For the typical US resident who is in Australia, one is in need of understanding the US retirement scheme and how the Australian superannuation system operates. Having a 401(k) in America and now contributing to the superannuation in Australia, one cannot help but think about how these two retirement schemes compare and, more so, how they translate for expats who need to be compliant with both the IRS and the Australian Tax Office (ATO).
This tutorial splits 401(k) vs Superannuation into contributions, taxes, withdrawals, and what US expats should know about managing both systems effectively.
What is a 401(k)?
A 401(k) is an American employer-sponsored plan to save for retirement on a tax-benefited basis.
Essential features of a 401(k):
- Contributions: Employee contributed (pre-tax or after-tax through Roth 401(k)) and often matched by employers.
- Tax treatment: Contributions are generally tax-deferred, thus you don’t pay US income tax at the time of withdrawal.
- Your investments grow: Grows tax-free in the plan.
- Withdrawals: Taxed at retirement if pre-tax, or tax-free if Roth, but withdrawals before age 59½ might be subject to penalties.
What is Superannuation
Superannuation, or “super,” is Australia’s compulsory pension savings plan. Employers are required to contribute a portion of an employee’s wage to a super fund. The rate of contribution is 12% of ordinary earnings, such as salary, bonuses, and allowances, as of July 2025.
Key characteristics of superannuation:
- Contributions: Employers contribute with employees’ voluntary contributions allowed on top of the mandatory contribution.
- Tax treatment: Employer contributions liable for a concessional rate of 15% in Australia.
- Investment growth: Taxed on super fund income to a maximum of 15%.
- Withdrawals: Typically tax-free on withdrawal at retirement age, depending on residency and type of fund.
401(k) vs Superannuation: Key Differences
| Feature | 401(k) (US) | Superannuation (Australia) |
| Contribution Source | Employee (pre-tax or Roth) + employer match | Employer compulsory (12% from 2025) + voluntary employee contribution |
| Contribution Tax Treatment | Pre-tax contributions reduce taxable income | Contributions subject to 15% tax on commencement |
| Growth Tax | Tax-deferred until withdrawal | Income taxed at 15% in the fund |
| Withdrawal Tax | Normal income tax rates (pre-tax accounts) | Typically tax-free after retirement age |
| Withdrawal Age | 59½ (penalties withdrawn earlier) | Preservation age (55–60 based on DOB) |
| Government Involvement | IRS regulates and taxes retirement accounts | ATO regulates superannuation compliance |
US Expat View: Tax Issues
For US expats in Australia, it is not that easy to keep one or the other. If you keep a 401(k) in the US but contribute superannuation in Australia, things to watch out for are:
1. Superannuation Treatment by the IRS
The IRS does not offer an easy solution to how superannuation is handled. Some expats find that:
- Employer contributions aren’t recognized as deductible by the IRS.
- US super fund returns may be taxed in the US annually.
- US withdrawals may be handled differently than in Australia.
That uncertainty helps contribute to making superannuation one of the biggest tax concerns for US expats.
2. Double Taxation Risks
Because the US taxes citizens on worldwide income, super contributions and growth may be subject to IRS rules—even though they’re already taxed by the ATO. The US–Australia tax treaty provides some relief, but gaps remain.
3. Managing a 401(k) Abroad
If you’ve left the US but still hold a 401(k):
- You can typically leave your funds in the plan until retirement.
- Withdrawals in retirement will still be taxable in the US.
- You can rollover your 401(k) to an IRA but that isn’t going to necessarily reduce expat complexity.
Which is Better, 401(k) or Superannuation?
Neither is so much better but rather they do different things depending upon where you reside currently and what you do professionally.
- If you have irrevocably established yourself in Australia: You will be using Superannuation as your primary vehicle for retirement, but you’ll still need to continue to manage your 401(k) in the correct manner.
- If you expect to go back to the US: Keeping your 401(k) with you in the US may be worth the cost while continuing to make super contributions in Australia.
- If you’re a long-term expat: Expert guidance must be had in an effort to avoid double taxation, especially related to reporting superannuation to the IRS.
How Expatustax.com Can Help
We specialize at Expatustax.com with US expats in Australia and with traversing the complex crossroads of 401(k) vs. Superannuation. Our staff have experience with the IRS rules, ATO laws, and the US–Australia tax agreement regarding retirement savings.
If you have been receiving puzzling IRS letters, want to voluntarily super contribute, or must report multiple retirement accounts, we help you remain in good standing and minimize unnecessary tax liabilities.
FAQs: 401(k) vs Superannuation
- Do I have to report my 401(k) to the IRS if I am living in Australia?
Yes. Your 401(k) is still a US account and will need to be reported on your US return of taxation. Withdrawals will usually also remain taxable in the US. - Will the IRS tax my superannuation account?
Maybe. The IRS does not have any guidance, but most expats have found that contributions and gains can be taxable, while the ATO already taxes them. - Can I roll my 401(k) into my superannuation account?
No. The two plans are under different jurisdictions and cannot be rolled over in the immediate sense. - Will I double-tax my 401(k) withdrawals if I retire in Australia?
Double taxation should be completely avoided under the US–Australia tax treaty, but adequate use of credits and provisions of the treaty must be ensured. - Where can I get help to administer both my 401(k) and superannuation?
Firms like Expatustax specialize in assisting US expats with international tax compliance and retirement planning.
