# Tax and social security for UK expat in Australia



## ngophotographer (Dec 4, 2019)

Hi folks!

My partner and I will be moving to Australia in early 2020, and I’m trying to get my head round my tax and social security situation. I’m British, and I am the director of a tiny limited company registered in the UK. This company hasn’t really been doing any business for the past two years, as my partner and I have been living in Singapore since late-2017. During this time, my partner has had a job in Singapore and I have remained resident for tax purposes in the UK while ‘visiting’ her on a Long-Term Visitor’s Pass (LTVP), during which time I’ve not worked. In order to ensure I have continued to ‘pay stamp’ in the UK for the sake of my security in old age, my limited company has continued to pay me a minimal salary, enough to make the minimum national insurance contributions.

Though we will be moving to Australia soon, I can’t as yet be certain that we’ll remain there for the rest of our days. I understand that to qualify for Australia’s Age Pension, one has to have lived there for 10 years. The first thing I’d like to know is whether I can continue to contribute to UK National Insurance during this time. Would I be able to continue with the existing arrangement, under which my company pays me a salary through PAYE to my UK bank account of £719 per month? Or should I close this down and switch to sole trader status, tell HMRC that I’ll be freelancing abroad (I intend to be a sole trader photographer in Australia) and pay the flat rate contribution of £3.00 per week required under Class 3 National Insurance?

My understanding is that once my partner and I start renting a flat and working in Australia, we will be ‘resident for tax purposes’ there and therefore liable to be taxed on 100% of our worldwide income in Australia. Is that right? Would this therefore mean that I would be unable to have a UK PAYE salary?

I basically want to guard against a situation in which we return to the UK after five to ten years or so and have a large out-of-pocket expense to make for missing year contributions to National Insurance to ensure we get the full state pension at the time of retirement (or, worse, that we return after 20 years and have no scope for paying for missed years and therefore get only the minimum pension).

Thanks in advance for your help! I really appreciate it.


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## Moulard (Feb 3, 2017)

ngophotographer said:


> Hi folks!
> Though we will be moving to Australia soon, I can’t as yet be certain that we’ll remain there for the rest of our days. I understand that to qualify for Australia’s Age Pension, one has to have lived there for 10 years.


That is correct. Unless there is a social security agreement in place, the default is 10 years, including 5 continuous. Unfortunately the UK-AUS agreement was terminated in 2001. 

This page has a fair bit of information from the Australian perspective...

https://www.dss.gov.au/about-the-de...h-the-uk-information-for-prospective-migrants




> My understanding is that once my partner and I start renting a flat and working in Australia, we will be ‘resident for tax purposes’ there and therefore liable to be taxed on 100% of our worldwide income in Australia. Is that right? Would this therefore mean that I would be unable to have a UK PAYE salary?


That is correct, once you are a tax resident of Australia, then like pretty much every other country, you will be taxed on your Global income. 

Outside of the Pension phase, you would report the UK PAYE salary as income, on your return to the ATO, you would be able to claim a foreign tax offset for the amount of tax paid to the UK. 

I am not familiar with the UK-AUS Income Tax agreement, but it pretty common for a foreign pensions to only be taxable in the source country. But you will probably want to read it, and technical explanations and amending protocols.

https://treasury.gov.au/tax-treaties/income-tax-treaties


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## Moulard (Feb 3, 2017)

So I had a quick chance to skim the UK-Aus Tax treaty.. 

I got it wrong..

Article 17 (1) 



> Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State.


Once in Pension phase, while you are resident in Australia it would only be taxable by Australia.

If it was taxable in the UK, and tax was withheld, you would need to apply for treaty relief.

If you maintain your UK Company, and pay yourself a wage from it, while a resident of Aus, then you will want to carefully read Article 7 (Business Profits) and Article 17 (Income from Employment)

for that matter it is probably worthwhile reading the bulk of it if you have not done so already.

https://assets.publishing.service.g...a/file/496636/uk-australia-dtc_-_in_force.pdf


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## ngophotographer (Dec 4, 2019)

Many thanks for your reply, Moulard.

Re-reading my original post, I think I may have over-complicated things by asking too many questions at the same time. Let me therefore try to simplify what I’d like to know here. 

I understand that in Australia, to receive the Age Pension at retirement one needs to have had residence there for at least 10 years, at least five of which need to have been consecutive. Meanwhile, for the UK, one needs to have made National Insurance contributions for at least 35 years in order to receive the full state pension.

I am 40 now. While I don’t have certainty about where I’ll be retiring, can I continue to meet the requirements of both the UK and Australia’s social security systems in order to receive the full state pension at retirement age in the country in which I settle?

Thanks so much!


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## Moulard (Feb 3, 2017)

Sorry, I cannot comment on the contribution rules etc on the UK side. I can only really comment n the Oz side of things.

There are some folks on the forum here that are knowledgeable on the UK side. Hopefully they will chip in.


Do bear in mind that the Australian Aged Pension is not something that you "pay into". The Aged Pension is a residency based scheme ( so there are no "contributions" to be made into it) ,and over the years the portability of the scheme (i.e. payments to people who are outside Australia ) has been ratcheted down. 

That said, Australia has a three pillar retirement scheme (Savings, Superannuation, Pension). So you also need to factor into your thinking Superannuation. Super is currently 9.5% employer contribution. That scheme you *can* make personal contributions. These personal contributions can be made regardless where you live. 

Given you are the director of your own UK company, I guess one thing you need to consider is whether you will be operating out of that company (in which case Super would be optional for you I believe) , setting up an Australian Pty Ltd (which would then have to make super payments to you).


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## ngophotographer (Dec 4, 2019)

Thanks for the further insight, my lad. Yes, I understand about superannuation. After getting to Australia, I intend to set myself up as a sole trader, not as the director of a limited company this time.

My plan in the short term is to keep money aside for super each month, but not to set up an actual super fund until our long-term plans are known. My thinking behind this is that at the time of departing Australia (if we eventually decide to settle in the UK), super funds are returned only after tax at 35 to 40%.

As you say, hopefully somebody can chip in on whether it will be possible for me to continue making National Insurance contributions in the UK, and, if so, how this can be done.


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## Moulard (Feb 3, 2017)

While you wait for someone to chip in I assume you have seen this....

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

Which indicates that yes, you can indeed continue to make contributions.


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## ngophotographer (Dec 4, 2019)

Yes, I had indeed seen that page. The question is really whether I'll be eligible under the circumstances, and, secondly, whether I can go on making contributions through PAYE as a company director, or whether I need to switch to sole trader status and make Class 3 National Insurance contributions.

By the way, sorry for referring to you as 'my lad' in the previous reply. I had been dictating to my computer, and hadn't picked up the mistake before submitting the reply!


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## Moulard (Feb 3, 2017)

ngophotographer said:


> Yes, I had indeed seen that page. The question is really whether I'll be eligible under the circumstances, and, secondly, whether I can go on making contributions through PAYE as a company director, or whether I need to switch to sole trader status and make Class 3 National Insurance contributions.


I figured you probably had, but thought I would add the link as much for the benefit of those who might be searching for similar in future.

If you are still in the UK perhaps a quick phone-call might be quicker (and if you are lucky more accurate) than random internet advice 

From the aforementioned site:

Telephone:
0300 200 3500

Outside UK:
+44 191 203 7010


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## ngophotographer (Dec 4, 2019)

Okay, I have an update. I called that helpline, and they confirmed that I can indeed pay voluntary National Insurance contributions while I’m in Australia. Apparently, there is no limit to the number of years I can do this for. So by doing that, I can protect my UK state pension entitlement in case we eventually return.

They then directed me to Google for HMRC leaflet NI38, ‘Social Security abroad’, and told me to read through it and establish what class of National Insurance I believe I ought to be paying while in Australia. In my case, it would be either Class 1 (for employed people, as I am the director of my limited company) or Class 2 (assuming I bring an end to the arrangement of earning a salary through PAYE and work instead as a sole trader/freelancer when I get to Australia).

For Class 1, the three conditions are that one’s employer has a place of business in the UK, one is ‘ordinarily resident’ in the UK (this is apparently different from being ‘resident for tax purposes’, and there’s a fairly long-winded test for it) and one was resident in the UK immediately before starting employment abroad. However, if I’ve understood correctly, this can only be done for the first year abroad, after which one needs to move to either Class 2 or Class 3. Given that I expect to be in Australia for much more than one year, it seems simpler to move straight to Class 2 now.

In order to make an arrangement to play pay National Insurance contributions while abroad, one first needs to complete application form CF83, which can be found on the last two pages of the above-mentioned leaflet. For Class 2, which I am expecting to pay, the conditions are that one must have lived in the UK for a continuous three-year period at some point in the past, or else have paid a set amount of contributions for three years or more; one must also have been ordinarily an employed or self-employed earner in the UK immediately before going abroad.

I hope this information helps some people.


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