When is the best time to move to Australia to save tax?

Jane Cooper 15 September, 2014

This is a question that comes up often: when is it best to move to Australia to save tax?

There isn’t one answer that will cover all circumstances, but here’s an example that indicates how tax planning can improve the position.

Consider an income from the UK that will only be taxable in Australia once you have moved to Australia – for example, UK pension income totalling £32,000 per annum, received by a permanent visa holder.

Compare the situation between moving in April 2015 with moving 3 months later, in July 2015.

> Move in April

* No tax to pay in the UK from time of departure (given the present tax arrangements in the UK – the UK Government’s consultation on the withdrawal of the personal allowance for non-UK resident individuals might change this).

* In Australia, you have a tax free threshold for the year of arrival of $13,464 plus $4,736 x 3/12, or $14,648.

* Per annum income of £32,000 equals £8,000 for the 3 months, equals (say) A$14,400. This is less than the Tax Free Threshold in Australia => no tax to pay in Australia either.

> Move in July

* For the 3 months in which you have remained in the UK the pension income of £8,000 has been taxable under PAYE in the UK.

* As things stand, the UK personal allowance is available in full for the tax year in which you leave the UK, and is available to non residents who are UK citizens (as well as to certain other persons, including Australian citizens under the Tax Treaty between the UK and Australia).

* => No tax to pay in the UK either.

* Note though that PAYE will have been deducted from the pension for the 3 months because the PAYE system works by apportioning the taxpayer’s personal allowance (and rate bands) on the basis of the pay intervals. This means that there will be a need to reclaim the PAYE overpaid subsequently, once the migrating individual has departed the UK.

In summary, given a choice, in this circumstance we would usually recommend departing in the April rather than the July as it is a cleaner transition in a tax sense.

If you are planning to migrate to Australia, are in receipt of UK source income that will continue when you move to Australia, and would like to discuss tax planning relating to your move please contact your local GM Tax office, or complete the enquiry form on this page.

We’ll be pleased to have an initial free no obligation discussion with you about how we might help.