Overseas Pensions and Age Pension Rules

Overseas Pensions - Aust. Pension Rules

As a growing number of Australians live abroad, retire overseas, or receive income from overseas sources, navigating the complexities of overseas pensions and how they impact your Australian Age Pension has become more important than ever.

This guide dives deep into everything you need to know about:

• How Centrelink treats income from overseas pensions
• Which countries have Social Security Agreements with Australia
• Portability of your Age Pension overseas
• How overseas pension income is assessed under the income test
• Where tax fits in
• Implications of moving overseas, returning, or dying abroad
• Practical examples and FAQs

If you're looking for a truly definitive guide on this topic, you're in the right place.

An Overview of Overseas Pensions

An “overseas pension” is any regular pension or retirement payment received from a foreign government, institution, or fund think New Zealand’s NZ Super, the UK's State Pension, or a European government scheme.

Understanding how income from overseas pensions interacts with your Australian entitlements is key to getting the full picture.

Receiving an Overseas Pension

Reporting Your Pension

When you apply for your Australian Age Pension, you’ll be asked about foreign pensions. Centrelink will ask you to complete the Overseas Pension and Income Certification so they can verify your overseas pension source, amount, frequency, and status.

They might also ask for certified proof—like a letter or statement from the overseas pension authority—especially if there's no formal Social Security Agreement.

How Income Is Calculated

Between $0.50 and $1 of your overseas pension counts as income for every $1 received, depending on the agreement with that country. Some agreements allow reduced assessment; others don’t.

It may also be deemed under deeming rules if it comes as a lump sum—like a private/delayed retirement fund. But that's less common.

Social Security Agreements

Australia has agreements with 27 countries to coordinate pensions and avoid being penalized by double taxation or pension loss.

Important covered countries include:

• United Kingdom (State Pension)
• New Zealand (NZ Super)
• Canada, Ireland, USA
• European countries such as UK, Germany, Netherlands, Sweden
• Asia Pacific nations including Japan, Korea and others

These Agreements allow:

• Counting foreign years toward Australian residence requirements
• Claiming a pro-rata pension if you don’t meet full requirements
• Reduced income assessment under the income test
• Avoiding double social security contributions

Country-Specific Rules

UK

If you receive UK State Pension, only 90% of it counts toward income in Australia. This encourages those with UK pensions to remain eligible.

New Zealand

NZ Super payments are treated the same as other overseas pensions unless you receive a lump-sum, which may be deemed.

USA, Canada, Europe

These agreements vary, most allow full or partial income exemptions or aggregation toward residency.

Taking Your Pension Overseas

Australia allows Age Pension payments to be exported under certain conditions:

• Up to 26 weeks anywhere in the world
• Over 26 weeks in certain countries with Agreements

Each country has its own portability rules:

• UK – payable anywhere
• New Zealand – payable indefinitely
• Canada, Ireland, USA – indefinite portability
• Some European countries – limited or indefinite under agreements

If you move temporarily overseas, the pension pauses after the maximum period (26 weeks or longer under agreement) and becomes permanent if you stay past the allowed time.

How Overseas Pensions Are Assessed

Overseas pensions count under the Income Test, not Assets. Each fortnight, any pension you receive, including overseas, goes into the income test. Your total assessable income affects your Age Pension balance, based on thresholds and tapers.

Tax Considerations

Understanding how your overseas pension interacts with Australian tax is crucial:

• UK State Pension: Not taxed in Australia, though reportable
• US Social Security: Australia–US tax treaty may apply
• EU pensions: Depends on country-specific GST treaty
• Private overseas pensions: Usually taxable unless exempt

Always check the ATO website or speak with a tax professional for your country’s rules.

Residency and Returns

Splitting residency between countries can affect your pension. Centrelink requires you to report when you leave Australia and return. Your pension may pause after the allowable overseas period and resume upon your return.

Legal and Estate Issues

If you pass away overseas, estates involving foreign pensions can get complicated. Check pension provider rules about beneficiary claims, reporting to Centrelink, and bridging allowances.

Fit with Super and Lump-Sum Withdrawals

What if you build an overseas lump-sum retirement benefit? Australia may treat it as a private pension. This can be assessed as deemed income if still held or deposited in Australia, but may be covered under Agreements.

Living in Australia, Receiving Overseas Pension

Even if you're healthy and living in Australia, declaring your overseas pension is vital. Centrelink includes it in the income test, and failure to declare can lead to overpayments or penalties.

Practical Examples

UK pensioner in NSW

• Receives £120/week (~$10,000/year)
• Assessable income: $9,000/year x 0.9 = $8,100/year
• Reduces Australian pension fortnightly amount slightly

Kiwi couple in NZ

• Each receives NZ Super NZ‑$22k/year
• Assessable income: NZ income pledge
• Centrelink bundles both incomes to calculate pension deduction

EU pension in Spain

• Receives €15,000/year
• Country Agreement allows exemption for 50%
• Assessable income: €7,500, converted to AUD for testing

FAQs

Do I have to apply for the Australian Age Pension first?

Yes, declare your overseas pension when applying to avoid surprises and ensure accurate calculation.

What if my overseas pension fluctuates?

Notify Centrelink of any payment changes. A quarterly income check may be required by completing a review form.

Does housing overseas affect my pension?

If you own a foreign property (holiday home/land), it counts in your assets test when moving overseas, not while still living in Australia.

What if I legally live in two countries?

Centrelink treats your principal residence as the one you stay in most; declare time spent overseas to avoid portability issues.

Can I receive multiple overseas pensions?

Yes, each is assessed separately.

Tips and Checklist

• Gather pension documents — amounts, frequency, country
• Check if your country has an Agreement with Australia
• Ask your overseas provider for an Australia-specific statement
• Contact Centrelink appointment to confirm steps
• Notify both Centrelink and ATO if living overseas
• Declare your overseas pension in every income review
• Discuss tax implications with your accountant

Key Messages

Overseas pensions bring complexity, but with the right knowledge, you can make them work in your favour. Understanding Agreements, declaring your income, and staying organised ensures your Age Pension remains fair, accurate, and maximised.

If you’d like personal help, especially with Agreements or portability—consider seeking advice from a financial advisor or Centrelink specialist.