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Is there Australian tax due to pay on a UK pension scheme?
The article will assume that any UK nationals residing in Australia, or those with a UK pension scheme reading this have notified the HMRC of their Australian tax residency, if not please follow this link: https://www.gov.uk/tax-right-retire-abroad-return-to-uk
The United Kingdom and Australia hold a double taxation agreement which came into force on December 17th 2003. The legislation became effective in both countries on April 1st 2004. This treaty ensures that based on your residency in one of the two countries you are not subject to double taxation on your wealth.
Within the double taxation convention published by the British government Article 17 covers pensions and annuities.
1. Pensions (including government pensions) and annuities paid to a resident of a
Contracting State shall be taxable only in that State.
2. The term “annuity” means a stated sum payable periodically to an individual at
stated times during life or during a specified or ascertainable period of time under an
obligation to make the payments in return for adequate and full consideration in money
or money’s worth.
To put it more simply, this translates to mean if you are a tax resident in Australia, you should only be taxed in Australia on your pensionable income. This again is assuming you have informed HMRC of your tax residency in Australia.
The Australian income tax rate is listed below:
Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000 $20,797 plus 37c for each $1 over $90,000
$180,001 and over $54,097 plus 45c for each $1 over $180,000
Private and Occupational Pensions
The amount of tax you pay on your pension will depend on your visa status and your income.
Your overall income will comprise of your salary and wages, investment income from rent, bank interest or dividends you receive, profits from selling shares or property and income from your business and pensionable income.
The amount of income tax and the tax rate you will pay depends on your circumstances and the size of your overall income.
Australians do not pay income tax on their pensionable income from their 60th birthday onwards. However, if you are drawing down from a UK SIPP or private UK pension then you will still be taxed based on your income rate. There are ways of avoiding this tax by changing the status of your pension so it is considered an Australian pension. To register for a conversation to explore all the options available to those with a UK pension in Australia please follow this link to speak with an expert.