UK expat retiring in Australia - Jason O'Connell - Financial planning

Jason O'Connell

UK expat retiring in Australia

UK pensions for expats retiring in Australia

You’ve worked all your life for it, so you’ll want to take your pension with you when you retire in Australia.

Accessing your British state pension in Australia

It shouldn’t be a problem if you’ve paid enough National Insurance over the years. State pension payments can be paid either into your UK bank account or an Australian bank account. 

Bear in mind that Australia is one of the countries that if you move to, your state pension will be indexed (increase with inflation) annually until you reach state pension age, however indexation will cease being applied from the date you become entitled to receive benefits. This is not a big issue to most people, but worth noting.

The rules around maximising your entitlement to a full UK state pension can appear complex, and depend on your National Insurance record. Despite this, the rules for non UK residents are currently very favourable. 

Below are some of the highlights of the rules that apply to Australian residents:

As a non-resident of the UK you can increase your entitlement by making voluntary contributions either by filling gaps (going back and making contributions for the last 6 UK tax years (6th April – 5th April) or making voluntary contributions each UK tax year going forward.

There are various classes of National Insurance contributions depending on your circumstances.

If you meet to following criteria as a non-resident you’re entitled to purchase class 2 contributions, which are significantly less expensive than class 1:

Current example of criteria

This is not an exhaustive list and is only intended as an example. It’s important you research or appoint a professional adviser like Jason to establish the criteria that applies to your individual circumstances.

  • Having a minimum number of years of contribution at the time your left the UK
  • Being an employer directly prior to your departure from the UK
  • Being employed or self-employed in you country of residence at the time of making an application to make voluntary contributions

Accessing private UK pensions in Australia

This is much more important – and slightly more problematic.

You’ll still have access to these pots once you reach the requisite age, but due to your new location, you may need to pay additional charges or admin fees, or even be restricted in your investment options.  

A lot of expats avoid the cost, exchange rate complexities and hassle of this by transferring their UK pensions to an Australian provider. This provider needs to be HMRC registered and you’ll need to choose a Qualifying Recognised Overseas Pension Scheme (QROPS).

Jason is one of Australia’s most specialist expat retirement financial planners. Get in touch to find out how he can help you.

If you have deferred benefits in an unfunded public servant pension such as a police officer, a NHS worker or teacher, unfortunately you may not have the option of transferring your pension pot overseas due to changes in legislation introduced by HMRC in April 2015. However, there may be exceptional circumstance that allow you to transfer the benefits in an unfunded scheme.

What about tax?

Australia has a progressive tax system, so the more income you earn, the more tax you pay. The tax-free threshold is $18,200 in a financial year and after that tax kicks in.

Australian residents are generally taxed on their worldwide income from all sources. However, temporary residents of Australia and foreign residents (Work out your tax residency – ATO) are generally only taxed on their Australian-sourced income – such as money you earn working in Australia, plus any income you make from employment or services performed overseas while you are a temporary resident of Australia. 

This is important, as many expats initially relocate to Australia on a temporary resident visa, so foreign rental income and other foreign earnings and capital gains don’t have to be declared, as they are usually taxable in the country the income originates in.

However it’s important to note that where a temporary resident’s spouse is a permanent resident or citizen, this exemption may not apply. Equally, If you become a permanent resident or citizen, you’ll typically be subject to tax on all worldwide income and capital gains. 

So it goes without saying, that managing your foerign income and investment gains in line with your residency status is of paramount importance to ensure the most optimal outcome.

Double tax treaties

The UK and Australia have a Double Tax Treaty/Double Tax Agreement. This helps protect you from paying tax on your pension in both the UK and in Australia 

Some of the taxes you could encounter include:

  • Australian income tax – starts at 19% for individuals with an annual income of more than AUD$18,200 (financial year 2021) rising to 45% on earning over $180,000 plus medicare levy of 2%.
  • Income drawn directly from a UK pension by an Australian resident is assessable for income tax and added to your other income, so it’s effectively taxed at an individual’s highest marginal rate of income tax. 
  • Members of UK pension schemes are entitled to a Pension Commencement Lump Sums (PCLS) more commonly referred to as “tax free lump sum” of up to 25% of an individual’s total private and company pension assets, however drawn directly from a UK pensions PCLS are not tax free in Australia.
  • Tax on any additional Australian income – there’s usually no tax-free threshold for expats.
  • Capital gains tax on any Australian assets you acquire are added to your assessable income in the relevant financial year, so taxed at your highest marginal rate of income tax. However, there is a 50% discount applied where the relevant asset has been held by the individual for 12 months or more.
  • Superannuation concessional contributions (those you make before tax) are taxed at 15%. 
  • Investment earnings generated by your super are taxed at a maximum rate of 15%. But, if the earnings are capital gains from an asset owned through your super for more than 12 months and then sold, the tax on the gain is reduced to 10%. 
  • Medicare levy helps fund some of the costs of Australia’s public health system. The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income. There are exemptions that ATO may apply, depending on your circumstances. 


Unfortunately, tax is notoriously difficult to navigate alone, and can depend on your legal residency status too. That’s where Jason can help, just
get in touch.

How much do you need to comfortably retire in Australia?

The exact amount will be relative to your retirement dreams. Jason can help you plan and achieve them accordingly. Here are some generic insights you may find useful when planning on retiring in Australia:
  • Monthly rental cost in one of the major cities can be around AUD$900, with utilities clocking up another $100 AUD.
  • You can buy a house and use a mortgage even in your retirement – speak to Jason and he’ll help you navigate the paperwork and requirements.
  • As mentioned earlier, Healthcare is the last major expense. Australia’s system of universal medical cover is Medicare. Only the first 75% of your primary care charges are covered – and that costs 2% of your income. Most expats (and Australians) buy additional insurance to cover the rest of their healthcare expenses.
There is useful information on moneysmart.gov.au about how much super you need to retire in Australia, however each individual has their own circumstances and needs. You’ll always need to consider these when estimating how much income you’ll require in retirement. Moneysmart is brought to you by the Australian Securities and Investments Commission (ASIC), the corporate, markets, financial services and consumer credit regulator in Australia.

Information on this website is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

UK pensions for expats retiring in Australia

You’ve worked all your life for it, so you’ll want to take your pension with you when you retire in Australia.

Accessing your British state pension in Australia

It shouldn’t be a problem if you’ve paid enough National Insurance over the years. State pension payments can be paid either into your UK bank account or an Australian bank account. 

Bear in mind that Australia is one of the countries that if you move to, your state pension will be indexed (increase with inflation) annually until you reach state pension age, however indexation will cease being applied from the date you become entitled to receive benefits. This is not a big issue to most people, but worth noting.

The rules around maximising your entitlement to a full UK state pension can appear complex, and depend on your National Insurance record. Despite this, the rules for non UK residents are currently very favourable. 

Below are some of the highlights of the rules that apply to Australian residents:

As a non-resident of the UK you can increase your entitlement by making voluntary contributions either by filling gaps (going back and making contributions for the last 6 UK tax years (6th April – 5th April) or making voluntary contributions each UK tax year going forward.

There are various classes of National Insurance contributions depending on your circumstances.

If you meet to following criteria as a non-resident you’re entitled to purchase class 2 contributions, which are significantly less expensive than class 1:

Current example of criteria

This is not an exhaustive list and is only intended as an example. It’s important you research or appoint a professional adviser like Jason to establish the criteria that applies to your individual circumstances.

  • Having a minimum number of years of contribution at the time your left the UK
  • Being an employer directly prior to your departure from the UK
  • Being employed or self-employed in you country of residence at the time of making an application to make voluntary contributions

Accessing private UK pensions in Australia

This is much more important – and slightly more problematic.

You’ll still have access to these pots once you reach the requisite age, but due to your new location, you may need to pay additional charges or admin fees, or even be restricted in your investment options.  

A lot of expats avoid the cost, exchange rate complexities and hassle of this by transferring their UK pensions to an Australian provider. This provider needs to be HMRC registered and you’ll need to choose a Qualifying Recognised Overseas Pension Scheme (QROPS).

Jason is one of Australia’s most specialist expat retirement financial planners. Get in touch to find out how he can help you.

If you have deferred benefits in an unfunded public servant pension such as a police officer, a NHS worker or teacher, unfortunately you may not have the option of transferring your pension pot overseas due to changes in legislation introduced by HMRC in April 2015. However, there may be exceptional circumstance that allow you to transfer the benefits in an unfunded scheme.

What about tax?

Australia has a progressive tax system, so the more income you earn, the more tax you pay. The tax-free threshold is $18,200 in a financial year and after that tax kicks in.

Australian residents are generally taxed on their worldwide income from all sources. However, temporary residents of Australia and foreign residents (Work out your tax residency – ATO) are generally only taxed on their Australian-sourced income – such as money you earn working in Australia, plus any income you make from employment or services performed overseas while you are a temporary resident of Australia. 

This is important, as many expats initially relocate to Australia on a temporary resident visa, so foreign rental income and other foreign earnings and capital gains don’t have to be declared, as they are usually taxable in the country the income originates in.

However it’s important to note that where a temporary resident’s spouse is a permanent resident or citizen, this exemption may not apply. Equally, If you become a permanent resident or citizen, you’ll typically be subject to tax on all worldwide income and capital gains. 

So it goes without saying, that managing your foerign income and investment gains in line with your residency status is of paramount importance to ensure the most optimal outcome.

Double tax treaties

The UK and Australia have a Double Tax Treaty/Double Tax Agreement. This helps protect you from paying tax on your pension in both the UK and in Australia 

Some of the taxes you could encounter include:

  • Australian income tax – starts at 19% for individuals with an annual income of more than AUD$18,200 (financial year 2021) rising to 45% on earning over $180,000 plus medicare levy of 2%.
  • Income drawn directly from a UK pension by an Australian resident is assessable for income tax and added to your other income, so it’s effectively taxed at an individual’s highest marginal rate of income tax. 
  • Members of UK pension schemes are entitled to a Pension Commencement Lump Sums (PCLS) more commonly referred to as “tax free lump sum” of up to 25% of an individual’s total private and company pension assets, however drawn directly from a UK pensions PCLS are not tax free in Australia.
  • Tax on any additional Australian income – there’s usually no tax-free threshold for expats.
  • Capital gains tax on any Australian assets you acquire are added to your assessable income in the relevant financial year, so taxed at your highest marginal rate of income tax. However, there is a 50% discount applied where the relevant asset has been held by the individual for 12 months or more.
  • Superannuation concessional contributions (those you make before tax) are taxed at 15%. 
  • Investment earnings generated by your super are taxed at a maximum rate of 15%. But, if the earnings are capital gains from an asset owned through your super for more than 12 months and then sold, the tax on the gain is reduced to 10%. 
  • Medicare levy helps fund some of the costs of Australia’s public health system. The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income. There are exemptions that ATO may apply, depending on your circumstances. 


Unfortunately, tax is notoriously difficult to navigate alone, and can depend on your legal residency status too. That’s where Jason can help, just
get in touch.

How much do you need to comfortably retire in Australia?

The exact amount will be relative to your retirement dreams. Jason can help you plan and achieve them accordingly.

Here are some generic insights you may find useful when planning on retiring in Australia:

  • Monthly rental cost in one of the major cities can be around AUD$900, with utilities clocking up another $100 AUD.
  • You can buy a house and use a mortgage even in your retirement – speak to Jason and he’ll help you navigate the paperwork and requirements.
  • As mentioned earlier, Healthcare is the last major expense. Australia’s system of universal medical cover is Medicare. Only the first 75% of your primary care charges are covered – and that costs 2% of your income. Most expats (and Australians) buy additional insurance to cover the rest of their healthcare expenses.

There is useful information on Moneysmart.gov.au about how much super you need to retire in Australia, however each individual has their own circumstances and needs. You’ll always need to consider these when estimating how much income you’ll require in retirement. Moneysmart is brought to you by the Australian Securities and Investments Commission (ASIC), the corporate, markets, financial services and consumer credit regulator in Australia.

Information on this website is general advice and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

How can Jason help you retire in Australia?

This is a literal once-in-a-lifetime opportunity – don’t take any risks.

Jason can help you make the most of it. He has direct knowledge and everyday experience helping hundreds of expats not just make the move to Australia, but enjoy a golden retirement there too.

How can Jason help you retire in Australia?

This is a literal once-in-a-lifetime opportunity – don’t take any risks.

Jason can help you make the most of it. He has direct knowledge and everyday experience helping hundreds of expats not just make the move to Australia, but enjoy a golden retirement there too.