The US-Australia income tax treaty

By Brent Chudoba, editor Updated September 15, 2026

Under the US-Australia income tax treaty, the most the paying country can withhold from an ordinary investor is 15% on dividends, 10% on interest and 5% on royalties. Some recipients and some kinds of payment get a different rate, and the table below lists each one. Without a treaty, US-source dividends and royalties paid to a nonresident are withheld at 30%, while the tax code already exempts most portfolio and bank-deposit interest whether or not a treaty applies.

The treaty has generally applied since 1983, and IRS lists its most recent protocol as taking effect in 2004. It also decides residency when both countries claim you, and assigns who taxes pensions and Social Security. It does not generally stop the US taxing its own citizens.

What are the US-Australia treaty withholding rates?

US-Australia treaty withholding rates and who qualifies
Income	Rate cap	Who gets this rate, and where the treaty says so
Dividends	15%	Anyone not in a category below, including an ordinary individual investor (Article 10(2)(b))
Dividends	5%	a company that directly holds at least 10% of the voting power of the company paying the dividend (not available on dividends from a US RIC or REIT) (Article 10(2)(a))
Dividends	0%	a company resident in the other country that has owned shares with 80% or more of the voting power of the paying company for the 12 months ending on the date the dividend is declared, and that either is listed and regularly traded on a recognized stock exchange (or at least 50% owned by five or fewer such listed companies) or is granted the benefit by the competent authority (not available on dividends from a US RIC or REIT) (Article 10(3))
Interest	10%	Anyone not in a category below, including an ordinary individual investor (Article 11(2))
Interest	0%	either government, a political subdivision or local authority, any other body exercising governmental functions, or a central bank (Article 11(3)(a))
Interest	0%	a financial institution (a bank or other business that raises money in financial markets or takes deposits and uses it to provide finance) that is unrelated to and dealing wholly independently with the payer, unless the interest is paid under a back-to-back loan or an economically equivalent arrangement, which is taxed at up to 10% under Article 11(4)(a) (Article 11(3)(b))
Interest	15%	interest whose amount is determined by reference to the profits of the payer or an associated enterprise (Article 11(9)(a))
Royalties	5%	Everyone, including an ordinary individual investor (Article 12(2))

The cap applies to income paid from one country to a resident of the other, and each treaty conditions it on that resident being the real recipient rather than a conduit; the article cited beside each rate is the one that sets the condition. Which document sets each rate today: dividends, Article 10 as substituted in full by Article 6 of the 2001 protocol (the 1982 text had a single 15% rate); interest, Article 11 as substituted in full by Article 7 of the 2001 protocol (the 10% rate carries over from the 1982 text; the exemptions in 11(3) are new); royalties, base treaty Article 12(2) as amended by Article 8(a) of the 2001 protocol, which replaced 10% with 5%.

What else changes the rate?

These are edge cases. If you hold ordinary shares, bonds or a copyright, skip to the next section.

Dividends: Dividends from a US regulated investment company (RIC) get 15%. Dividends from a US real estate investment trust (REIT) get 15% only if the owner is an individual holding no more than 10% of the REIT, holds no more than 5% of a publicly traded class, or holds no more than 10% of a diversified REIT; otherwise the treaty sets no cap, Article 10(4). REIT dividends paid to a listed Australian property trust get 15%, with a look-through for its unitholders owning 5% or more, Article 10(4)(d), and REIT shares the trust held on March 26, 2001 are grandfathered at 15% (protocol Article 13(3)). The branch profits tax is capped at 5%, Article 10(8) and (9).

Interest: The 0% rates are for governments, central banks and unrelated financial institutions, not for individuals. Interest on ownership interests in a securitization vehicle, to the extent it exceeds a normal return on comparable publicly traded debt, may be taxed under each country's domestic law with no treaty cap, Article 11(9)(b). Article 1(2) keeps any more favorable domestic-law exemption available, so the treaty rate is a ceiling.

Royalties: The protocol removed rentals of industrial, commercial or scientific equipment from the royalty definition (Article 12(4)(a) as substituted by protocol Article 8(b)), so the 5% rate no longer applies to them. The Treasury technical explanation treats them as business profits, taxable at source only through a permanent establishment.

Which country are you a resident of under the US-Australia treaty?

If the US and Australia both treat you as a resident under their own laws, Article 4(2) decides. It works through these tests in order, and stops at the first one that points to a single country:

Where you maintain your permanent home, looking at where you live with your family
If you have a permanent home in both countries or in neither, where you have a habitual abode
If you have a habitual abode in both countries or in neither, where your personal and economic relations are closer, with your citizenship of one of the two countries taken into account

Using the tie-breaker to be treated as a resident of Australia has US consequences: you file Form 1040-NR with Form 8833 attached, and a green card holder of 8 of the last 15 years who makes the claim is treated as having ended US residency. The details are on the hub page.

How does the US-Australia treaty tax pensions and Social Security?

Pensions (Article 18(1)). A pension for past employment, meaning periodic payments on retirement or death, paid to a resident of one country is taxable only in that country of residence, and annuities are likewise taxable only where the recipient lives (Article 18(3)); a government-service pension paid to a citizen of the paying country falls under Article 19 instead. Because 18(1) is not a saving-clause exception, the United States can still tax its citizens living in Australia on these pensions.

Social Security (Article 18(2)). Social security and other public pensions paid by one country to a resident of the other country, or to a US citizen wherever they live, are taxable only by the paying country, so US Social Security received by a resident of Australia is taxed only by the United States and Australian public pensions received by a US resident or US citizen are taxed only by Australia. This rule is an exception to the saving clause, so it applies to US citizens too.

Does the treaty stop the US taxing its own citizens?

Generally no. The saving clause (Article 1(3)) keeps that right. Each country may tax its own residents, and the United States its citizens, as if the treaty did not exist; for US-source income this also reaches a former US citizen or long-term resident who gave up that status with tax avoidance as one of the principal purposes, for 10 years afterward (long-term residents added by Article 1 of the 2001 protocol).

The exceptions: Article 1(4) keeps for everyone the benefits of Article 9(2), Article 18(2) (social security and public pensions) and 18(6) (alimony and child support), Article 22, Article 23, Article 24 and Article 27(1); it keeps Articles 19 (government pay), 20 (students) and 26 (diplomats) only for people who are not US citizens or green card holders (for US benefits) or not ordinarily resident in Australia (for Australian benefits).

What does the treaty say about students?

Article 20. A student who is, or was immediately before the visit, a resident of one country and is temporarily in the other for full-time education is exempt in the host country on payments from sources outside the host country for maintenance or education. The article sets no time limit and covers only those outside payments.

What do people most often get wrong about this treaty?

Three things readers get wrong. First, the dividend rate is not one number: 15% for individuals, 5% for a company holding 10% of the voting power, and 0% for an 80%-owned subsidiary meeting a 12-month holding period and a stock-exchange or competent-authority test, all set by the 2001 protocol, which also cut royalties from 10% to 5% and added interest exemptions that cover governments and unrelated financial institutions, not individuals, who still face up to 10%. Second, the residence tie-breaker runs permanent home, then habitual abode, then closer personal and economic relations, putting habitual abode ahead of the closer-ties test, with citizenship only a factor in that last test; since the protocol a US citizen is also treated as a US resident unless resident in a third country under that country's own tax treaty with Australia (Article 4(1)(b)(ii)), but the saving clause still lets the United States tax a citizen living in Australia as if the treaty did not exist, apart from the Article 1(4) exceptions. Third, social security is taxed only by the paying country, so US Social Security received by someone living in Australia stays taxable by the United States, not Australia.

How do you claim the treaty rate?

Give the US payer Form W-8BEN naming Australia as your country of residence, before the payment. Many countries ask a US resident for Form 6166, a US residency certificate requested on Form 8802, before they apply the lower rate on their side. Both, with the fees and who can get them, are covered on US tax treaties by country.

Sources

Every rate and article on this page was read in the treaty text and its protocols, then checked a second time by a separate review of the same documents, on September 15, 2026.