Tax on UK Pensions
The double Tax Relief Agreement between Britain & Australia
With the compliments of British Age Pensioner Alliance

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The form for telling HMRC that you are an Australian resident for tax purposes is at

The form includes instructions on what to do with it.

The Double Tax Relief Agreement between Australia and Britain is designed to ensure that income earned in Britain and paid in Australia, or earned in Australia and paid in Britain, is not taxed twice.

In what follows, we are talking about income arising in Britain and payable in Australia.

Income such as dividends, interest, rent, earned in Britain is taxed on a withholding tax basis, which is less then the standard tax rates. The same income is then included in your Australian assessable income, but you can claim the UK tax against the tax payable in Australia. Thus the total tax you pay is the same as if the income was not taxed at all in Britain.

Pension income is treated differently. Pensions are not taxed in Britain but are fully taxed in Australia.

A problem has arisen because of a change made in Australia in 2006. Under this change holders of certain visas are treated as temporary residents, and consequently are no longer taxed in Australia except for income arising in Australia. As a consequence their pensions are taxed in Britain.

This page does not deal with that special situation. If you are a citizen or hold a permanent residency visa, then no change has been made to your taxation treatment in Australia.

A separate problem has arisen due to serious mistakes made by the UK tax authorities. They blame the problem on a new computer system that is supposed to amalgamate tax and pension data all in one place; but of course the problem should be blamed on incompetence.

The UK tax system is governed by a complex Tax Code structure, designed to ensure that tax is deducted uniformly through the working year. It should not affect pensions paid in Australia. Many people have been caught up in these mistakes and suddenly find that UK pensions are being taxed, mainly occupational and private pensions. The Revenue people are very slow to respond to enquiries or complaints and often need a lot of stirring before they do anything to set things right.

With the compliments of British Age Pensioner Alliance