Is a UK pension taxed in Australia?

Is a UK pension taxed in Australia? Under the UK-Australia treaty a pension is taxable only in the country where you live, with exceptions.

If you live in Australia and wonder whether your UK pension is taxed there, the treaty points to Australia as the country that taxes it, not the UK. That only holds once the right claim is made and your residence is settled. If you are still deciding how to take a defined contribution pension, Pension Wise offers a free appointment that MoneyHelper describes as impartial and backed by government. Your treaty position hinges on visa status and years in Australia, so if the form on this page suits you, mention both when an FCA-authorised adviser phones; the call is free.

Does Australia or the UK tax a UK pension?

The 2003 UK-Australia Double Taxation Convention, published by HM Revenue and Customs (HMRC) on GOV.UK, deals with this in Article 17(1):

"Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State."

For someone resident in Australia, the State in question is Australia. Without a treaty the UK would still tax UK income: GOV.UK says "You usually have to pay tax on your UK income even if you’re not a UK resident", and that is why a treaty claim exists. Each agreement sets out which country you pay tax in, which you apply for relief in and how much relief you get, so the Australian one is not a guide to any other country.

Two things sit behind that sentence. HMRC's notes make residence in Australia a condition of the relief, so the date you became resident there matters. And Australia's tax rules are for Australia to state; the sections below give the UK position and what the Australian Taxation Office (ATO) says, with a pointer to Australian advice.

Which UK pensions does the treaty cover?

Article 17 names pensions, government pensions among them, and annuities. It defines an annuity as a stated sum payable periodically during life or for a set period in return for full consideration, so a purchased annuity fits. HMRC's notes to its Australian claim say what it is for: relief at source from UK income tax on "a UK State Pension and UK-source pensions, purchased annuities, royalties and interest".

HMRC's notes add that pensions, the State Pension included, and most annuities from the UK paid to a resident of Australia can be exempted from UK Income Tax. How the payments are treated once they reach Australia is the ATO's matter.

The temporary resident visa exception

HMRC's notes carry a warning for holders of an Australian Temporary Resident Visa. Article 23(2) of the Convention means the UK relief does not apply to the extent that income is exempt from tax in Australia because you are a temporary resident, and the notes conclude: "This means that if you hold a Temporary Resident Visa, you are liable to UK Income Tax on your UK source income paid on or after 1 July 2006." If that describes you, the treaty claim may not remove UK tax.

How do I claim UK tax relief from Australia?

Use HMRC's form Australia-Individual 2003. You send it to the ATO office for the state you live in, not to HMRC. If you are resident in Australia for Australian tax, the ATO certifies the form and sends it on to HMRC.

The form can do two jobs. One is relief at source on future payments, so your pension provider stops taking UK tax. The other is a repayment where UK tax has already come off, which HMRC says can be repaid in full. For a pension taxed under PAYE, HMRC's notes ask for a photocopy of your latest P60 from the payer. HMRC says it deals with each application on its merits, and relief at source is not guaranteed.

What an NT code means

You may hear that you need an NT code. GOV.UK's list of tax code letters gives NT as "You’re not paying any tax on this income". The claim comes before any code. HMRC's notes say the Convention provides for "no UK tax to be withheld from payments of pensions and annuities", but relief at source depends on HMRC using its discretion to issue a notice, and HMRC's PAYE manual tells its staff not to allow a treaty claim to exempt a pension automatically. What your payer does follows HMRC's decision on the form. To find out how that decision is likely to apply to your own pension, request a call-back in the enquiry form here. Talking it through is something an FCA-authorised adviser covers on the free call.

What does Australia tax on a UK pension?

This site covers the UK side, so use the ATO's own pages for Australian tax. The ATO's guidance on completing a tax return through myTax has a section on reporting foreign pensions and annuities, separate from its page on other foreign income. On that other page the ATO says: "If you're an Australian resident and received income from overseas, you must show your assessable foreign income at this section. This is even if you paid tax on the income in the foreign country." Check the ATO's current instructions, as these pages are for an earlier tax return.

Putting a figure on the Australian side is a job for an adviser in Australia, though an FCA-authorised adviser can start on the UK end once you request a call-back in the enquiry form here.

Is a UK pension lump sum taxable in Australia?

The treaty article speaks of pensions and annuities, and the ATO has its own rules for lump sums from foreign super funds. Of foreign super fund lump sums the ATO says some "are taxable and some are exempt from Australian tax", and one "may be tax-free if you receive it within 6 months" of becoming an Australian resident or ending foreign employment. Otherwise, unless an exception the ATO lists applies (for example, the whole payment going into an Australian complying super fund), the part to show is the "applicable fund earnings", in general terms the earnings that accrued while you were an Australian resident.

Those lines are about foreign super funds. Whether a particular UK scheme counts as one, and how its tax-free cash is seen, is for the ATO or an Australian adviser to confirm. On the UK side, the tax-free lump sum has its own rules.

Moving a UK pension to Australia

A transfer brings UK charges as well as Australian ones, and the sequence matters. Both ends are set out in moving a UK pension to Australia, and QROPS lump sums covers payments from the receiving scheme. Treat offers of a tax-free move with care: the FCA lists scam signs including "A guaranteed better return on your pension savings", and several groups, some based overseas, all taking a fee. Its pension scams page has the rest.

Is the State Pension taxed in Australia, and does it go up?

On the UK side, GOV.UK says non-residents do not usually pay UK tax on the State Pension, and HMRC's Australian form notes say it is "usually paid without deduction of tax", with a box on the form to claim exemption. The Australian tax on it sits with the ATO, as above. See whether the State Pension is taxable for the UK rules.

The State Pension is also frozen for people living in Australia. Statistics the Department for Work and Pensions published on 19 July 2023 name Australia, with Canada and New Zealand, as where most overseas recipients who get no yearly increases live; Australia is not on GOV.UK's list of places that get them, and HMRC's manual says the pension "will remain at the level it was on leaving the UK" unless you live in a country with the right agreement. The State Pension guide explains how the amount is built up.

Common questions from UK pensioners in Australia

How much is a UK pension taxed in Australia?

The UK-Australia treaty decides which country taxes it; the rate in Australia is set by Australian law and your other income. Ask the ATO or an adviser in Australia for a figure that fits your case.

Do I need to report my UK pension to HMRC if I live in Australia?

GOV.UK says: "You do not need to report your income to HMRC if you’ve already claimed tax relief under a ‘double-taxation agreement’." Until a claim is in place the position can differ, so keep your P60 and any HMRC letters.

Can I get back UK tax already taken from my pension?

HMRC's notes say tax deducted from pension or annuity payments can be repaid in full through the Australia form. For a pension taxed under PAYE the adjustment goes back to the latest of three dates: when you became Australian-resident for tax, when payments began, or the earliest UK tax year still in date for a claim.

Does the treaty cover annuities as well as pensions?

Yes, Article 17 covers both and defines an annuity as a stated sum paid at stated times during life or for a set period in return for full consideration in money or money's worth.

Do all UK treaties work the same way?

No. HMRC's manual says "Whilst many of the UK’s DTAs will exempt the pension income, not all do so", so check the treaty for the country you live in. The Australian rule is Article 17 of this convention. If you are weighing a move elsewhere, moving abroad with a UK pension covers the general position.

What to take to an adviser or the ATO

Have your latest P60, the date you became resident in Australia for tax, your visa type and any HMRC letters to hand, since the UK answer turns on those and on the kind of pension you have. Treaty, visa rules and ATO guidance all have to line up, and for the UK end you can request a call-back in the enquiry form here and put your questions to an FCA-authorised adviser. The wider rules on tax relief are in pension tax relief and pension tax.