GM Tax

Super/UK Pensions - UK Pensions
Regular Income

Are you considering accessing your UK Pension Benefits?

As a tax resident of Australia your UK pension income is wholly taxable in Australia.  You are not able to simply choose for the UK to tax the pension income and not declare the income to the ATO. The tax treaty between the UK and Australia determines which country has the taxing rights.

An application is required to be completed to achieve this outcome, whereby a NT (No Tax) PAYE Coding is issued to each of your UK Pension Schemes, this will ensure the pension income is received gross (with no tax deducted), and the gross pension income is included on your Australian tax return. 

Please note that this applies to pension income only, and does not apply to any lump sum payments.

Tax on the pension income is then accounted for to the Australian Taxation Office, which means that your UK Pension Income once converted to Australian Dollars would be reported on your Australian tax return and will form part of your taxable income which will be subject to tax and 2% Medicare Levy. 

You can either use the ATO average exchange rate for the year or you can use the exchange rate in place at the date of payment. 

Under the terms of the Double Taxation Agreement between the UK & Australia it is not correct to pay tax on your pension under PAYE in the UK, and to claim a credit for this UK tax on your Australian tax return.  The UK pension is only taxable in Australia, (unless your visa permits you from reporting your foreign sourced income) and would be omitted from any UK tax return and included on your Australian return only.  The tax would be reclaimed on the UK return if taxed at source. 

Whether you retain the pension income in the UK or remit it to Australia is not a relevant factor in how the pension is taxed.

Undeducted Purchase Price

If you have income from a foreign pension or annuity you may be entitled to claim a deduction to reduce the taxable amount if your pension has an undeducted purchase price (UPP).  Only some foreign pensions and annuities have a UPP. The UPP is the amount you have contributed towards the purchase price of your pension or annuity – your personal contributions, for which you didn’t claim a tax deduction at the time you made the contribution i.e. after tax contributions. 

You would need to contact the pension schemes to obtain the relevant information to determine the amounts you have contributed towards the purchase price of your pension. Once you have this information you, and with the help of your tax agent, can compute the UPP figure or you can request a determination from the ATO using the link below;

The UPP for the British State Pension has already been determined by the ATO at 8%.  This percentage will be applied to your income and claimed as a deduction on your Australian Tax Return.

GM Tax has a policy of providing a fixed fee quote to those that are interested in engaging our services.

We at GM Tax can provide you with a comprehensive guide to your UK & Australian tax position when considering accessing your UK pension benefits, please call one of our offices or send an online enquiry via our website.

GM Tax also offers the following services:

  • Preparation of Financial Statements for Self Managed Superannuation Funds (SMSF).
  • Preparation of SMSF tax returns, with all returns submitted to the ATO electronically.
  • QROPS approval applications with HMRC, including attendance to trust deed alterations.
  • Assistance with QROPS reporting obligations to HMRC.
  • Preparation with the application for exemption from UK tax in relation to UK Pensions with Australia.
  • Establishment of SMSF and attending to all appropriate registrations.
  • Preparation and electronic submission of UK and Australian tax returns