, with the first post-enactment round of new QOZ designations taking effect on 1 January 2027 and new rounds following every 10 years. 

It also introduced additional tax benefits for certain rural-area Opportunity Zone investments. 

For practical purposes, this means a business should not simply ask, “Are we in a zone?” 

It should ask: who receives the benefit, what investment is required, when must the investment be made, what compliance applies, and does the benefit fit our capital structure?

The R&D Tax Credit – Powerful, But Not A Blank Cheque

For innovative Australian companies entering the U.S., the federal R&D tax credit can be one of the most valuable incentives available. 

But it is often oversold.

The U.S. R&D credit is not a reimbursement of research spending. 

It is a tax credit calculated by reference to qualifying research activities and qualifying research expenses. 

The activity must satisfy the section 41 requirements, including the four-part framework: the expenditure must relate to section 174-type research, the work must seek technological information, the information must be intended for use in developing a new or improved business component, and substantially all of the activity must involve a process of experimentation for a qualified purpose. 

That does not mean the company must invent something never seen before. 

The IRS guidance confirms there is no separate requirement that the work exceed or expand the common knowledge of skilled professionals. 

In practice, the focus is on whether the company faced technical uncertainty, identified alternatives and evaluated those alternatives through a genuine process of experimentation. 

Qualifying expenses are narrower than many businesses expect. 

They generally include eligible wages, supplies used in qualified research, certain computer-use costs and 65% of eligible contract research expenses. 

A broad claim for “cloud computing” or “software development” costs should be reviewed carefully rather than assumed to qualify automatically. 

For Australian groups, one rule is especially important – foreign research does not qualify for the U.S. federal R&D credit. Research conducted outside the United States, Puerto Rico or U.S. possessions is excluded, even if it is performed for a U.S. taxpayer or by American researchers. 

That means work performed by engineers in Sydney, Melbourne or Brisbane generally cannot be converted into a U.S. federal R&D credit merely because the intellectual property is later used by a U.S. subsidiary. 

The structure of contracts, ownership of IP, location of personnel, funding arrangements and technical records all matter.

The Payroll Tax Opportunity For Younger Companies

For early-stage businesses, the R&D credit may be valuable even before the company has meaningful income tax liability.

A qualified small business may elect to use up to US$500,000 of its research credit against payroll tax for tax years beginning after 31 December 2022. 

The IRS states that the payroll tax credit is first used against the employer share of Social Security tax, with remaining credit then reducing the employer share of Medicare tax for the quarter. 

The eligibility rules are specific. 

A qualified small business generally must have gross receipts of less than US$5 million for the tax year and no gross receipts for any tax year before the five-tax-year period ending with the credit year. 

The election is also subject to timing and repeat-use limits. 

For a young Australian technology company launching in the U.S., that can be meaningful cash-flow support. 

But the company needs the right records from day one: project descriptions, technical uncertainties, employee time allocation, contracts, invoices and evidence of experimentation.

Do Not Confuse The R&D Credit With R&E Expensing

Another common trap is mixing up the R&D credit with the deduction rules for research and experimental expenditure.

Following recent U.S. tax changes, taxpayers may generally deduct domestic research or experimental expenditure paid or incurred in taxable years beginning after 31 December 2024, or elect to capitalise and amortise those domestic costs over at least 60 months. 

Foreign research or experimental expenditure cannot be currently deducted and is generally amortised over 15 years. 

That distinction is important for cross-border planning. 

A U.S. subsidiary carrying out domestic research may have both credit and deduction considerations. 

An Australian parent carrying out research offshore may face a different U.S. outcome. 

For groups with shared development teams, intercompany agreements and transfer pricing policies should be aligned with the intended tax position.

Clean Energy Incentives – Attractive, But Increasingly Technical

Sustainability incentives remain significant, but the rules are now highly technical.

The U.S. Clean Electricity Investment Credit has a base credit amount of 6% of qualified investment. 

That amount can increase up to 30% where prevailing wage and registered apprenticeship requirements are satisfied. 

Additional 10-percentage-point bonuses may be available for projects meeting certain domestic content requirements or located in an energy community. 

The credit may also be eligible for direct payment or transferability in certain circumstances, although taxpayers cannot claim both the investment credit and production credit for the same facility. 

This is a major planning area for businesses investing in solar, storage, clean electricity, manufacturing facilities or energy-intensive operations. 

But the “30% credit” should not be described as automatic. 

It depends on the project, the property, labour compliance, timing, location, domestic content, tax ownership and documentation.

The timing rules are also changing. 

IRS Notice 2025-42 explains that, under the 2025 legislation, section 45Y and section 48E credits terminate for applicable wind and solar facilities placed in service after 31 December 2027 where construction begins after 4 July 2026. 

For businesses, the message is clear – clean energy tax credits can improve project economics, but they should be modelled before committing capital. 

A rooftop solar project, a battery installation, a manufacturing upgrade and a major renewable generation project may all sit under different rules.

The Real Strategy – Design The U.S. Footprint Before Asking For Incentives

The most successful incentive strategies are built before the U.S. expansion is announced. 

Once a company has chosen a state, signed a lease, hired staff and committed publicly, the economic development agency may have little reason to offer support.

A strong U.S. incentives review should ask:

• What activities will be performed in the U.S.? 

• How many jobs will be created, and at what wage level? 

• What capital expenditure will be made? 

• Will the company conduct U.S.-based R&D? 

• Will it invest in training, manufacturing, clean energy, logistics or distressed-area development? 

• Does the company need incentives as cash grants, tax credits, abatements, training support or infrastructure assistance? 

• Are the incentives discretionary, automatic, refundable, transferable or subject to clawback? 

• How will the structure interact with Australian tax, U.S. federal tax, state tax and transfer pricing? 

The businesses that win do not treat incentives as an afterthought. 

They treat them as part of site selection, entity structuring, workforce planning and capital allocation.

Final Word – America Rewards Specificity

The U.S. incentive system is not simple but it can be worked through.

Australian businesses should avoid three mistakes:

1. assuming incentives are automatic;

2. chasing headline tax rates without modelling the full operating cost; and 

3. trying to claim credits after the commercial facts have already been locked in.

The better approach is to enter the U.S. with a clear operating story, where the company will invest, who it will hire, what it will build, what technology it will develop and how its presence will benefit the local economy.

In America, governments do not usually subsidise vague ambition. 

They support specific activity. 

The companies that understand that early can turn U.S. expansion from a cost centre into a strategic advantage.

CHECKLIST: Australia – US Market Entry Checklist

The US Market Is Not One Market: What Australian Businesses Must Understand Before Expanding

For Australian businesses with global ambition, the United States often represents the defining opportunity.

It is the world’s largest consumer market, one of the deepest capital markets, and home to many of the customers, investors, strategic partners and industry ecosystems that can transform a company’s trajectory. For businesses in technology, sport, health, consumer products, professional services, education, financial services and advanced manufacturing, the US is often not simply an expansion market. It is the market that determines whether the business becomes regional or genuinely global.

Yet the same qualities that make the US attractive also make it unforgiving.

Australian businesses often approach the US with a degree of familiarity. The language is familiar. The legal heritage feels familiar. The commercial culture is recognisable. The brands, investors and institutions are globally known. On the surface, the US can appear to be a larger version of a market Australian businesses already understand.

That assumption is dangerous.

The United States is not just a bigger market. It is a different legal, tax and regulatory environment altogether. More importantly, it is not one market in any simple sense. It is a federation of states, cities, regulators, courts and commercial norms layered on top of a federal system. A business may enter through California, raise capital in Delaware, hire in New York, sell into Texas, store data in Virginia and use contractors in Florida — and each of those choices can carry different legal and commercial consequences.

This is where many Australian businesses underestimate the challenge. They do not fail because the US opportunity is too difficult. They fail because they treat US expansion as a sales project when it is also a structural, legal, tax and governance project.

The distinction matters.

A company that enters the US with the wrong structure, weak contracts, unprotected intellectual property, inadequate insurance, poor employment processes or unmanaged privacy exposure may still generate revenue. It may even grow quickly. But growth without structure can simply scale the risk. By the time the issue appears — an investor diligence request, a lawsuit, a tax notice, a product complaint, a data incident, a distributor dispute or a regulatory inquiry — the cost of fixing the problem is usually far greater than the cost of preparing properly at the outset.

Structure Is A Strategic Decision, Not An Administrative Step

The first serious question for an Australian business entering the US is not where to sell, but how to exist in the market.

Should the business operate directly from Australia? Should it form a US subsidiary? Should that subsidiary be a corporation or an LLC? Should it be established in Delaware, the state of operation, or somewhere else? Should the group structure be reorganised before a US capital raise? Should intellectual property remain in Australia or be licensed to the US entity? How should intercompany arrangements be documented?

These questions are often treated as technical matters. They are not. They influence tax outcomes, investor appetite, legal liability, operating flexibility, employee equity arrangements, state filing obligations, exit planning and the perceived maturity of the business.

For many Australian companies, a US subsidiary can be a sensible way to separate US operating risk from the Australian parent. But that protection is not automatic. A subsidiary is not a piece of paper that magically insulates the group from all exposure. It must be respected as a real entity. That means separate accounts, proper contracts, appropriate capitalisation, clear decision-making, arm’s-length intercompany arrangements and disciplined corporate governance.

Where the business is a high-growth startup seeking US venture capital, a different issue may arise. US investors, particularly venture funds, often prefer investing into a US parent company, commonly a Delaware corporation. This can lead to a “flip-up”, where the corporate structure is reorganised so that the US company becomes the parent of the group.

For the right business, this may be commercially sensible. It can align the structure with US investor expectations, simplify future funding rounds and position the company for a US exit. But it should never be treated as a cosmetic change. A flip-up can have consequences for Australian tax, US tax, shareholders, employee equity plans, intellectual property ownership and future exit proceeds. It is one of those decisions that looks simple only when viewed from too far away.

The broader point is that structure should follow strategy. A founder-led software company preparing for US venture capital does not necessarily need the same structure as an Australian manufacturer selling through US distributors. A professional services firm establishing a US client base has different issues again. A sports, entertainment or talent-related business may need to think carefully about immigration, state law, withholding, image rights, contracting and agency arrangements.

The correct structure is not the most popular one. It is the one that supports the commercial plan while managing tax, legal and operational risk.

Contracts Are The Operating System Of US Risk

In the US, contracts carry more weight than many Australian businesses expect.

A contract is not merely a record of what the parties agreed. It is a risk allocation tool. It determines who bears responsibility if something goes wrong, whether liability is capped, whether consequential damages are excluded, who owns the intellectual property, how confidential information is protected, which law applies, where disputes are heard, whether arbitration is required, whether legal costs can be recovered and what happens when the relationship breaks down.

This matters because the US litigation environment is expensive. Discovery can be broad and intrusive. Legal fees can escalate quickly. Claims that appear commercially manageable can become financially distracting. Even a strong defence can consume executive time, damage relationships and create pressure to settle.

Australian businesses should therefore treat US contracts as a commercial control system, not as administrative paperwork.

The key clauses are not boilerplate. Indemnities, warranties, limitations of liability, governing law, jurisdiction, dispute resolution, confidentiality, IP ownership, non-solicitation, termination, payment terms, audit rights and insurance obligations all need to be drafted for the transaction and the relevant US context.

This is also where businesses need to be cautious about relying on AI-generated documents or generic templates.

The issue is not that AI has no role. It can be useful for early drafting, issue spotting and helping business owners understand common contractual concepts. The problem is that a contract can sound sophisticated and still be wrong. It can use terminology that appears legal but does not achieve the intended result. It can import concepts from the wrong jurisdiction. It can omit state-specific requirements. It can include a clause that is unenforceable, commercially unrealistic or unsuitable for the industry.

In the US, the difference between a contract that looks right and a contract that works can be very expensive.

Intellectual Property Should Be Protected Before The Business Becomes Visible

For many Australian companies, the most valuable assets entering the US are not physical assets. They are brands, software, product designs, proprietary processes, client data, trade secrets, content, know-how, commercial relationships and reputation.

Those assets need to be protected before the business becomes visible.

Too many companies reverse the sequence. They launch the product, appoint a distributor, speak to investors, hire contractors, share technical information, run a campaign, build a customer base and only then ask whether their intellectual property is protected in the US. By that stage, the business may discover that a similar brand is already registered, a contractor agreement does not properly assign IP, confidential information has been shared too broadly, or a competitor has moved faster.

In the US, trade marks, patents, copyright and trade secrets each require different thinking.

A brand that is available in Australia may not be available in the US. A name that feels distinctive to an Australian founder may already be used by a US company in a related category. A trade mark search and filing strategy should therefore be addressed early, particularly where the US brand will be central to market entry.

For technology and product businesses, patent timing can be critical. Public disclosure, investor presentations, product launches and commercial negotiations can all affect the position if not managed properly. Businesses with potentially patentable technology should obtain advice before they disclose too much.

For software, content and creative assets, copyright protection may be important, but businesses should also ensure that ownership is clean. That means reviewing agreements with developers, agencies, consultants, employees and contractors. It is surprisingly common for companies to assume they own what they paid to create, only to find the legal position is more complicated.

Trade secrets require discipline. Confidential information is not protected merely because the business considers it confidential. Protection depends on practical steps: non-disclosure agreements, access controls, internal policies, employee obligations, contractor restrictions, cybersecurity practices and careful management of commercial discussions.

The principle is simple. If the US market is important enough to enter, the assets being taken into that market are important enough to protect.

Product Liability And Consumer Risk Can Change The Economics Of Expansion

For businesses selling physical products, the US requires particular care.

The US product liability environment can be far more aggressive than Australian businesses expect. Claims may arise from alleged design defects, manufacturing defects, inadequate warnings, poor instructions, breach of warranty, misleading marketing or failure to act once a product risk becomes known. Manufacturers, distributors and retailers can all be drawn into disputes, even where the business believes it acted responsibly.

This can be especially confronting for Australian companies that have strong internal quality standards and assume those standards will be enough. In the US, the question is not only whether the product was made carefully. It is also whether the design was appropriate, whether foreseeable misuse was considered, whether warnings were adequate, whether instructions were clear, whether claims made in marketing were supportable, whether warranties were properly drafted and whether the company had systems to respond to complaints or safety issues.

Before entering the US, product businesses should review packaging, warnings, instructions, safety certifications, warranties, recall procedures, supply chain contracts, distributor obligations and insurance coverage. The insurance point is critical. Australian policies may not provide the protection required for US exposure, or may contain territorial exclusions, product exclusions or limits that are inadequate for the US market.

A business should not ask only whether it can sell the product in the US. It should ask whether it is prepared for the legal consequences of selling the product in the US.

Compliance Is Fragmented, And Fragmentation Creates Risk

One of the defining features of the US market is regulatory fragmentation.

There are federal regulators, state regulators and local authorities. There are national rules, state-specific rules and city-level requirements. There are industry-specific regimes and general consumer laws. There are licensing rules, employment rules, tax rules, privacy rules, advertising rules, import rules and product safety rules.

The relevant obligations depend heavily on what the business does.

A food, cosmetics, health, medical device or pharmaceutical business may need to consider FDA requirements. A financial services or investment-related business may need to consider securities regulation. A company making environmental claims may need to substantiate those claims carefully. A consumer product business may need to consider product safety standards. An online business may need to consider privacy, automatic renewal rules, digital marketing obligations and state consumer protection laws. A business importing goods may need to consider customs, tariffs, sanctions and restricted-party screening.

This is why there is no single US compliance checklist that works for every Australian business. The right analysis depends on the product or service, the states involved, the customer base, the distribution model, the industry and the way the business earns revenue.

The problem is that many compliance risks arise before the company thinks it has “entered” the US in a formal sense. A business may create US exposure by selling online to US customers, engaging US influencers, collecting data from US residents, appointing a US sales agent, attending trade shows, hiring contractors, storing inventory, using a fulfilment provider or raising capital from US investors.

Market entry is not always marked by opening an office. Sometimes it begins with the first US customer.

Marketing, Privacy And Data Practices Need To Be US-Ready

The US is a powerful market for digital growth, but it is also a market where marketing practices, consumer disclosures and data handling can create significant risk.

Advertising must be accurate. Performance claims need support. Pricing needs to be clear. Promotional terms need to be properly disclosed. Influencer relationships need to be transparent. Subscription arrangements and automatic renewals need careful attention. Environmental claims, health claims and financial claims require particular care because they can attract scrutiny if they are exaggerated, vague or insufficiently substantiated.

This matters for Australian businesses because many enter the US digitally. They sell through a website, run paid advertising, use influencers, collect customer information, offer subscriptions, promote through social media and sell across multiple states before building a physical presence.

That model can scale quickly. It can also scale legal exposure quickly.

Privacy is another area where Australian assumptions can be misleading. The US does not operate under one simple, comprehensive national privacy regime that applies uniformly to every business. Instead, it has a patchwork of state privacy laws, federal sector-specific laws, breach notification obligations and industry-specific requirements.

California is often the best-known example, but it is not the only state that matters. Health data, children’s data, biometric information, financial information and sensitive personal information may carry additional obligations depending on how the business operates.

Privacy should therefore be treated as an operational issue, not merely a website policy issue. Businesses need to know what information they collect, why they collect it, where it is stored, who receives it, how long it is retained, how it is protected and what rights customers may have.

A privacy policy that looks acceptable on a website is not enough if the underlying systems do not match it.

Governance Protects The Business When Growth Accelerates

In early-stage expansion, governance often feels secondary to sales. That is understandable, but it is also risky.

A company entering the US needs basic corporate discipline. It should maintain proper records, document key decisions, separate group entities, keep accurate accounts, ensure contracts are signed by the correct entity, manage tax registrations, comply with employment obligations and maintain appropriate insurance.

This is not bureaucracy for its own sake. It is what protects the business when pressure arrives.

If a dispute arises, the company’s documents matter. If an investor conducts due diligence, the records matter. If a regulator asks questions, the systems matter. If a customer makes a claim, the contract and insurance position matter. If the business is eventually sold, the buyer will examine whether the US operations were built properly or improvised.

Poor governance can also create personal exposure for executives in certain circumstances, particularly where there are unpaid taxes, employment law breaches, personal guarantees, fraud, misuse of entities, commingling of funds or serious compliance failures. While corporate structures can provide important protection, they are not a substitute for responsible management.

Insurance is part of this framework. Depending on the business, relevant policies may include general liability, product liability, cyber, directors and officers, employment practices liability, professional liability and workers’ compensation. But insurance should not be treated as a cure-all. Coverage depends on policy wording, exclusions, limits, retentions, notification requirements and the nature of the claim.

Good governance does not slow growth. Done properly, it makes growth more durable.

The Businesses That Succeed Prepare Before The Market Tests Them

The US rewards ambition, but it also tests assumptions.

Australian businesses that succeed in the US usually understand that expansion is not a single event. It is a sequence of decisions that must fit together: structure, tax, contracts, IP, employment, privacy, insurance, regulatory compliance, financing and governance. None of these issues should be considered in isolation because each one affects the others.

The businesses that struggle often follow a familiar pattern. They sell first and structure later. They use Australian contracts in US transactions. They assume a template agreement will be sufficient. They leave IP protection until after launch. They hire contractors without understanding worker classification. They underestimate state taxes and sales tax. They use marketing claims that have not been reviewed. They collect data without mapping their obligations. They discover insurance gaps only after a claim.

None of these mistakes necessarily comes from carelessness. More often, they come from momentum. The company sees an opportunity, moves quickly, wins customers and assumes the infrastructure can catch up later.

In the US, that can be an expensive assumption.

The better approach is not to over-lawyer the opportunity or delay commercial progress. The better approach is to build a practical expansion framework before the business is exposed. That means identifying the highest-risk issues early, prioritising what must be fixed before launch, and creating a structure that can evolve as the US business grows.

A business entering the US does not need perfection from day one. But it does need clarity. It needs to know which entity is contracting, who owns the IP, what taxes may apply, which states matter, what the contracts say, what insurance covers, what employment obligations exist, what data is collected and what regulatory regimes are relevant.

That clarity gives management the confidence to grow without constantly discovering hidden risk.

The Real Opportunity Is Building A US Platform, Not Just Making US Sales

The US can be transformational for Australian businesses. It can provide access to capital, customers, strategic partners, talent, acquirers and industry ecosystems that are difficult to replicate elsewhere.

But the businesses that create lasting value in the US do more than make sales. They build a platform.

A platform has the right structure. It has contracts that allocate risk properly. It protects intellectual property. It understands its tax position. It has employment and contractor processes. It manages privacy and data. It has suitable insurance. It complies with relevant regulation. It keeps records. It can withstand investor diligence, customer scrutiny, regulator questions and commercial disputes.

That is the difference between entering the US and being ready for the US.

For Australian businesses, the message is not that the US is too complex. Complexity is manageable. The real issue is whether the business recognises the complexity early enough to turn it into a competitive advantage.

A well-structured Australian business can enter the US with confidence. It can move faster because the major risks have been considered. It can negotiate better because its contracts are prepared. It can raise capital more effectively because its structure makes sense. It can protect value because its IP is secured. It can respond to disputes because its documents and insurance are in order.

US expansion should not be approached with fear. It should be approached with discipline.

The companies that do this well will not see legal, tax and compliance planning as obstacles to growth. They will see them as part of the architecture of growth.

Because in the US, getting to market is only the first challenge.

The real test is whether the business has been built to survive success.

CHECKLIST: Australia – US Market Entry Checklist

When Australian business owners talk to me about entering the US, the conversation usually starts where it should – growth. 

A bigger market, deeper capital, more customers, stronger partnerships.

The opportunity is real. What is often underestimated, though, is how quickly momentum can slow due to tax and reporting issues that were never properly mapped at the start. In the US, you are rarely dealing with one simple compliance system. Federal rules are only part of the picture. State tax, registration and sales tax obligations can arrive much earlier than many businesses expect.

One of the first things I usually encourage clients to think through carefully is the entity itself. 

Too often, the structure is treated as something that can be tidied up later. In practice, that can be an expensive mistake. A C corporation files Form 1120 and is taxed separately. A partnership files Form 1065 and pushes tax items out to the owners through Schedule K-1. A single-member LLC is generally disregarded for US income tax purposes unless it elects to be taxed as a corporation. On paper that may sound technical, but commercially it matters a great deal, because the wrong structure can create complexity long before the business has properly found its feet.

If an Australian group is looking at a US LLC, I would be especially careful. Where a foreign-owned US disregarded entity has reportable related-party transactions, Form 5472 can come into play, and it is filed with a pro forma Form 1120. The penalty for missing that filing starts at $25,000. That is exactly the kind of issue that catches decent businesses off guard—not because they are doing anything aggressive, but because nobody warned them early enough that the reporting obligation existed in the first place.

The state-tax piece is where many founders realise that the US is less one market and more fifty overlapping systems. Sales tax, state income tax, franchise tax and registration obligations can arise in different ways and at different times. Even the “business-friendly state” conversation needs a bit of nuance. Texas has franchise tax, Florida has corporate income/franchise tax, and many states now apply economic nexus rules that can pull remote sellers into registration and collection once thresholds are met.

Financial reporting deserves a little more attention than it usually gets at the start as well. In a public company context, SEC reporting can mean ongoing Form 10-K and Form 10-Q filings. More broadly, US financial reporting still revolves around GAAP. In practice, the challenge is often not understanding the theory, but ensuring the US numbers can be reported cleanly and consistently within the wider group without constant rework.

Hiring in the US is another area where practical business decisions and compliance meet very quickly. Employers generally need to withhold federal income tax and Social Security and Medicare taxes from wages, and most employers also need to deal with unemployment taxes at both federal and state levels. On top of that, worker classification matters. The IRS looks at the full relationship and the degree of control, not just what the contract happens to call someone. That is why I always say that calling a person a contractor is not the same thing as them actually being one.

Once the US business starts moving money across borders, the international rules need to be treated seriously. US persons with foreign financial accounts may have an FBAR filing obligation once aggregate balances exceed $10,000, and intercompany charges between an Australian parent and a US operation need to satisfy the arm’s-length standard. The best time to think about that is before the structure goes live, not halfway through an audit trail reconstruction exercise.

The good news is that none of this is unmanageable. 

But it does reward businesses that treat tax and financial reporting as part of commercial strategy, rather than as admin to be cleaned up later. 

The businesses that usually do well in the US are not always the ones that move fastest. They are often the ones that enter with the clearest structure, the best discipline and the fewest surprises. In my experience, that is where good advice still pays for itself.

CHECKLIST: Australia – US Market Entry Checklist

Taking your Australian business to the United States is an exciting milestone, but it comes with a steep learning curve—especially regarding human resources and employment law. 

In Australia, businesses rely on a familiar, centralised system governed by the Fair Work Act 2009. However, the US operates under a highly decentralised, federalist system. For Aussie expats and expanding enterprises, this means adapting to overlapping federal, state, and local regulations that can vary wildly depending on your exact location. Here is your essential guide to understanding the US labour landscape.

Navigating A Fragmented Legal Landscape

In the US, federal employment laws establish the baseline protections for workers nationwide. Statutes like the Fair Labor Standards Act (FLSA) set minimum wage and overtime rules, while the Civil Rights Act and Americans with Disabilities Act (ADA) strictly prohibit workplace discrimination.

However, federal laws are merely the floor. Individual states—and even local cities—can enact significantly stricter protections. For instance, while the federal minimum wage is set at US$7.25 per hour, states like California and New York enforce much higher minimum wages, along with enhanced paid sick leave and wrongful termination protections. Cities like San Francisco and Seattle have even more restrictive local rules. An Australian company operating in both Texas and California will face starkly different compliance landscapes, making a state-by-state HR compliance strategy absolutely essential.

The “At-Will” Culture Shock

One of the biggest paradigm shifts for Australian employers is the US at-will employment doctrine. Unlike Australia, which mandates minimum notice periods and redundancy entitlements, most US jurisdictions allow employers to terminate a worker at any time, for any reason (or no reason at all), provided the reason is not illegal.

While this flexibility allows businesses to scale their workforces rapidly, it is not an absolute rule. Crucial exceptions exist that can easily lead to wrongful termination lawsuits:

• Contractual Protections – Executives or unionised workers often negotiate “just-cause” termination clauses or severance agreements.
• Public Policy – You cannot fire someone for whistleblowing, refusing to commit fraud, or exercising a legal right like filing a workers’ compensation claim.
• Implied Contracts – Promises made in employee handbooks or during interviews can inadvertently create implied contracts, requiring employers to follow progressive disciplinary steps before firing. To protect your business, always include clear at-will disclaimers in offer letters and handbooks, and meticulously document your reasons for any termination.

The Benefits Gap: Healthcare and Retirement

Securing top talent in the US requires understanding that employee expectations differ vastly from those in Australia.

Healthcare Is An Employer Obligation

The US lacks a universal public system like Medicare. Because access to healthcare is heavily tied to employment, offering competitive, employer-sponsored health insurance is a fundamental necessity if you want to attract and retain quality staff.

The 401(k) vs. Superannuation

Instead of compulsory 11% superannuation contributions, the US utilises a voluntary defined-contribution system known as a 401(k). Employees contribute pre-tax income, and while it isn’t legally mandated, competitive employers usually match these contributions by 3% to 6%.

Navigating Payroll Taxes And Contractor Risks

US payroll taxes are a multi-tiered system. Rather than dealing with a single entity like the ATO, employers must withhold and match Federal Insurance Contributions Act (FICA) taxes, which fund Social Security (6.2%) and Medicare (1.45%). Additionally, employers are liable for both federal and state unemployment taxes (FUTA and SUTA), with state rates fluctuating based on your specific industry and history of layoffs.

Finally, if you plan to hire freelancers, tread carefully. The IRS and Department of Labor strictly enforce worker classification laws. Misclassifying an employee as an independent contractor can trigger severe fines, back-pay claims, and lawsuits. Ensure you have well-drafted independent contractor agreements that clearly define the project scope, payment terms, and the worker’s independent status.

Conclusion

Expanding into the American market is not a one-size-fits-all endeavour. By implementing centralised HR compliance systems, understanding local legislative nuances, and consulting with US labour attorneys, Australian businesses can successfully mitigate risks and build a thriving stateside workforce.

CHECKLIST: Australia – US Market Entry Checklist

If you live internationally, run an online business, invest across borders, or use platforms like Wise to manage multiple currencies, you may be wondering:

Do I need to report my Wise account to the IRS?

The answer depends on one key factor:
Where the account is legally held, and not the currency and not the routing number.

Let’s break this down clearly.

The Two Reporting Regimes: FBAR And FATCA

U.S. taxpayers may need to report foreign accounts under:

1. FBAR (FinCEN Form 114)

You must file an FBAR if:

• You are a U.S. person (citizen, green card holder, or U.S. tax resident), and
  
• The total value of all your foreign financial accounts exceeds $10,000 at any time during the year.

2. FATCA (Form 8938)

This form is filed with your tax return and applies if your foreign financial assets exceed higher thresholds (which vary based on where you live and your filing status).

Both rules focus on whether an account is foreign.

What Actually Makes An Account “Foreign”?

This is where confusion happens.

An account is considered foreign if it is maintained by a financial institution located outside the United States.

That’s it.

Not:

• The currency
• The interface language
• The debit card logo
• The routing number format

What matters is which legal entity holds your account and where that entity is regulated.

Common Misconceptions About Wise Accounts

Wise operates through multiple regulated entities around the world, including in the U.S., UK, Belgium, and elsewhere.

Depending on your residency and how you opened the account, your Wise account may be held by:

• A U.S. entity (domestic), or
• A non-U.S. entity (foreign)

Important Clarifications

• Just because your Wise account holds USD does NOT mean it is domestic.
• Just because your account holds EUR does NOT mean it is foreign.
• Just because your account uses U.S. payment rails (like an ABA routing number) does NOT mean it is domestic.

Payment rails are not the legal location of the financial institution.

An account can:

• Hold U.S. dollars,
• Have an ABA routing number,
• Send ACH payments,

and still be legally maintained by a foreign financial institution.

Simple Examples

Example 1: USD Account That Is Foreign

You live abroad and open a Wise account. It holds only U.S. dollars. It has an ABA routing number.

However, your account is maintained by Wise’s UK or EU entity.

That account is considered foreign for FBAR and FATCA purposes.

If your total foreign accounts exceed $10,000 at any point during the year, it must be reported.

Example 2: EUR Account That Is Not Foreign

You live in the United States and open a Wise account issued by Wise’s U.S. entity. You hold euros in it.

Even though the balance is in EUR, the account is maintained in the United States.

That account is generally not foreign for FBAR purposes.

Currency does not determine reporting — location does.

Why This Matters

Many internationally mobile professionals and online entrepreneurs:

• Hold multiple currency balances
• Move funds across borders frequently
• Use fintech platforms instead of traditional banks
• Assume “digital” means “not foreign”

That assumption can create compliance risk.

FBAR penalties can be severe — even for non-willful violations.

How to Determine If Your Wise Account Is Foreign

Here’s what you should check:

1. Review your account terms and conditions.
   
2. Look at your statements — they usually identify the regulated entity.
   
3. Confirm which Wise legal entity services your account.
   
4. Identify where that entity is regulated.

If the account is maintained by a non-U.S. entity, it is generally considered a foreign financial account.

Aggregation Rule (Often Overlooked)

For FBAR purposes:

You must combine the maximum balances of all your foreign accounts.

If the total exceeds $10,000 at any point during the year, you must report all of them — even if each individual account is small.

Wise accounts count toward that total if they are foreign.

Bottom Line

When it comes to FBAR and FATCA:

• USD does not mean domestic.
  
• EUR does not mean foreign.
  
• An ABA routing number does not make an account U.S.-based.
  
• Digital platforms are not automatically exempt.
  
• The legal location of the institution controls.
  

If you operate internationally and use modern fintech tools, it’s critical to analyze your accounts properly rather than relying on assumptions based on currency or payment systems.

When in doubt, verify the entity and not the interface.

Expanding into the US can be a growth-defining move for an Australian business — new customers, deeper capital markets, a bigger talent pool. But there’s one reality that catches founders off guard: in the US, immigration isn’t a “formality.” It’s a regulated operating system. If you treat it like admin, it will eventually treat you like a compliance event.

At a high level, three agencies shape most employment- and investment-based pathways:

• USCIS (US Citizenship and Immigration Services) – adjudicates petitions and many work-authorisation processes inside the US
• DOL (Department of Labor) – protects US wage and working-condition standards (especially for employer-sponsored roles)
• DOS (Department of State) – issues visas at US embassies/consulates outside the US

When these agencies don’t align — or when documentation isn’t airtight — the cost is rarely “just delay.” It can disrupt onboarding, derail projects, and create legal exposure you don’t want attached to your US launch.

The E-3 Visa: Australia’s Unfair Advantage (When You Can Use It)

For many Australian companies and professionals, the E-3 is the cleanest entry point. It’s available only to Australian citizens working in a specialty occupation (typically requiring at least a bachelor’s degree or equivalent).

Why it’s so attractive:

• A dedicated annual cap (10,500) that has historically not been reached
• Lower friction and cost compared to many alternatives
• Renewable in two-year increments with the ability to extend repeatedly (so long as eligibility remains)

A major practical benefit: spouses of E-3 holders can obtain work authorisation (EAD) and work broadly in the US. For many families, that single feature makes the E-3 dramatically more livable than other work visas.

The key constraint: E-3 is not “dual intent.” In plain English: it’s designed as a temporary visa. You generally need to maintain the narrative (and supporting facts) that you intend to return to Australia. That doesn’t make a future green card impossible, but it does mean you need a plan — and you need to time it properly.

When E-3 Doesn’t Fit: The Other Work Visa Lanes

If the role or candidate doesn’t qualify for E-3 — or if permanent residency is part of the strategy — the next options depend on your structure and the person’s profile.

H-1B: The Well-Known Option (And The Lottery Problem)

H-1B also targets specialty occupations, but it’s open to all nationalities — which is why it’s heavily oversubscribed. Most applicants face a lottery due to annual caps (commonly referenced as 65,000 plus an additional 20,000 for certain US master’s degree holders).

Why companies still use it:

• Dual Intent (clearer alignment with future green card planning)

The downside many families feel most:

• Spousal work rights can be more limited and situational than E-3 (some H-4 spouses can qualify for an EAD under specific conditions, but it’s not as straightforward as E-3/E-2 in practice).

L-1: Ideal For Intracompany Transfers (If You Have The Structure)

L-1 is often the most logical pathway when you have a real operating company in Australia and you’re transferring someone to a US entity.

• L-1A for executives/managers
• L-1B for specialised knowledge staff
• Requires the employee to have worked for the overseas entity for at least one year within the preceding three years (in most cases)
• Dual intent is permitted

This visa often works best when your corporate structure and role definitions are clean — and when your organisational chart supports what you’re claiming.

O-1: For Top-Tier Profiles With Evidence To Match

The O-1 is for individuals with extraordinary ability (business, science, arts, etc.). There’s no annual cap, and extensions can continue as long as the work remains eligible.

But this is not a “strong resume” visa — it’s an evidence visa. Think:

• major awards or significant recognition
• published material about the person
• critical roles in distinguished organisations
• judging, original contributions, high salary, and other recognised criteria

If the story is “they’re excellent,” O-1 is hard. If the story is “their excellence is documented by third parties,” O-1 becomes very viable.

The E-2 Visa: The Founder/Operator Pathway

For entrepreneurs and owner-operators, E-2 can be a powerful route. Australia is a treaty country for E-2, and the visa is designed for people who will develop and direct a US business they’ve invested in.

Key points that matter in real life:

• You generally need to own at least 50% (or otherwise control the enterprise)
• The investment must be substantial and genuinely at risk (committed and exposed to loss)
• There’s no fixed minimum, but in practice investments often sit in a broad range (commonly US$100k–$500k+, depending on the business model)
• The business can’t be “marginal” — it should be capable of supporting more than just the investor’s household over time

Like the E-3, a major family advantage is that E-2 spouses can obtain open work authorisation.

Compliance That Actually Matters: LCAs, Files, And Timelines

For E-3 and H-1B, one recurring compliance anchor is the Labor Condition Application (LCA). This is where the employer certifies (to the DOL) that the worker will be paid appropriately (prevailing wage rules) and that hiring them won’t undercut local working conditions.

A few operational truths:

• Processing timelines vary – E-3 can often be relatively quick; H-1B and some USCIS petitions can take longer due to caps, scrutiny, and workflow
• Your file is your defence– job descriptions, wage rationale, organisational charts, degree equivalency support, and consistent HR records matter more than people expect
• Tracking expiry dates isn’t optional – late renewals create avoidable risk and business interruption

The Tax Trap: Immigration Status ≠ Tax Status

This is the part that blindsides many Australians.

Your visa category does not determine US tax residency. The IRS applies the Substantial Presence Test, which is based on days in the US over a rolling period. It’s entirely possible to be on a temporary visa and still become a US tax resident, meaning worldwide income may enter the US tax net.

That can pull in items Australians don’t expect to be “in play,” including:

• investment income from Australia
• complex treatment questions around superannuation
• reporting regimes that can apply to foreign accounts and entities
• state tax exposure (often the nastiest surprise), especially in places like California and New York, which operate with their own rules and don’t “care” as much about treaty outcomes as people assume

The US–Australia tax treaty can help mitigate double taxation, but treaties don’t automatically make complexity disappear — they often just change how you need to document and position the outcome.

The Mistakes That Create Expensive Problems

A few patterns show up again and again in US market entries:

• Misclassifying Employees As Contractors To “Simplify Payroll”
  This can trigger issues with the DOL and IRS, and it’s a fast way to attract scrutiny.
• Building The US Plan First And Asking Immigration To “Make It Work” Later
  Better approach: design the role, entity structure, and timeline with the visa pathway in mind.
• Overstays And Timing Errors
  Overstaying by more than 180 days can trigger a three-year re-entry bar, and one year can trigger a ten-year bar. Those are business-ending outcomes for the wrong person at the wrong time.

A Practical Way To Think About It

If you’re entering the US, treat immigration and tax as two parallel workstreams:

1. Immigration Workstream – right visa, right evidence, right timing
2. Tax Workstream – residency modelling, entity/payroll setup, cross-border reporting, state exposure

When those two streams are coordinated early, the US expansion feels controllable. When they’re not, businesses find themselves reacting — and reaction is always more expensive than design.

General information only — not legal or tax advice. US immigration and tax outcomes depend heavily on facts, timing, and documentation.

CHECKLIST: Australia – US Market Entry Checklist

A Practical Checklist For Australians Moving To The United States

Moving from Australia to the United States is exciting, but the first U.S. tax season can feel like stepping into a maze. The U.S. tax system is far more document-driven and globally focused than Australia’s, and many new arrivals are caught off guard by what the IRS expects.

The good news? With the right preparation before you move, your first tax season can be far less stressful. Here’s a checklist of items every Australian should gather and understand before relocating to the U.S.

1. Clear Records Of Your Move Date (This Matters More Than You Think)

Your exact date of arrival in the U.S. is critical. U.S. tax residency is not based on intention—it’s based on days physically present. You also need to have records of any dates you’ve left (even for temporary travel) the U.S. once you’ve moved.

Have on hand:

• Flight itineraries and entry stamps
• Visa start date
• Lease agreements or housing contracts
• Any travel dates after your move to the U.S.

These dates determine whether you’re treated as:

• A nonresident,
• A dual-status taxpayer, or
• A U.S. tax resident for that year

This classification drives everything that follows.

2. Copies Of Your Most Recent Australian Tax Returns

Bring at least the last two years of:

• Australian individual tax returns
• Notices of assessment
• PAYG summaries or income statements

These help:

• Establish income earned before U.S. residency
• Support treaty positions
• Substantiate foreign tax credits later

Even income that won’t be taxed again in the U.S. often needs to be reported.

3. A Full Snapshot Of Your Worldwide Income (Not Just Salary)

The U.S. taxes based on citizenship and residency, not source. Once you’re a U.S. tax resident, the IRS wants to see everything.

Prepare documentation for:

• Australian employment income
• Bonuses paid after you leave (even if earned before)
• Rental income
• Dividends and interest
• Trust or partnership distributions

If it earned money anywhere in the world, assume the U.S. cares.

4. Details Of All Australian Bank Accounts

Many Australians are surprised to learn that foreign bank accounts are a major U.S. compliance issue, not a minor one.

You’ll want:

• Bank names and addresses
• Account numbers
• Maximum balances during the year

Why this matters:

• Accounts may trigger FBAR and FATCA reporting
• Penalties for missing these forms can be severe even when no tax is owed

This includes everyday savings and transaction accounts. 

5. Information On Your Superannuation Accounts

Australian superannuation is one of the most misunderstood areas in U.S.–Australia tax planning.

Before moving, gather:

• Super fund statements
• Employer vs personal contribution history
• Withdrawal restrictions

The U.S. does not treat super the same way Australia does. In some cases:

• Earnings may be taxable annually
• Reporting obligations may apply even if funds are locked until retirement

This is an area where advance planning pays off.

6. Investment And Asset Purchase Records

If you own assets, documentation is essential to avoid double taxation later.

Bring records for:

• Australian shares or ETFs
• Property purchase contracts
• Cost base and acquisition dates
• Crypto transaction history

The U.S. uses different rules for:

• Capital gains
• Depreciation
• Currency conversion

Without records, you may pay more tax than necessary.

7. Visa And Immigration Documents

Your visa type can affect how the IRS views you.

Have copies of:

• Visa approval notices
• I-94 arrival records
• Employment authorization documents

Certain visas may qualify for:

• Treaty benefits
• Temporary exemptions from residency tests

But these benefits are time-limited and documentation-dependent.

8. Awareness Of The U.S.–Australia Tax Treaty

The tax treaty can:

• Prevent double taxation
• Modify how certain income is taxed
• Provide tie-breaker rules for residency

But treaties are not automatic. You must claim them correctly on your return.

Knowing this ahead of time helps avoid missed opportunities.

9. A Cross-Border Tax Advisor (Before You Need One)

Perhaps the most important item on this list isn’t a document—it’s expert guidance.

The U.S. tax system:

• Penalizes late or incorrect filings harshly (penalties for a single missing form can amount to tens of thousands of dollars)
• Requires proactive reporting
• Treats foreign assets with heightened scrutiny

Working with someone who understands both Australian and U.S. tax systems can save you time, money, and stress in your first year.

Final Thought

Your first U.S. tax season doesn’t start in April—it starts before you board the plane. A little preparation now can prevent expensive mistakes later and help you start your new chapter in the U.S. with confidence.

Most Australian businesses don’t fail in the United States because the market rejects them. 

They fail because the structure underneath them wasn’t built for the way the US actually works.

From a distance, the US looks like one market. 

In practice, it’s a federal system sitting on top of fifty separate state regimes, each with its own tax rules, registration requirements, employment laws and compliance triggers. What works neatly in Australia can become awkward very quickly once you have people on the ground, customers in multiple states, or inventory crossing state lines.

That’s why the first mistake is usually asking the wrong question.

The question isn’t “Should we set up in Delaware?”
The real question is “What are we actually building in the US?”

If the plan is to test the water,  a small team, early customers, limited capital at risk and a structure that needs to stay flexible. If the plan is to scale, raise capital, issue equity to US hires and keep exit options open, the structure needs to look like something the US market already understands.

Most Australian businesses end up in one of those two lanes, whether they realise it or not.

Where the ambition is serious growth, the default answer is often a US C-Corporation. 

Not because it’s clever, but because it’s familiar. US investors, banks, lawyers and employees all know how to deal with it. Equity can be issued cleanly. Option plans work the way people expect. Governance is recognisable. Due diligence is faster because the shape of the company makes sense to the people looking at it.

The trade-off is that C-Corps come with formality and tax layering. There is corporate tax at the company level and tax again when profits are distributed. Board processes matter. Records matter. But that discipline is usually the price of admission if you want to play properly in the US growth market.

At the other end of the spectrum sits the LLC, which often gets sold as the “simple” option. And in the right circumstances, it can be. LLCs offer limited liability, fewer rigid corporate rules and a lot of flexibility in how economics and control are documented.

The catch though and it’s a big one for Australians is that simplicity in the US domestic context doesn’t always translate neatly across borders. The way an LLC is treated for US tax depends on elections and ownership, and foreign owners can find themselves pulled into US tax filings and reporting in ways they didn’t anticipate. Add state-level fees and compliance, and the “easy” structure can become anything but if it hasn’t been thought through properly.

That doesn’t make LLCs wrong. It just means they need to be chosen deliberately, not by default.

Then there are the structures that sound familiar but rarely fit. S-Corporations are popular with small US businesses, but they generally don’t work for Australian expansion because of tight ownership and equity restrictions. Partnerships can be excellent for joint ventures and specific commercial arrangements, but when foreign partners are involved, withholding and reporting obligations in the US can quickly outweigh the flexibility they offer.

What often gets missed entirely in early conversations is whether a US subsidiary is even the right first step. Some Australian businesses initially operate in the US as an Australian entity registered at the state level, particularly where activity is limited or transitional. In other cases, a clean US subsidiary is essential from day one to contain risk, satisfy customers or prepare for an eventual sale. There’s no universal rule but the choice has real consequences for liability, tax exposure and how easy it is to unwind or exit later.

Another blind spot is the assumption that incorporation solves everything. 

It doesn’t. In the US, obligations are driven less by where you’re incorporated and more by where you actually operate. 

Hire people in one state, warehouse goods in another, sell software into several more, and you can quickly find yourself dealing with multiple tax authorities and registration regimes. Sales tax in particular has a habit of appearing earlier than expected, especially for digital and e-commerce businesses.

And then there’s the question that almost always gets left until too late, how does the money come home?

Funding a US operation, charging for IP, repatriating profits and documenting intercompany arrangements are not clean-up exercises. 

They’re foundational. The longer they’re left, the more value gets trapped behind structures that weren’t designed to move it efficiently.

The same applies to people. The moment you hire in the US, everything becomes real, payroll, employment compliance, benefits, insurance, and expectations around equity. 

This is another reason growth-oriented businesses often gravitate to C-Corp structures early, US employees understand them, and equity incentives actually work the way they’re supposed to.

The pattern, after years of watching Australian businesses expand into the US, is fairly consistent. The companies that do well are not the ones with the cleverest structures. They are the ones that chose a structure that matched their ambition, accepted the discipline that came with it, and put the foundations in place before momentum made change difficult.

The ones that struggle usually weren’t reckless. They were just early optimists. They picked something that worked “for now” and assumed they’d fix it later. In the US, later tends to arrive during fundraising, diligence or a dispute when flexibility is at its lowest and the cost of change is at its highest.

General information only. Not advice. But if you’re planning a US expansion, it’s worth remembering this, the market is big, forgiving and full of opportunity but it has very little patience for structures that don’t match the story you’re trying to tell.

CHECKLIST: Australia – US Market Entry Checklist

A Practical Guide For Australians And Globally Mobile Founders

For Australians moving to the United States — as executives, investors, or globally mobile founders — the U.S. personal tax system can feel both familiar and foreign. The rules are extensive, the terminology takes getting used to, and the way deductions operate is fundamentally different from Australia’s.

Where Australia offers targeted deductions within a tightly defined framework, the U.S. system blends statute, history, case law, and political compromise. For internationally mobile taxpayers, that combination creates both unexpected pitfalls and valuable planning opportunities.

This article provides a clear guide to the most significant deductions available on a U.S. personal tax return, complete with examples that reflect the situations Australians commonly face.

1.  Above-The-Line Deductions — The Most Valuable Deductions You Can Claim Without Itemising

Above-the-line deductions reduce Adjusted Gross Income (AGI), which then determines eligibility for further deductions and credits. Reducing AGI is often the single most powerful tax optimisation strategy for globally mobile individuals.

Retirement Contributions: IRA, SEP IRA And Solo 401(k)

Contributions to traditional IRAs may be deductible depending on income and employer-plan participation. For self-employed founders operating in the U.S., SEP IRAs and Solo 401(k)s offer substantial deductible contributions.

Example:
Michael, an Australian executive earning USD 160,000 in the U.S., contributes to his employer’s 401(k). Because he is already covered by that plan, his IRA contribution is not deductible due to income limits.

However, if Michael were self-employed and earned the same amount, a SEP IRA could allow deductible contributions of tens of thousands of dollars.

Health Savings Accounts (HSAs)

Unique to the U.S., HSAs allow deductible contributions, tax-free earnings, and tax-free withdrawals for medical expenses. Australians often find HSAs to be one of the most generous structures in the U.S. system.

Example:
Sarah, an Australian relocating to California, switches to a qualifying high-deductible health plan and contributes USD 8,300 into an HSA for her family.

This contribution is fully deductible, grows tax-free, and withdrawals for medical expenses remain tax-free. No Australian equivalent exists.

Self-Employed Deductions

For entrepreneurs and consultants, these include:

• Self-employed health insurance
• Half of self-employment tax
• Qualified retirement plan contributions
• Certain business expenses

Example:
An Australian consultant billing USD 220,000 through a U.S. LLC deducts:

• USD 9,000 in self-employed health insurance
• USD 8,000+ for half of self-employment tax
• USD 20,000–40,000 in retirement contributions

These deductions significantly reduce taxable income.

2. Standard Deduction vs. Itemised Deductions — The Annual Decision

Each taxpayer chooses either:

• The Standard Deduction, or
• Itemised Deductions, if they exceed the standard deduction.

Standard Deduction Example:

David and Emma, an Australian couple living in Texas, have:

• USD 6,500 property tax
• USD 3,000 charitable gifts

Total: USD 9,500

The standard deduction is much higher, so they do not itemise.

Itemised Deduction Example:

An Australian family living in New York has:

• USD 23,000 state income tax
• USD 14,000 property tax (but SALT capped at USD 10,000)
• USD 18,000 mortgage interest
• USD 12,000 charitable gifts

Their itemised deductions total USD 40,000, higher than the standard deduction, so they itemise.

3. State And Local Tax Deduction (SALT) — Now Capped At USD 10,000

Before 2017, many high-income earners benefited from large SALT deductions. Today, the deduction for:

• U.S. State Income Tax
• U.S. Local Taxes
• U.S. Property Taxes

Is capped at USD 10,000 per return.

Example:
Grace, an Australian senior executive in San Francisco, pays:

• USD 45,000 state income tax
• USD 15,000 property tax

Despite paying over USD 60,000, she may deduct only USD 10,000.

Important:
Foreign taxes do not count toward SALT. They belong to the foreign tax credit calculation, not deductions.

4. Mortgage Interest Deduction — Still Valuable, But Limited

Interest paid on qualifying mortgages for U.S. residences is deductible, subject to limits.

• Up to USD 750,000 of acquisition debt (for loans after 2017)
• Older mortgages may retain the USD 1 million limit

Example:
A couple buys a Los Angeles home with a USD 900,000 mortgage taken in 2021. Only interest on the first USD 750,000 is deductible.

Foreign Mortgages – Interest may be deductible if the loan is secured by the property, but foreign property taxes fall under the USD 10,000 SALT cap, reducing overall benefit.

5. Charitable Contributions — A Generous And Flexible Deduction

Charitable gifts remain a highly effective deduction for high-income taxpayers.

Key Points

• Must be made to U.S. qualified charities
• Cash gifts deductible up to 60% of AGI
• Appreciated assets deductible up to 30% of AGI

Example: Cash Donation

A Sydney entrepreneur working in the U.S. donates USD 50,000 to a U.S. 501(c)(3). Fully deductible.

Example: Appreciated Stock Donation

If the founder donates USD 50,000 in stock purchased for USD 10,000:

• USD 50,000 deduction
• No capital gains tax on the USD 40,000 appreciation

Foreign Charity Contributions – Donations to Australian charities are generally not deductible unless channelled through a U.S.-recognised “friends of” organisation.

6. Medical And Dental Expense Deductions — Only For Major Costs

Medical expenses are deductible only to the extent they exceed 7.5% of AGI.

Example:

A family with AGI of USD 200,000 incurs USD 25,000 in medical expenses.
Deductible portion = 25,000 – (7.5% × 200,000)
= 25,000 – 15,000
= USD 10,000

For high earners, only significant medical events typically produce a deduction.

7. Investment-Related Deductions

Investment Interest

Interest on margin loans is deductible up to net investment income.

Example:
Liam pays USD 12,000 interest on a margin loan and has USD 18,000 in investment income.
He may deduct the full USD 12,000.

Capital Losses

Capital losses offset capital gains and up to USD 3,000 of ordinary income.
Excess losses carry forward indefinitely.

8. The Qualified Business Income (QBI) Deduction — A Major Benefit For Eligible Founders

Eligible owners of U.S. pass-through businesses (LLCs, partnerships, S corps) may deduct up to 20% of qualified business income.

Example:

Tom runs a logistics LLC and earns USD 300,000.
He may claim a USD 60,000 QBI deduction, subject to wage and property basis tests.

Specified Service Businesses – Consulting, accounting, financial services, and similar professions face phase-out limits.

Example:
Lisa, an Australian consultant earning USD 220,000, is within the phase-out range and still receives a partial QBI deduction.

9. International Mobility Considerations — Where Australians Often Get Caught

Superannuation Contributions 

Australian super contributions are not deductible for U.S. tax purposes.

Foreign Property Tax

Property tax on homes in London, Singapore or Sydney does not escape the SALT cap.
Only USD 10,000 total may be deducted.

PFIC And Foreign Trust Advisory Fees

These are not deductible, as miscellaneous itemised deductions remain suspended until at least 2026.

Conclusion

The U.S. deduction framework is powerful but complex. For Australians and other globally mobile founders, the goal is to understand which deductions reduce AGI, which are capped, and which are unavailable for foreign assets and pensions.

Used properly, these deductions can significantly reduce U.S. tax liability while maintaining full cross-border compliance — a balance every global individual needs.