401(k) or Superannuation: What is the Difference for US Expats Down Under

For most Americans in Australia, perhaps the most frequent financial inquiry is how their US retirement scheme compares with the superannuation scheme of Australia. Both are long-term retirement funding vehicles, but they have very different rules, taxation treatment, and government regulation.

If you’re a US expat managing a 401(k) back home while also contributing to superannuation in Australia, it’s important to understand the differences. This guide explains how each system works, the key points of comparison, and what US expats should watch out for when handling both.

What is a 401(k)?

401(k) is an American employer-sponsored retirement plan in which employees can put a portion of their earnings into a tax-favored account. Employers provide matching contributions in many cases, and it becomes the backbone of retirement planning in America.

Major characteristics of a 401(k):

• Contributions: Employee made (pre-tax or Roth) and occasionally employer matched.
• Tax treatment: Pre-tax for traditional 401(k) contributions, which lowers taxable income. After-tax contributions for Roth 401(k).
• Growth: Earnings on investment grow tax-deferred.
• Withdrawals: Typically taxed at regular income rates in retirement except for Roth. Early withdrawals prior to age 59½ might incur penalties.

What is Superannuation?

Superannuation, or “super,” is Australia’s forced retirement savings system. Employers are obligated by law to contribute a portion of an employee’s regular earnings into a super fund.

Key features of superannuation:

• Contributions: From July 2025, the Superannuation Guarantee (SG) is 12% of wages, bonuses, and allowances. Voluntary contributions can also be made by employees.
• Tax treatment: The 15% in the fund is taxed for employer contributions. There are caps on concessional and non-concessional contributions.
• Growth: Up to 15% tax is levied on investment income in the super fund.
• Withdrawals: Generally tax-free once the preservation age (55–60 based on year of birth) is reached and retired.

401(k) vs Superannuation: Side-by-Side Comparison

Feature	401(k) (US)	Superannuation (Australia)
Contribution Source	Employee + employer match	Employer mandatory + employee voluntary
Contribution Tax Treatment	Pre-tax (Traditional) or after-tax (Roth)	Employer contributions taxed at 15%
Investment Growth	Tax-deferred	Earnings taxed up to 15%
Withdrawal Tax	Taxable at retirement unless Roth	Typically tax-free after preservation age
Withdrawal Age	59½ (penalty for early withdrawal)	Preservation age (55–60) depending on DOB
Regulation	IRS and US federal law	ATO and superannuation regulations

Challenges for US Expats in Australia

Being in Australia doesn’t allow you to forget about your US retirement requirements. Worldwide income is still taxed by the IRS on US citizens, meaning that both your superannuation and 401(k) can have tax implications in the US.

1. Superannuation and the IRS

Superannuation is not precisely defined by the IRS, leaving expats in a quandary. In reality:

• Employer contributions are not tax-deductible for purposes of US taxation.
• Investment earnings within the fund can be taxed each year in the US.
• Withdrawals can be treated differently by the IRS compared to the ATO.

2. Double Taxation Risk

Since both the ATO and IRS can tax contributions and growth, there’s a possibility of paying twice. Although there are relief arrangements in the US–Australia Tax Treaty, it doesn’t relieve you of the obligation to file.

3. Planning a 401(k) Overseas

Generally speaking, you can simply leave your 401(k) back in the US until retirement.

• Withdrawals are still subject to US taxation, even when you retire in Australia.
• You cannot roll over to superannuation since the two systems operate under different jurisdictions.

Which is Better: 401(k) or Superannuation?

There isn’t really a “better” option—each will play its part depending on your residence and long-term situation.

• For long-term expats in Australia: Superannuation is now your main retirement fund, but your 401(k) is still subject to US taxation.
• If you’re returning to the US: Maintaining your 401(k) in force is advisable, and continuing to contribute to super as necessary in Australia.
• If you don’t know where you’ll end up: Talk to a cross-border tax specialist to conform and prevent double taxation.

FAQs: 401(k) vs Superannuation

1. Do I have to report my 401(k) while residing in Australia?
   Yes. A 401(k) is still a US retirement account and will need to be filed on your US tax return. Withdrawals will typically still be taxable in the US.
2. Will the IRS tax my superannuation account?
   Possibly. The IRS hasn’t given outright guidance, but lots of expats have found contributions and earnings are taxed for US purposes even though they’re already taxed by the ATO.
3. Can I roll over my 401(k) into superannuation?
   No. They are subject to different jurisdictions and cannot be combined.
4. Will I be double taxed on retirement distributions?
   The US–Australia tax treaty prevents double taxation, but you need to properly apply credits and treaty provisions.
5. Where can I receive assistance in managing both accounts?
   Companies such as Expatustax offer specialist guidance for US expats in Australia, assisting you in reporting properly and maximizing your retirement planning.

 

Key Takeaway

A 401(k) and a superannuation have the same purpose—saving for retirement—but are taxed, governed, and accessed entirely differently. For US expats living in Australia, it’s not a matter of deciding to use one or the other, but ensuring both are handled so as to meet the IRS and the ATO requirements. That’s where Expatustax.com comes in.