Two Separate Agreements, Two Separate Purposes
The US and Australia have both an income tax treaty (1982, updated by a 2001 protocol) and a Totalization Agreement (in force since October 1, 2002). They solve different problems and it's easy to conflate them: the tax treaty addresses which country can tax which income, the Totalization Agreement addresses which country's social security system you pay into.
What the Income Tax Treaty Covers
The treaty reduces withholding on cross-border dividends (5-15% depending on ownership stake), interest (generally 10%), and royalties (5%). Article 18 addresses pensions, generally allowing them to be taxed exclusively in your country of residence rather than where earned, useful context for US Social Security or 401(k) distributions received while living in Australia.
Critically, the treaty does not override citizenship-based taxation: a savings clause preserves the US government's right to tax its citizens on worldwide income as if the treaty didn't exist for that purpose. Most of your actual double-tax relief comes from the Foreign Tax Credit under domestic law, not the treaty itself.
Form 8833: Claiming a Treaty Position
If you're taking a return position that relies on a specific treaty article, reduced withholding on Australian-sourced dividends, for example, Form 8833 discloses that position to the IRS. Skipping it when required can trigger a $1,000 penalty per omission.
The Totalization Agreement's Five-Year Rule
If a US employer sends you to Australia for five years or less, you generally remain covered under US Social Security and are exempt from Australia's Superannuation Guarantee for that assignment, your employer needs a Certificate of Coverage from the Social Security Administration to prove it.
If you're hired locally by an Australian employer instead, you're generally covered under the Australian system (paying into superannuation) and exempt from US Social Security tax, though US citizens remain subject to Medicare tax regardless.
Totalization of Benefit Credits
If you split a career between the two countries and don't reach the standard minimum credits in either system alone, the agreement lets you combine work credits from both countries to qualify for retirement or disability benefits, though the actual benefit paid is generally prorated based on time worked in each country.
Worked Example: The Locally-Hired Contractor
An American hired directly by an Australian firm (not sent by a US employer) pays into superannuation like any Australian employee and does not pay US Social Security tax on that wage income. She still owes US Medicare tax as a self-employed contractor if she invoices rather than receives a payslip, since Medicare tax isn't waived by the Totalization Agreement the way Social Security is.