How Aussie Founders Can Tax-Effectively Make the Jump to the US

Two weeks ago I gave a talk at Sunrise about why and how Aussie entrepreneurs should make the jump to the US to scale a startup - I later published the talk and slides here. That talk was about pull factors - the bigger market, the access to capital, etc.

On budget night this week, the Labor government supplied the push.

I'm posting on a flight to New York, but the threat to Aussie Founders is too pressing to ignore, so instead of building my startup, I’m writing this instead.

Fifteen years ago, when I made my entrepreneurial move to the US, I wrote up a blog post on how to get the E3 visa for Aussie founders. I didn’t think anyone would read it, and mostly wrote it so I'd have notes to pull up when it came time to renew my own visa in 2 years. However, it turned out to be useful to many thousands of people, and it's still the post I get the most thank-you messages about.

So, I'm writing this post in the same spirit - hard-won lessons that took me years and real money to learn, written down once so the next wave of Aussie founders doesn't have to learn them the same way.

I hope you can focus your energy on what matters much more than structures and taxes - building a great company and getting to a great outcome. That's how the Aussie startup ecosystem grows and thrives in the years and decades ahead.

One disclaimer up front. I'm not a lawyer. So, I'm definitely not your lawyer. The whole point of this post is that the law is complicated and the stakes are high, which is exactly why you need to get your own professional advice. What follows is what I've learned the hard way, with citations so you can dig deeper with people who do this for a living.

The US tax system actively rewards founders. The gap just widened.

The first thing to understand is that the US tax system is materially better for founders than the Australian one - and the gap has just opened up.

Until this week’s announcement, long-term capital gains rates aren’t that different. Right now, the US top long-term CGT rate of 20% plus the 3.8% Net Investment Income Tax for high earners works out roughly comparable to Australia's current effective rate of 23.5% (top marginal 47% with the 50% discount on assets held over 12 months - for as long as it remains). The two systems are within a hair of each other today.

The big difference between the two systems isn't the rate. It's Qualified Small Business Stock (QSBS).

QSBS is Section 1202 of the US Internal Revenue Code. In the simple case, if you hold shares in a US C-Corporation that meets the requirements (active business, gross assets under the cap, not in a disqualified industry) for at least five years, you can exclude up to the greater of $10 million or 10x your basis in the stock from your US federal capital gains tax. Tax-free US$10M+ on an exit or secondary sale.

That's the headline. The detail is even better.

The US tax law signed in July 2025 raised the dollar cap to $15 million indexed for inflation, raised the gross asset test from $50 million to $75 million, and introduced a tiered exclusion for shares issued after July 4, 2025: 50% at three years, 75% at four years, 100% at five years. The five-year mark is still the prize, but you can now exit earlier and still pocket a meaningful exclusion.

And that's just one taxpayer's slice. It doesn't mean your tax benefit is only US$10M either. Founders routinely "stack" QSBS by gifting shares to family members or to non-grantor trusts in tax-friendly states, with each beneficiary or trust getting their own per-issuer cap. I've heard of founders treating well over US$50M as tax-free this way. It's a specialist area - get qualified advice before you go anywhere near it. The Davis Wright Tremaine and Frost Brown Todd writeups are good starting points for your own advisor.

The point is this: the US tax code actively rewards the people who take the risk of starting and scaling companies - creating jobs and prosperity and returns for investors - over the long term. And it just got more generous, at exactly the moment Australia decided to go the other way.

Tip #1 from my Sunrise talk: Flip Up Early

The single most important move for an ambitious Aussie founder is to flip up to a US C-Corporation as the top of your corporate stack, well before you're trying to move yourself to the US.

A flip-up sounds intimidating but isn't. You incorporate a Delaware C-Corp. That new entity then acquires 100% of the shares in your existing Aussie company (which becomes a wholly-owned subsidiary). Your cap table reshuffles so existing shareholders now own equivalent stakes in the new US parent instead of the old Aussie company - a scrip-for-scrip transfer which does not trigger a capital gains tax event. The Aussie company keeps trading; the holding structure is just now US-headquartered with the Aussie Pty Ltd now a wholly owned subsidiary.

The process is mostly mechanical. Delaware filing for the new C-Corp, EIN from the IRS, potentially state stamp duty and a change of ownership update with ASIC. It shouldn't take months and it shouldn't cost five figures. With the right advisors I'd expect a clean flip-up to come in well under US$10,000 of professional fees and a couple of weeks of elapsed time. Annual maintenance is also in the low thousands a year. Your lawyers will also generate Board Consents for the new (empty) US C-Corp to acquire the AU Pty Ltd by issuing its own stock to the existing Aussie shareholders in exchange for their Pty Ltd shares. This is largely boilerplate, but it's not a DIY process - especially if your cap table is anything other than dead simple.

The 83(b) election: where founders get burned

When you receive founder stock in a US C-Corp that's subject to vesting (which yours should be), you have 30 days from the date of grant to file a one-page 83(b) election with the IRS. The election tells the IRS to tax you now on the value of the stock at grant - which for a freshly-incorporated startup with no revenue is effectively zero - rather than at each vesting milestone as it appreciates.

Miss the 30-day window and you get taxed as ordinary income on the spread between the grant price and the fair market value at each vesting event over the next four years. On a startup that's working, that compounds into a brutal tax bill on phantom income you haven't actually received in cash. It is also extremely difficult to undo.

There's no equivalent gotcha in the Australian system. Aussie founders typically don't think about this stuff because Pty Ltd founder shares aren't subject to the same vesting-and-deemed-income treatment under Australian tax law. Coming from that context, it's easy to miss how unforgiving the 83(b) deadline is. Make sure your US lawyers file it on day one. Get an emailed confirmation. Keep that confirmation forever.

Why flip up early? Two reasons.

First, the QSBS five-year clock starts ticking from the date the C-Corp first issues stock. Every month you delay is a month of tax benefit you're forfeiting. If you get acquired after 2 years and 11 months, you get zero QSBS tax relief.

Second, when you eventually go to raise US institutional capital - or sell, or list - having the US C-Corp already on top makes everything easier. US institutional investors don't want to wire money into an Aussie Pty Ltd. US acquirers don't want to buy an Aussie company. Doing the flip when you have time and leverage is much cheaper than doing it under duress when a term sheet is on the table.

The one caveat: don't flip up before you've got real signal of product-market fit. Spending money on cross-border structure while you're still searching for PMF is a bad use of focus. But once you're past that point - early traction, early customers, a real shot at something - it's the highest-leverage hour of legal work you'll do.

Leaving Australia without getting destroyed on the way out

This is where most founders get caught.

Getting QSBS treatment in the US requires you to be a US tax resident at the point of disposal. Being a tax-resident isn’t about your citizenship or visa status - it is about physically and substantively living in the US, and crucially, having ceased to be an Australian tax resident.

The moment you cease being an AU tax resident, CGT Event I1 fires. Australia treats you as having disposed of all your non-Taxable Australian Property (non-TAP) assets at market value on the date of departure. It's an exit tax on unrealised gains. With the new CGT regime coming, that exit bill is going to be a lot more expensive for anyone leaving after July 1, 2027.

But there is a move here, and it's the one I'd be making if I were doing this today.

You can elect under section 104-165(2) of the ITAA 1997 to defer the deemed disposal. The election treats your non-TAP assets as if they remain Taxable Australian Property until they're actually sold (or until you return to Australia and become resident again). Importantly, Article 13(6) of the Australia-US tax treaty then steps in: where an individual has made this kind of deferral election upon ceasing residency, the right to tax a subsequent disposal sits exclusively with the US. What this functionally means, though is that the move is pretty much one way - you need to sell/exit the company in the US. As my accountant said when I made this move: "you can't come back until you've finished the job".

Combine the deferral on the AU side with QSBS on the US side, and the Australian exit tax effectively evaporates. The ATO doesn't tax you on the way out; the IRS gives you the exclusion on the way through. Clean.

A few things to watch:

• The election is all-or-nothing across your non-TAP portfolio. You can't cherry-pick which assets to defer. Apply it to one, you apply it to all.
• This only works if your move is substantively real. The ATO is famously aggressive about treating departures as temporary. Selling the house, breaking domicile, getting an SSN, filing US taxes, having a US lease - the substance has to be there. I can't tell you exactly how long you need to be out. In my case it's been fifteen years and the question never came up. Get specialist cross-border advice on your specific facts. My instinct, watching others do it, is that once you have a US Social Security Number, US W-2 income, a US lease, and have filed a full year of US taxes, the ATO is going to struggle to argue you didn't actually leave.

Where this comes off the rails: trusts

If you've followed the standard advice of most Australian asset-protection lawyers and put your founder shares in a discretionary trust with you as an individual trustee, you have a problem.

When you move to the US, the trust ceases to be a "resident trust for CGT purposes" and CGT Event I2 (section 104-170) fires. Same deemed disposal at market value. But unlike Event I1 for individuals, there is no election to defer for trusts. It's a forced crystallisation. The Australian trust pays CGT on unrealised gains the moment the trustee leaves. No treaty override, no deferral, nothing. (See ATO determination TD 1999/83). However, if you leave when the company is still pretty early and the value of your shares is pretty small, the CGT hit - before the discount goes away - is probably not too bad.

You might think the answer is to swap in a corporate trustee so the trust stays AU-resident. That avoids CGT Event I2 - but it traps your founder shares inside the Australian tax net forever - and it gets worse. Under the Peter Greensill Family Co decision in 2020, when an Australian-resident trust later distributes a capital gain on non-TAP assets to a non-resident beneficiary (you in the US, post-exit), the trustee gets assessed for AU tax on the entire gain anyway. You don't escape AU CGT - you pay it after the US has already had a go.

The clean play: hold your founder shares in your own personal name. Asset-protection lawyers will tell you this is reckless. They're optimising for a different problem than the one you probably have. If you're an early-stage founder, your real risk isn't a third-party lawsuit going after your personal assets. It's wasting a generational tax outcome on a structure that doesn't survive the move.

If you've already set up a trust, talk to a cross-border specialist about your options well before you book the flight. The longer you wait, the more expensive the unwind.

Getting to the US: the E3 visa

The visa Aussie founders should default to is the E3.

The E3 is a specialty-occupation work visa created under the Australia-United States Free Trade Agreement. It's available only to Australian citizens, has a dedicated annual cap of 10,500 visas, and only about a third of that cap is actually used each year. Compared to the H1B lottery (where you have roughly a one-in-four shot in a good year, and the US has applied some insane fees), the E3 is open road.

The mechanics: your flipped-up US C-Corp issues you a letter of offer for a specialty-occupation role. You file a Labor Condition Application with the US Department of Labor. You apply for the E3 at a US embassy or consulate. The visa is issued for up to two years, renewable indefinitely in two-year increments. There is no lifetime cap on renewals, and renewals don't count against the annual quota.

A few details that matter:

• Your spouse can work in the US. Since January 31, 2022, E3 dependent spouses are automatically work-authorised on entry via the E3S I-94 admission code. No separate EAD application required. This is a meaningful improvement on how it used to work.
• Your kids attend US schools on E3D dependent visas, regardless of citizenship.
• The E3 isn't a "dual intent" visa like the H1B. Technically you're meant to maintain an intention to return to Australia eventually. In practice, US immigration policy doesn't deny E3 applications solely because you've started a green card process, but it's a wrinkle to work through with an immigration lawyer if you decide to try and get a green card down the track.

Using your own flipped-up C-Corp to issue yourself the letter of offer is a workable approach but has wrinkles. The consular officer needs to see a bona fide employer-employee relationship and a real specialty occupation, not just "I am the CEO of a one-person company." An independent director on the board, outside counsel drafting the offer letter, and a properly-evidenced specialty role all help. I wrote the original founder's HOWTO for self-sponsorship on the E3 a few years back. It's still mostly current: E3 Visa for Australians - How To.

Choosing your US state

Once the visa is sorted, where you actually land - or, more accurately, sell the business - in the US matters more than most people realise.

QSBS is a federal tax benefit. But states make their own choices about whether to follow federal treatment, and a handful of them don't.

The clean play is to live in a state that conforms to federal QSBS. Most do. Colorado, where I live, conforms via Colo. Rev. Stat. §39-22-104, so my federal QSBS exclusion flows through and I pay zero of Colorado's 4.4% income tax on QSBS gains. Texas, Florida, Washington, Tennessee, Wyoming and Nevada have no state income tax at all, so by definition there's nothing to worry about at the state level.

The state to watch is California. California explicitly does not conform to Section 1202. The previous partial conformity was repealed effective January 1, 2013 after a state Court of Appeal ruling. A California-resident founder selling QSBS still owes up to 13.3% in California state tax on the entire federal gain. On a $30M exit, that's an extra $4M handed to Sacramento despite the federal tax being zero. Alabama, Mississippi and Pennsylvania also don't conform. Hawaii and Massachusetts partially conform.

If your business needs you to be in the Bay Area for talent or capital reasons, that's a real trade-off to weigh. But for most Aussie founders, the better play is to base yourself somewhere QSBS-friendly and fly to California for the meetings that matter - or to move to another state as you get closer to your exit.

Being a US Tax Resident Aussie Isn't Trivial

When you become a US tax resident, you're in for a few surprises. The US tax system is byzantine and the regression from a modern tax agency like the ATO to the dark ages of the IRS is a shock.

While you might be tempted to try and get by as a simple W2 employee with TurboTax, the short advice is: don't.

When it comes to Income Tax, not only do you have the complexity of Federal and State tax interplay, there are sometimes City and even local District tax differences (hello, Manhattan). And the IRS is going to require special filings called FBARs which are needed for your foreign bank accounts and assets (eg, Superannuation) - and the penalties for not filing run to five figures per form even for honest mistakes, and a lot more if the IRS decides it was willful (even if it is that little ING Direct savings account from when you were in Uni that you forgot to close... this one I know personally).

So, when you become a US Tax Resident, you'll need a CPA to file your taxes for you. The key thing to ask when choosing one is whether they also have a high-level understanding of the Aussie tax system - I've always been grateful for the advice of Inna from BPM in SF.

What to do sooner rather than later

The Treasurer has promised a consultation on the interaction between the CGT reforms and startup incentives. It might soften some of the impact. But even if Labor’s push factors get removed because they realise crushing entrepreneurship just to fix Australia’s property Ponzi scheme is insane, the pull factors are still strong.

Two things to do if any of the above hits home:

1. Find a US-AU cross-border tax lawyer and a US corporate lawyer who do this work regularly. Not your AU accountant, not a generalist. Specialists. Get a one-hour scoping call on your specific structure.
2. If you don't already have a Delaware C-Corp as the top of your stack, get one before you do anything else that matters. The five-year QSBS clock doesn't start until you've issued the stock.

This shit is complicated, and you've got more important things to do with your time than the nitty-gritty of cross-border tax structuring. You've got a company to build. Hopefully though, knowing where the big differences are will help you move with more confidence and less distraction than I had learning this the hard way.

Good luck and build a great company.