The Internal Revenue Service states that the place where personal services are performed generally determines the source of the income, regardless of where the contract was made or the residence of the payer. Work done in Australia is therefore generally foreign-source income, outside the 30 per cent withholding that applies to US-source income paid to foreign persons.
If an American client asks you for a tax form before paying an invoice, the question is where you did the work. United States tax law sorts pay for personal services by the place the services were performed, and that one rule decides whether the client's 30 per cent withholding obligation reaches your money. For work done at a desk in Australia, it generally does not. The form certifies to the client that you are not a US person; the source of the income follows from where the work was done.
Key Takeaways
- The Internal Revenue Service (IRS) states that the place where personal services are performed generally determines the source of the income, regardless of where the contract was made, the place of payment or the residence of the payer.
- Most types of US-source income received by a foreign person are subject to US tax of 30 per cent, generally withheld from the payment; the regime attaches to US-source income.
- Where work is split between countries, US-source income is the total pay multiplied by the fraction of days on which services were performed in the United States.
- Form W-8BEN establishes that the payee is not a US person and, where a treaty applies, claims a reduced rate; it is given to the person requesting it, not sent to the IRS, and generally lasts until the end of the third calendar year after signing.
- The Australian tax treatment of the income is a separate question, and this page does not address it.
The rule that decides most of it: where the work was performed
The Internal Revenue Service publishes the source rule for personal service income in plain terms. The place where the personal services are performed generally determines the source of the personal service income, regardless of where the contract was made, or the place of payment, or the residence of the payer.
Read that against a typical arrangement between an Australian designer, developer or consultant and a company in Austin or New York. The contract may have been signed under American law. The payment leaves an American bank. The client is an American resident. Every one of those facts points to the United States, and the IRS says none of them decides the source. What generally decides it is where the person was when the work was done. If that was Australia, the income is foreign-source in American terms.
That phrase matters, because the United States generally taxes foreign persons on US-source income. The IRS page on withholding for nonresident aliens states the principle: generally, a foreign person is subject to US tax on its US-source income. Income that is not US-source is not what that sentence is about. The IRS calls the regime nonresident alien (NRA) withholding.
| Where the services were performed | Source of the pay, on the IRS rule | Reached by NRA withholding? |
|---|---|---|
| in Australia | foreign-source | no |
| in the United States | US-source | yes, at 30 per cent unless specifically exempted or subject to graduated withholding |
| partly in each | split by the fraction of days worked in the United States | the US-source part only |
What the 30 per cent is, and what it attaches to
The same IRS page describes the withholding regime a client has in mind when it asks for a form. Most types of US-source income received by a foreign person are subject to US tax of 30 per cent. A reduced rate, including exemption, may apply if a provision of the Internal Revenue Code provides for one or there is a tax treaty between the foreign person's country of residence and the United States. The tax is generally withheld from the payment made to the foreign person.
The IRS defines the regime by its object: NRA withholding describes the withholding regime that requires 30 per cent withholding on a payment of US-source income, with the payer filing Form 1042 and issuing Form 1042-S. The IRS titles that second form Foreign Person's US Source Income Subject to Withholding. Source is in the name of the form.
For pay for personal services specifically, the IRS states on its page on pay for personal services performed that employers or payers must generally withhold tax at the 30 per cent rate on compensation paid to a nonresident alien individual for labour or personal services performed in the United States, unless that pay is specifically exempted from NRA withholding or subject to graduated withholding. Performed in the United States is the operative phrase, and it is the same test as the source rule.
So the two halves fit together. The withholding reaches US-source income. The source of pay for services is generally where the services were performed. An invoice for work performed in Australia is generally for foreign-source income, and the 30 per cent regime has nothing to attach to.
When the work was partly in America
The rule is applied day by day rather than contract by contract. The IRS sets out a time-basis allocation: US-source income is the amount that results from multiplying the total amount of pay by the fraction of days in which services were performed in the United States.
That matters for anyone who travels to the client. A three-month engagement with two weeks on site in the United States has a US-source portion, worked out on the days. That portion is within the withholding rules unless a treaty or a specific exemption takes it out, and the rest remains foreign-source. The IRS refers a reader who needs the detail on treaty exemptions for independent contractors to its Publication 515. The position for the American days is a question for that publication and for any treaty relief that applies, and this page does not cover either.
The consequence for the invoice is practical. The fraction the rule asks for needs a record of where each day's work was done, so a freelancer who keeps one has the number ready when the client asks.
What Form W-8BEN does, and who gets it
The client is the withholding agent, and the IRS says to give the form to the withholding agent or payer. That form is Form W-8BEN, the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting for individuals.
The Instructions for the form describe its purpose in two parts. It establishes that you are not a US person, and it lets you claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty. The instructions are equally clear about who receives it. Do not send Form W-8BEN to the IRS; instead, give it to the person who is requesting it from you. The client keeps it and relies on it.
It has a fixed term. The instructions state that the form will generally remain in effect for establishing foreign status from the date it is signed until the last day of the third succeeding calendar year, unless a change in circumstances makes any of the information on it incorrect. Signed in 2026, it runs to the end of 2029.
The form is not a tax return. It certifies who you are, and the source of the income follows from the facts of where the work was done.
Nor is it the form for a business entity, which the IRS lists separately as Form W-8BEN-E, the certificate of status of beneficial owner for entities. Income effectively connected with a US trade or business uses Form W-8ECI. The IRS lists the W-8BEN for an individual.
After the form is on file
Once the client has the form and has settled that the pay is foreign-source, what leaves the United States is the full invoice in US dollars, less whatever the payment route takes in transit. The USD to AUD rate page shows what that converts to at the mid-market rate on the day, and the charges that can come off a transfer between banks are the subject of understanding transfer fees.
How Australia then taxes the income is a separate body of law, and a separate question from anything on this page. The American rules decide only what the client withholds.
Where to look next
- Receiving money from the United States - the live rate page for this corridor.
- What drives the AUD/USD rate - why the pair moves, which is the other thing an invoice in dollars depends on.
- How international transfers work - the sequence a payment moves through once the client releases it.
- Understanding transfer fees - what can come off in transit between the client's bank and yours.
- AUD to USD - the convert page for the pair on its own.
Sources
- Source of income - personal service income, Internal Revenue Service - the place where personal services are performed as the general determinant of source regardless of where the contract was made, the place of payment or the residence of the payer, and the time-basis allocation by fraction of days worked in the United States.
- NRA withholding, Internal Revenue Service - a foreign person being subject to US tax on US-source income, most types of US-source income being subject to 30 per cent tax generally withheld from the payment, reduced rates under the Code or a treaty, the regime's definition around US-source income, Forms 1042 and 1042-S with the latter's title, and the list of W-8 forms by which a foreign person documents itself.
- Pay for personal services performed, Internal Revenue Service - the general requirement to withhold at the 30 per cent rate on compensation paid to a nonresident alien individual for labour or personal services performed in the United States, unless specifically exempted or subject to graduated withholding.
- About Form W-8 BEN, Internal Revenue Service - the form's full title, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), and the instruction to give it to the withholding agent or payer.
- Instructions for Form W-8BEN, Internal Revenue Service - the purpose of the form in establishing that you are not a US person and claiming treaty relief, the instruction not to send it to the IRS but to give it to the person requesting it, and its expiry on the last day of the third succeeding calendar year.
General information about United States withholding and documentation rules as they apply to a person in Australia paid for services by a client in the United States. Not financial advice, not tax advice in either country, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.
Common questions
Will my American client withhold 30 per cent of my invoice?
The Internal Revenue Service describes nonresident alien (NRA) withholding as a regime that requires 30 per cent withholding on a payment of US-source income to a foreign person. Whether your pay is US-source is generally decided by where you performed the services. Services performed in Australia generally produce foreign-source income, which is outside that regime. For services performed in the United States, the IRS states that payers must generally withhold at the 30 per cent rate unless that pay is specifically exempted from NRA withholding or subject to graduated withholding.
Why does the client want a Form W-8BEN if no tax is due?
The Instructions for Form W-8BEN describe its purpose as establishing that you are not a US person and, where relevant, claiming a reduced rate of or exemption from withholding as a resident of a treaty country. The client is a withholding agent and needs the form to document why it is not withholding. The instructions state: do not send Form W-8BEN to the IRS; instead, give it to the person who is requesting it from you.
How long does a W-8BEN last?
The instructions state that the form will generally remain in effect for establishing foreign status from the date it is signed until the last day of the third succeeding calendar year, unless a change in circumstances makes any information on it incorrect. A form signed in September 2026 runs to 31 December 2029.
What if some of the work was done during a visit to the United States?
The IRS sets out a time-basis allocation. US-source income is the amount that results from multiplying the total pay by the fraction of days on which services were performed in the United States. The days worked in Australia stay foreign-source; the days worked in the United States are US-source and are the part the withholding rules reach.
Does it matter that the contract was signed in the United States or the client is American?
Generally, no. The IRS states that the place where the personal services are performed generally determines the source of the income regardless of where the contract was made, or the place of payment, or the residence of the payer. All three of those point to the United States for most Australian freelancers, and none of them decides the source.