If you’re a UK citizen considering relocating down under, you’ll be happy to know Australia offers some appealing tax benefits compared to the UK. From no capital gains on your primary residence to lower income taxes, you get to hold onto more of your hard-earned cash.
In this guide, we break down all the key financial perks for UK citizens moving to Australia to discover the benefits of tax in Australia vs UK. They include tax-free pension transfers, higher retirement contributions, and no inheritance tax too!
So, if you want to escape the UK’s high taxes and profit from Australia’s property boom tax-free, then this guide is for you. Read on to learn how you can take advantage of Australia’s favourable tax treatment and keep thousands more dollars in your pocket every year!
Table of contents
1. No Capital Gains Tax on Your Home
One major tax advantage is that does not apply when selling your primary residence in Australia. This compares favourably to the UK capital gains exemption of just £250,000 per person. You must have lived in the property the whole time you owned it, it must not have generated rental income, and it must not be on land larger than 2 hectares to qualify for the exemption. However, it’s important to be aware that the main home exemption doesn’t apply to non-residents.
| Feature | Australia | United Kingdom |
|---|---|---|
| Is CGT a separate tax? | Part of income tax | Separate from income tax |
| Who does it apply to? | Property, shares, crypto, collectables, businesses | Same as Australia |
| Main residence exemption | Full exemption on main home | Exemption available, but more limited |
| CGT discount | 50% discount after 12 months (for tax residents only) | Flat rates only |
| Rates | Same as income tax (0%–45%) after 50% discount for long-term assets | 10% (basic rate) or 20% (higher rate); 18%/28% for property |
2. More Take-Home Pay from Lower Income Taxes
Australia’s personal income tax rates are lower than the UK’s. The top 45% marginal rate doesn’t kick in until income exceeds AUD $180,000, versus £125,000 in the UK. Higher earnings get taxed less down under. Here is an income tax rate comparison between the UK and Australia:
| Taxable Income | Australia (Residents) | UK (Residents) |
|---|---|---|
| Up to £9,568 / $18,200 AUD | 0% | 0% (Personal Allowance) |
| £9,569 – £50,270 ($18,201 – $45,000 AUD) | 19% | 20% (Basic Rate) |
| £50,271 – £125,140 ($45,001 – $120,000 AUD) | 32.5% | 40% (Higher Rate) |
| Over £125,140 ($120,001 – $180,000 AUD) | 37% | 45% (Additional Rate) |
| Over $180,000 AUD (´Ê£95,000) | 45% | Already 45% in UK above £125,140 |
3. Tax-Free Transfer of Your UK Pension
It’s possible to transfer your UK pension to an Australian superannuation account tax-free if the transfer occurs within six months of you becoming an Australian resident. This prevents double taxation and consolidates retirement funds.
By acting within this timeframe, expats can consolidate their retirement savings into one fund, simplify ongoing management, and potentially take advantage of Australia’s superannuation tax environment, where investment earnings within the fund are taxed at just 15% and 0% once retired. This is a significant advantage over the UK, where pension withdrawals are taxed as income and can be subject to rates of up to 40%.
To qualify, however, the Australian fund must be a QROPS (Qualifying Recognised Overseas Pension Scheme), a scheme approved by HMRC to receive UK pension transfers. It’s also important to consider age restrictions, lifetime allowance limits, and exit fees from your UK pension provider, which could affect the overall benefit of transferring.
4. Boost Your Retirement Savings with High Contribution Limits
Australia allows tax-advantaged pension contributions of up to $30,000 AUD yearly, which is lower than the UK’s £60,000. Australia also benefits from a carryover rule, meaning if your total super balance is less than AUD $500,000 as of 30 June, you can carry forward unused concessional contributions for up to five years, allowing you to make larger contributions in future years.
5. Significant Tax Savings for Workers of Remote Areas
Some skilled professionals relocating to work in remote areas can benefit from tax savings. In order to be eligible for this, your usual place of residence needs to be both:
- Remote or isolated area (on the )
- Your residence for 183 days or more during the income year.
Here are some tax benefits available to those remote workers in Australia:
| Benefit | What It Does | Who It Helps |
|---|---|---|
| Zone Tax Offset | Reduces income tax | Long-term residents of remote areas |
| FBT Exemptions | Makes employer perks tax-free | Employees with housing/utilities provided |
| Higher Super Contributions | Boosts retirement savings | Remote professionals with incentive packages |
| Work Expense Deductions | Reduces taxable income | Remote area workers incurring extra costs |
6. No Inheritance Tax Down Under
, where as in the UK, Inheritance Tax is charged at 40% on estates over £325,000. For UK expats who become Australian tax residents and plan to retire or pass wealth to family, the lack of inheritance tax can preserve a significantly larger portion of their estate.
If the estate wants to transfer their pension to the heir, this is generally tax-free. There is also no gift tax or rules tied to death in Australia, which is significantly better than the UK’s strict 7-year rule.
Is It Better to Live in Australia or UK for Tax Reasons?
While relocating abroad can seem financially daunting, the potential tax savings for UK expats moving to Australia make it a savvy long-term investment. By taking advantage of Australia’s lower income taxes, tax-free pension transfers, and lack of inheritance tax, Brits can end up with substantially more take-home pay and greater wealth.
The tax incentives allow you to pocket more of your income while also turbocharging retirement savings through higher pension contribution limits. You can rest assured your estate will transfer tax-free to loved ones.
So do your homework, run the numbers, and consult qualified advisors to maximise the tax benefits. With proper planning, the savings can be well worth the effort for UK citizens moving down under long-term. Don’t let the short-term expenses deter you from long-lasting financial gains. Take advantage of Australia’s appealing tax policies and enjoy the lifestyle dividend. Your future self will thank you!
Thinking of Moving to Australia?
Here at 1st Move International, not only do we provide great advice on moving abroad, we also offer an unbeatable international removals service to Australia from the UK. Take advantage of our faster shipping services and safer packing techniques to help ease your transition Down Under. Get a free quote here on our website or get in touch today to learn more.
About 1st Move International
1st Move International are a specialist international moving and shipping company offering packing, shipping and shipment protection cover for shipping household goods and personal effects overseas. We have a global reach covering over 80 countries and 6500 worldwide destinations. You can get an international removals quote here or find more information on our international removals UK to Australia service here.
