UK-Australia Double Taxation Agreement: Who Taxes What

Key points

The UK-Australia treaty has a few unusual features: a shorter tie-breaker, no relief for temporary residents and little protection on gains.

✓ Regular UK pensions, including the State Pension, are taxable only in Australia for Australian residents who are not temporary residents.

✓ Pension lump sums are not covered by Article 17, and HMRC's view is that they can stay taxable in the UK.

✓ The UK taxes UK rent first with no cap. Australia then taxes it too and gives credit.

✓ Australian residents claim UK relief on Form Australia-Individual, sent through the ATO.

✓ The UK State Pension is frozen for people living in Australia.

The UK-Australia double taxation agreement is the 2003 convention that decides which country taxes your income and gains when you have links to both. Most UK pensions paid to an Australian resident are taxed only in Australia, rent and property gains are taxed first where the property is, and tax on dividends, interest and royalties is capped in the country they come from.

It works in both directions, so the same articles apply to a UK resident with Australian income. But it has unusual features: a shorter residence tie-breaker, no UK relief for Australian temporary residents, and little protection on capital gains.

This guide goes through the UK-Australia double tax treaty article by article: who taxes what, the withholding rates, pensions, property, capital gains, and how to claim relief from HMRC.

If you would like this checked for your own situation, see our international tax advice service.

What is the UK-Australia double taxation agreement?

Is there a tax treaty between the UK and Australia? Yes. The convention was signed on 21 August 2003, came into force on 17 December 2003 and replaced the 1967 agreement.

In the UK it has applied since 6 April 2004 for Income Tax and Capital Gains Tax, and since 1 July 2004 for tax deducted at source. In Australia it has applied since 1 July 2004. The OECD's Multilateral Instrument (MLI) later added anti-avoidance wording, with effect for UK Income Tax and Capital Gains Tax from 6 April 2020.

👉 GOV.UK: Australia tax treaties

👉 The law: The Double Taxation Relief (Taxes on Income) (Australia) Order 2003

Which taxes does it cover?

Article 2 covers UK Income Tax, Corporation Tax and Capital Gains Tax, and Australian income tax (which includes tax on capital gains), fringe benefits tax and petroleum resource rent tax.

It does not cover Inheritance Tax, and the UK has no inheritance tax treaty with Australia. Australia is not on HMRC's list of countries with a UK social security agreement, and a UK State Pension paid there does not get yearly increases.

For how treaties work in general, see our guide to 📖 UK double tax treaties. For the move itself, see 📖 moving to Australia from the UK.

Residence and the tie-breaker under Article 4

Which country are you resident in? Each applies its own rules first. If both treat you as resident, Article 4 decides, in three steps, not the usual four:

1. where you have a permanent home or, if that is both countries or neither, where your personal and economic ties are closer (your centre of vital interests)

2. if that cannot be determined, the country you are a national of

3. if that is both or neither, the two tax authorities try to settle it by agreement

There is no habitual abode test, so counting days will not settle it. See our guide to 📖 dual tax residency.

Australian temporary residents lose UK relief

Does a temporary visa change anything? Yes. For Australian tax you are a temporary resident if you hold a temporary visa and neither you nor your spouse is an Australian citizen or permanent resident. Australia then does not tax most of your foreign income or gains.

Article 23(2) responds. Where Australia exempts income for that reason, the UK relief the treaty would otherwise give does not apply to it. So your UK pension, interest and royalties stay taxable in the UK, and Article 17 does not help yet. You are not taxed twice, because Australia is not taxing that income.

Australia's exemption began on 1 July 2006, which is why HMRC's claim form says a temporary resident visa holder can claim relief only for income paid before that date. Once you stop being a temporary resident, for example on getting permanent residency, the treaty works normally.

👉 Australian Taxation Office: Foreign and temporary residents

UK and Australia tax treaty: who taxes what

How does the treaty split taxing rights? By type of income. The table works in both directions: the source country is where the income arises, and the residence country is where you are resident.

Image 1: Who taxes what for an Australian resident with UK income

UK-Australia double tax treaty by income type

Individuals get the 15% dividend cap. It falls to 5% for a company holding at least 10% of the voting power, and to nil for some companies holding 80% or more.

In practice the UK does not deduct tax from ordinary company dividends, and a non-resident's UK tax on dividends and savings interest is usually limited by the 📖 disregarded income rules. Australia does not withhold tax on fully franked dividends paid to foreign residents. Unfranked dividends face 30% without a treaty, cut to 15% for UK residents.

👉 HMRC manual: Australia treaty summary (DT2654)

👉 Australian Taxation Office: Interest, unfranked dividends and royalties

Employment income and the 183-day rule

Under Article 14, pay is taxed only where you are resident unless you do the work in the other country. Even then, the work country cannot tax it if all three conditions are met: you are there for 183 days or less in any 12-month period that starts or ends in its tax year, your employer is not resident there, and the cost is not borne by a branch your employer has there. Directors' pay follows the same rules.

UK-Australia tax treaty and pension income

Is a UK pension taxed in Australia or the UK? Under Article 17, pensions and annuities paid to a resident of Australia are taxable only in Australia. That covers the UK State Pension, workplace pensions and personal pensions. See our guide to the 📖 tax treatment of pension income.

Unusually, it also covers government service pensions, such as civil service, armed forces, NHS and teachers' pensions. Article 18 deals only with government salaries.

The rule works in reverse: an Australian pension, including a government pension, paid to a UK resident is taxable only in the UK.

Image 2: Which country taxes a UK pension paid to someone in Australia

Lump sums are different. Article 17 does not mention them. HMRC's view is that a lump sum not covered by a pensions article falls under the other income article, and Article 20 lets the source country tax income arising there. HMRC's treaty digest says there is no relief for a trivial commutation lump sum (a small pension pot paid in one go).

Property income under the treaty

Who taxes UK rent if you live in Australia? The UK does, under Article 6, with no cap. Australia then taxes the same rent and gives credit for the UK tax.

The UK collects it through the 📖 non-resident landlord scheme. Your letting agent, or a tenant paying more than £100 a week, deducts basic rate tax unless HMRC approves you to receive rent gross.

For a UK resident with an Australian rental property it is the mirror image. Australia taxes the rent at its foreign resident rates, 30% from the first dollar in 2025-26. The UK taxes it too and gives credit for the Australian tax.

Capital gains: what Article 13 really says

Does the treaty decide who taxes a gain? Only partly. Article 13 lets the country where land is situated tax gains on it, and on shares in companies whose assets are mainly land there.

For everything else, such as ordinary shares, most treaties say only your country of residence can tax. This one does not. Article 13(6) says nothing in the convention affects either country's own law on those gains.

➜ UK property sold by an Australian resident: the UK charges 📖 non-resident capital gains tax, reported within 60 days of completion. Australia taxes the gain too and credits the UK tax.

➜ Australian property sold by a UK resident: Australia taxes the gain, and the buyer withholds 15% of the price for contracts signed from 1 January 2025. The UK taxes the gain and credits the Australian tax.

➜ Leaving Australia: Australia treats you as selling most assets when you stop being resident. If you choose to defer that and are UK resident when you sell, Article 13(5) says only the UK taxes the gain.

The treaty does not switch off the UK's 📖 temporary non-residence rules. Article 13(9) keeps the UK's right to tax anyone who was UK resident in the six years before the tax year of sale, and UK law says a treaty cannot prevent the charge. If you return within five years, gains made while you were away can be taxed in the year you come back.

👉 The law: Taxation of Chargeable Gains Act 1992, section 1M (temporary non-residents)

👉 Australian Taxation Office: Foreign resident capital gains withholding overview

How double taxation relief is given and claimed

Where both countries can tax, Article 22 uses the credit method in both directions. Your country of residence gives credit for the other country's tax, up to its own tax on that income.

If you live in Australia

Use HMRC's Form Australia-Individual, not the standard DT-Individual. It covers UK pensions, purchased annuities, interest and royalties. You send it to the Australian Taxation Office, which certifies that you are resident and forwards it to HMRC.

Once the claim is accepted, HMRC can have your pension paid under tax code NT, with no UK tax deducted, and repay tax for years still open to claims.

👉 HMRC form: Double Taxation: UK-Australia (Form Australia-Individual)

If you file a UK Self Assessment return as a non-resident, for example because you have UK rent, you claim treaty relief with the return using the HS304 claim form and the SA109 residence pages.

👉 HMRC helpsheet: HS304 Non-residents, relief under double taxation agreements

👉 The law: Taxation (International and Other Provisions) Act 2010, section 6 (effect of treaty relief)

If you live in the UK

Report Australian income and gains on the foreign pages of your return and claim foreign tax credit relief for the Australian tax. Tell your Australian payers you are UK resident so they withhold at treaty rates. HMRC can issue a certificate of residence as proof.

👉 GOV.UK: Apply for a certificate of residence

Worked examples

Example 1: Margaret in Perth

➜ Margaret is a British citizen and a permanent resident of Australia. Her only home is in Perth.

➜ In 2026/27 she receives a UK State Pension and teacher's pension totalling £30,000, and £20,000 profit from letting her old flat in Leeds.

➜ The pensions are taxable only in Australia under Article 17. After her claim, the teacher's pension is paid under code NT.

➜ The rent is taxable in the UK. As a British citizen she keeps the £12,570 personal allowance, so UK tax is (£20,000 − £12,570) × 20% = £1,486.

➜ Australia taxes both, and gives credit for the £1,486.

Example 2: Liam in Manchester

➜ Liam is UK resident and a higher rate taxpayer. His flat in Brisbane makes a rental profit worth £10,000 under both countries' rules.

➜ Australia taxes it at 30% (2025-26 foreign resident rate), which is £3,000.

➜ The UK charges 40%, which is £4,000, and gives credit for the £3,000. Liam pays £1,000 to HMRC, so his total is £4,000, the higher of the two charges.

Common mistakes with the UK-Australia tax treaty

➜ Counting days to settle dual residence. This treaty has no habitual abode test. Your permanent home, centre of vital interests and then nationality decide it.

➜ Claiming relief on a temporary visa. If Australia exempts your UK income because you are a temporary resident, Article 23(2) removes the UK relief and the UK keeps taxing it.

➜ Treating a pension lump sum like pension income. Article 17 covers pensions and annuities. A lump sum can stay taxable in the UK.

➜ Assuming gains are taxed only where you live. Article 13 leaves most gains to each country's own law, and does not block the UK's temporary non-residence charge.

➜ Waiting for relief to happen. Pension payers keep deducting UK tax until HMRC issues the NT code.

Frequently asked questions

Is there a double taxation agreement between the UK and Australia?

Yes. The current convention was signed on 21 August 2003 and came into force on 17 December 2003. It has applied to UK Income Tax and Capital Gains Tax since 6 April 2004.

Is my UK pension taxed in Australia or the UK?

If you are resident in Australia and not a temporary resident, your UK State Pension, workplace, personal and government service pensions are taxable only in Australia under Article 17. Article 17 does not mention lump sums, and HMRC's view is that they can stay taxable in the UK.

Do I pay UK tax on rental income if I live in Australia?

Yes. The treaty lets the UK tax rent from UK property with no cap. Australia also taxes the rent unless you are a temporary resident, and gives credit for the UK tax.

Does the UK-Australia tax treaty cover capital gains?

Yes, but with limited protection. Gains on land are taxed first where the land is. For most other assets the treaty leaves each country to apply its own law.

How do I claim relief under the UK-Australia double tax treaty?

Australian residents claim relief from UK tax on pensions, annuities, interest and royalties on Form Australia-Individual, sent through the Australian Taxation Office. Non-residents who file a UK tax return claim with it, using the HS304 claim form. UK residents claim foreign tax credit relief on their return.

Last reviewed on 22 October 2026 by Emma McDermott, ATT, founder of Global Tax Consulting, in line with the law in force at that date: The Double Taxation Relief (Taxes on Income) (Australia) Order 2003, and the HMRC guidance cited above.