Residents of the U.S. are required to report all world-wide income on their tax returns. Therefore, your royalty income is entered on Schedule E of your 1040. The taxes you pay in Australia on this same income can be include on Form 1116 - Foreign Tax Credit. This article goes into detail about the foreign tax credit: Claiming the Foreign Tax Credit with Form 1116
TurboTax deals with U.S. income taxes, not Australian, and therefore, I'm unable to answer your last question.
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