How to retire to Australia

If you dream of retiring to Australia, you’re not alone. There’s more to life Down Under than beaches and barbecues, although it’s still a factor.

But transplanting your whole life to the far side of the globe is a major task, and there are plenty of questions to address – such as how you’d access your UK pension.

Here we take a quick look at the main things you’d need to think about in order to retire to Australia.

Who can get a visa to retire to Australia?

Australia has long been a popular retirement destination for Brits. In fact, the country is such a draw for pensioners there are currently over 230,000 British expats claiming their state pension there.

The first step in making the big move is to apply for a visa – and this can be the first major hurdle, too.

The Australian government closed its specialist Investor Retirement Visa to new applicants after 2018, but options are still available.

If you have family ties to the country, you can apply for a Parent Visa, Age Dependent Resident Visa, Remaining Relative Visa, or a Carer Relative Visa.

If none of these apply to you, you can look into the Retirement Visa Pathway, which sets out the eligibility criteria for achieving permanent residency.

The Australian government has many visa options listed on its Home Affairs website, so it’s worth taking some time to familiarise yourself with all that might apply to you.

How much does it cost to live in Australia?

When you start to live off your pensions (whether personal, workplace, state pension or a combination of them), you’ll be adjusting to a new financial landscape.

Your monthly expenses may not have changed much, but your income will tend to reduce by at least 30% (and perhaps more).

This means when you look ahead to the cost of living in retirement, you need to look at it from the point of view of someone with less money to spend.

The average rent in Australia has soared in recent years, with an average unit costing $2,452 per month and more in big cities such as Melbourne and Sydney.

Fuel in Australia is slightly cheaper than in the UK, and Australian households spend around $125 to $210 per month on electricity and around $60 per month on gas (the latter is in Victoria).

Healthcare is an important consideration, too. Australia works on a system of universal medical cover called Medicare, and resident taxpayers contribute 2% of their income. Non-residents are not required to pay the 2% Medicare levy.

If you’re a resident, then Medicare usually covers most of your costs. However, some costs are excluded, so most Australians buy insurance to account for any shortfall.

Be sure to factor this into your monthly expenses. For example, if you are treated in a private hospital, Medicare covers 75% of the fees, and your insurer pays the rest.

However, this cover usually only applies to around 75% of primary care charges, so most Australians buy insurance to account for any shortfall. Be sure to factor this into your monthly expenses.

If you’re a non-resident, there is a Reciprocal Health Care Agreement with the UK that may allow you to access Medicare treatment. Check here for more details about how to access Medicare as a non-resident.

Can I buy a house in Australia?

Renting a property is going to be a significant expense if you’re planning to retire to Australia, so you may want to look at your mortgage options instead. 

The first thing to note is that non-Australian citizens purchasing a property in the country need to get approval from the government, specifically the Foreign Investment Review Board.

There’s a whole range of specialist mortgage brokers who work exclusively with people moving to Australia or applying for a loan from an Australian bank.

You should be able to borrow up to 60% to 70% of the property’s value as a non-resident, but you’ll definitely need a source of income above and beyond your UK state pension, such as significant private pension savings or a good final salary pension.

Alternatively, you can look to get a mortgage from a UK lender. Many offer specialist products for people retiring in Australia or other countries.

It’s worth speaking to a specialist mortgage broker about your options before committing to anything.

How do I access my UK state pension in Australia?

Receiving your state pension shouldn’t cause any difficulties if you retire to Australia. You can either keep your UK account and have your state payments paid into it or have it paid into an Australian bank account.

However, it’s important to know that once you move to Australia or New Zealand, your state pension will be frozen and won’t increase each year. 

Over time you could get significantly less state pension income than staying in the UK.

How do I access my private UK pensions in Australia?

You can also transfer your private UK pension to an Australian scheme if you want to.

This could have a number of benefits, such as lower fees or management costs, and it could make managing your finances easier.

You will not be able to transfer a NHS, teacher or police pension though – in these cases you can only continue receiving your income from your UK scheme.

In order to transfer your private pension, you will need to make sure your new scheme is HMRC approved.

You’ll also need to be over 55 and not yet accessing your pension pot(s). Find out more about retiring abroad.

What taxes will I pay living in Australia?

Another factor to consider is the tax landscape down under.

Australia has some taxes that will relate specifically to you as a non-citizen moving over, especially regarding income tax.

If you plan to cover your monthly expenses and obligations primarily with your pension when you retire to Australia, it is important to understand how much you will be taxed.

Non-residents are charged 30% tax on any Australian income less than AUD $135,000.

Tax residents pay a sliding scale of tax and are charged 16% on income between $18,200 and $45,000. They pay 30% for income between $45,000 and $135,000, with higher rates for earnings above this level.

Residents also pay a 2% Medicare levy on top of their income tax.

The tax rules for your UK pension income will depend on your tax residency status. In general, Australian residents are taxed on their worldwide income, including pensions, while non-residents only pay tax on Australian income - their UK income is still subject to UK tax.

Taxes can be difficult to get to grips with, so talking to a specialist financial adviser is useful.

If you retire to Australia and continue to earn any additional income there, you will pay tax on it, and as a British expat, you may not be entitled to the tax-free threshold that citizens are. How much tax you pay depends if you are classed as a resident for tax purposes.

If you are a non-resident, you will be taxed on every dollar of Australian income you make. You could also pay capital gains tax on any Australian assets you acquire while living there.

Again, it is always worth seeking expert guidance on exactly what position you will be in before you leave.

How a financial adviser can help you retire to Australia

Retiring to Australia is a once-in-a-lifetime venture, and there are always big risks when you attempt something you’ve never done before.

However, an experienced financial adviser can help.

Unbiased can help you find an adviser with direct knowledge of the challenges you’ll face, including the practicalities of transferring assets and navigating the tax and pensions landscape.

This way, you can make the most of your wealth in retirement.

If you found this article useful, you might also find our article on the best places to retire to in the UK informative, too!