Tax in Australia vs UK: The Complete Guide to Tax Perks in Australia for UK Expats

25th March 2026

If you’re a UK citizen considering relocating down under, you’ll be happy to know that Australia offers some genuine tax advantages compared to the UK. From a 50% capital gains tax discount on long-term investments to lower income tax rates across most brackets, there are real financial incentives for those making the move.

In this guide, we compare the key differences between tax in Australia vs the UK for the 2025/26 financial year, covering income tax, capital gains, pensions, inheritance tax, remote area concessions and more. Whether you’re still weighing up the decision or already planning your move, understanding these differences will help you make informed financial choices.

As always, we’d recommend speaking with a qualified tax adviser who understands both UK and Australian systems before making any major financial decisions.

Lower Income Tax Across Most Brackets

One of the most immediate financial benefits for UK expats moving to Australia is lower income tax. Following the Stage 3 tax reforms that took effect on 1 July 2024, Australian residents benefit from reduced rates and higher thresholds across most income brackets.

Here’s how the two systems compare for the 2025/26 tax year:

Australian Resident Income Tax Rates (2025/26)

Taxable Income (AUD)	Rate
$0 to $18,200	0%
$18,201 to $45,000	16%
$45,001 to $135,000	30%
$135,001 to $190,000	37%
Over $190,000	45%

Note: These rates do not include the 2% Medicare levy (see section 7).

UK Income Tax Rates (2025/26)

Taxable Income (GBP)	Rate
Up to £12,570	0% (Personal Allowance)
£12,571 to £50,270	20% (Basic Rate)
£50,271 to £125,140	40% (Higher Rate)
Over £125,140	45% (Additional Rate)

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Note: The UK Personal Allowance tapers by £1 for every £2 earned over £100,000, disappearing entirely at £125,140. This creates an effective 60% marginal rate in that band.

What does this mean in practice?

The key advantage for most earners is in the mid-range brackets. In Australia, income between roughly A$45,001 and A$135,000 is taxed at 30%. The equivalent income in the UK (approximately £23,000 to £50,000 at current exchange rates) is taxed at 20%, but any income above that jumps straight to 40%.

For higher earners, Australia’s 45% top rate doesn’t apply until income exceeds A$190,000 (approximately £97,000). In the UK, 45% kicks in at £125,140, and there’s the effective 60% band between £100,000 and £125,140 where the Personal Allowance is withdrawn.

Australia also has a higher tax-free threshold in practical terms. While the UK’s £12,570 personal allowance is larger than Australia’s A$18,200 in nominal terms, Australia’s Low Income Tax Offset (LITO) effectively raises the tax-free amount to around A$22,575 for lower earners.

It is worth noting that the UK does not charge a Medicare-style levy on top of income tax (healthcare is funded through general taxation and National Insurance), whereas Australia adds a 2% Medicare levy to most incomes (covered in more detail below).

Further cuts from July 2026

The Australian government has legislated further reductions starting from 1 July 2026. The 16% rate on the $18,201 to $45,000 bracket will drop to 15%, and the 30% rate on the $45,001 to $135,000 bracket will reduce to 29%. This means the gap between Australian and UK tax rates will widen further.

Capital Gains Tax: The 50% Discount Advantage

Both Australia and the UK exempt your main residence (primary home) from capital gains tax. In the UK, this is known as Private Residence Relief, and in Australia, it’s the main residence exemption. In both countries, the exemption applies to your primary home with no monetary cap, provided you meet the relevant conditions.

Where Australia really stands out is how it taxes capital gains on other assets, such as investment properties, shares and crypto.

The 50% CGT Discount

Australian tax residents who hold an asset for more than 12 months before selling it receive a 50% discount on the capital gain. The remaining 50% is then added to your taxable income and taxed at your marginal rate.

For example, if you bought shares for A$50,000 and sold them for A$100,000 after holding them for two years, your capital gain would be A$50,000. With the 50% discount, only A$25,000 is added to your taxable income.

How does the UK compare?

In the UK, capital gains tax is charged at flat rates with no discount for holding period:

18% for basic rate taxpayers (on gains above the annual exempt amount)
24% for higher and additional rate taxpayers

The UK annual CGT exempt amount for 2025/26 is just £3,000, a significant reduction from the £12,300 it was as recently as 2022/23.

Comparison summary

Feature	Australia	UK
Main residence exempt?	Yes (full exemption)	Yes (Private Residence Relief)
CGT discount for long-term holdings?	50% discount after 12 months	No discount
CGT rates	Marginal income tax rate (after discount)	18% or 24%
Annual exempt amount	No specific annual exemption	£3,000 (2025/26)

Important: The Australian main residence exemption does not apply to non-residents. If you buy a home in Australia and later become a non-resident, you may lose the exemption. This is something to plan carefully if there’s any chance you’ll return to the UK.

Transferring Your UK Pension to Australia

If you’re planning a permanent move, consolidating your retirement savings into one country can simplify your financial life. It is possible to transfer a UK pension to Australia, but the process is considerably more complex than it once was, and the rules have tightened significantly in recent years.

How it works: QROPS

To transfer a UK pension to Australia, the receiving Australian fund must be registered as a QROPS (Qualifying Recognised Overseas Pension Scheme) with HMRC.

Since April 2015, almost all Australian retail and industry superannuation funds (such as AustralianSuper, Aware Super, Australian Retirement Trust, etc.) lost their QROPS status. This happened because these funds allow members to access their money before age 55 under certain hardship conditions, which breaches HMRC rules.

As a result, the most common route today is to set up a Self-Managed Super Fund (SMSF) with a QROPS-compliant trust deed that restricts access until age 55. This requires specialist setup and ongoing management.

Key rules and costs to be aware of

25% Overseas Transfer Charge (OTC): HMRC applies a 25% tax charge on pension transfers to a QROPS unless you are resident in the same country as the scheme at the time of transfer. So if you’re already living in Australia and transferring to an Australian QROPS, you should be exempt. HMRC can reassess this for five years after the transfer.
Overseas Transfer Allowance (OTA): Since April 2024, the UK’s Lifetime Allowance has been replaced by the OTA (currently £1,073,100). Transfers above your remaining OTA are taxed at 25% on the excess.
Australian Non-Concessional Contribution (NCC) cap: A UK pension transfer into an Australian super fund counts as a non-concessional contribution. The annual NCC cap for 2025/26 is A$120,000. Using the bring-forward rule, you may be able to contribute up to A$360,000 at once (three years’ worth), but larger pensions may need to be phased over several years.
The 6-month window: If you transfer your UK pension to Australian super within six months of becoming an Australian tax resident, the Australian Tax Office (ATO) generally will not tax the growth in your fund. Miss this window and the growth between your arrival date and transfer date may be taxable (known as “Applicable Fund Earnings” tax).
State Pension: Your UK State Pension cannot be transferred to a QROPS. However, you can still receive it in Australia. Be aware that Australia is one of the countries where the UK State Pension is frozen at the rate when you leave the UK (it does not increase with annual uprating).

Is it worth transferring?

Potentially, yes, but it depends entirely on your circumstances. The main advantages are: consolidating retirement funds in one currency, avoiding exchange rate risk on drawdowns, and potentially benefiting from Australia’s more favourable super tax treatment in retirement (0% tax on withdrawals from a “taxed” super fund for those aged 60 and over).

However, the costs (SMSF setup, ongoing compliance, potential OTA excess charges) mean it may not be worthwhile for smaller pension pots. Most advisers suggest it only makes financial sense for pensions above £75,000 to £100,000.

This is one area where professional financial advice from an adviser regulated in both the UK and Australia is essential.

Strong Retirement Savings Through Superannuation

Australia’s compulsory superannuation system is one of the most generous retirement savings frameworks in the world.

Employer contributions

All Australian employers are required to contribute 12% of an employee’s ordinary earnings into their superannuation fund (as of 1 July 2025, up from 11.5%). This is on top of your salary, not deducted from it. In the UK, the minimum employer pension contribution is just 3% under auto-enrolment.

Tax-advantaged contribution limits

You can make additional voluntary contributions to your super and receive tax benefits:

Concessional (before-tax) contributions: Up to A$30,000 per year (2025/26). These are taxed at just 15% going into the fund, rather than your marginal rate. If your total super balance is under A$500,000, you can carry forward unused concessional cap amounts from the previous five years.
Non-concessional (after-tax) contributions: Up to A$120,000 per year (2025/26), or A$360,000 using the bring-forward rule.

In the UK, the annual allowance for tax-relieved pension contributions is £60,000 (2025/26), but this tapers for higher earners.

Tax in retirement

Once you reach age 60, withdrawals from a “taxed” Australian super fund are completely tax-free, whether as a lump sum or regular income. In the UK, only 25% of your pension can be taken as a tax-free lump sum; the remaining 75% is taxed as income at your marginal rate.

This is one of the most significant long-term tax advantages of building retirement savings in Australia.

Tax Savings for Workers in Remote Areas

Skilled professionals relocating to work in Australia’s remote or regional areas can access additional tax benefits. To qualify, your usual place of residence must be in a designated remote or isolated zone for 183 days or more during the income year.

Key benefits include:

Zone Tax Offset: A direct reduction in your income tax, with the amount depending on which zone you’re in. Special Zone A offers a higher offset than Zone B.

Fringe Benefits Tax (FBT) exemptions: Employers in remote areas can provide benefits like housing, utilities and transport either exempt from FBT or at a significantly reduced rate. This effectively increases your total remuneration package without increasing your tax liability.

Work-related deductions: Remote workers may be able to claim deductions for additional costs incurred due to their location, such as travel to the nearest major centre.

These benefits are particularly relevant for professionals in mining, healthcare, education and agriculture who take roles in regional Australia.

No Inheritance Tax in Australia

One of the most straightforward advantages for UK expats planning long-term settlement in Australia is the complete absence of inheritance tax.

Australia does not impose any tax on assets passed on after death. There is no gift tax, no estate tax and no equivalent of the UK’s 7-year rule on lifetime gifts.

In the UK, Inheritance Tax is charged at 40% on estates valued above £325,000 (or £500,000 if the estate includes a residence passed to direct descendants). The UK also has complex rules around gifts made within seven years of death and various trust structures.

For UK expats who become Australian tax residents and plan to retire in Australia, the absence of inheritance tax means a significantly larger portion of their estate can pass directly to family members.

A caveat: There can be capital gains tax implications on certain inherited assets in Australia (such as investment properties), and the treatment of superannuation death benefits depends on whether they’re paid to a tax dependant. However, there is no blanket estate tax on the total value of what you leave behind, which remains a major advantage over the UK system.

What About the Medicare Levy?

Any fair comparison of Australian and UK taxes should mention the Medicare levy: a 2% charge on most taxable income that funds Australia’s public healthcare system (Medicare).

This effectively adds 2 percentage points to the rates shown in the income tax table above. So the real marginal rates for most Australian residents are:

0% up to $18,200
18% on $18,201 to $45,000
32% on $45,001 to $135,000
39% on $135,001 to $190,000
47% on over $190,000

Low-income earners (singles earning under approximately $27,222 in 2025/26) may be exempt or pay a reduced levy.

There is also a Medicare Levy Surcharge of 1% to 1.5% for higher earners (above $93,000 for singles) who don’t hold private hospital cover.

In the UK, the equivalent healthcare funding comes through National Insurance contributions and general taxation rather than a separate visible levy. UK employees pay 8% NI on earnings between £12,570 and £50,270, and 2% above that. Employers pay 15% on top. So while the Medicare levy adds to the Australian tax burden, the combined UK tax and NI burden is often comparable or higher.

So, Is It Better to Live in Australia or the UK for Tax?

For most UK expats earning a moderate to high income, Australia offers a lower overall tax burden, particularly once the 2024 Stage 3 reforms are factored in. The advantages are clearest in several areas:

Income tax: Lower marginal rates in the mid-to-high income brackets, with a higher top-rate threshold.
Capital gains: The 50% discount for assets held over 12 months is a significant advantage over the UK’s flat-rate CGT system.
Retirement: Compulsory 12% employer super contributions, tax-free withdrawals from age 60, and generous contribution caps make Australia’s retirement system highly attractive.
Inheritance: No estate tax of any kind, compared to the UK’s 40% rate above £325,000.

However, it’s not a one-sided comparison. The UK has a higher nominal personal allowance (£12,570 vs A$18,200), no Medicare-style levy on income, and the CGT annual exempt amount (small as it now is at £3,000) has no Australian equivalent. For lower earners, the differences may be marginal.

The best approach is to run the numbers for your specific income, assets and family situation, ideally with the help of a qualified adviser who understands both tax systems. The short-term costs of relocating should be weighed against the long-term financial gains, which for many UK expats moving to Australia can be substantial.

Moving from the UK to Australia?

If you’re ready to take the next step, our dedicated removals to Australia service provides professional packing, weekly sailings and full support from the UK to your new home in Australia. Get a free quote today, or get in touch to learn more about how we can help with your move.

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This guide is for general information purposes only and does not constitute financial or tax advice. Tax rules are subject to change, and individual circumstances vary. We recommend consulting a qualified tax adviser before making financial decisions related to your move.

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