Retiring in Israel: A Practical Guide for Australians

Australians arrive in Israel to retire for reasons that rarely show up on a spreadsheet: a grandchild in Modiin, a synagogue in Jerusalem, a lifetime of intending to make the move and finally doing it. The legal and financial side, though, does come down to numbers, and they are unforgiving if you get the sequence wrong. Israel offers new immigrants a ten-year exemption from tax on foreign income. Australia keeps paying your Age Pension overseas, but not always at the full rate. And the two countries have no health agreement at all, which surprises almost everyone.

This guide is for the Australian who is seriously planning the move and needs to know what actually happens to the pension, the super, the house in Australia, and access to a doctor. It assumes you are organising most of this from Australia before you leave, coordinating between an Australian accountant and an Israeli lawyer, because once you land the windows for some of these decisions have already closed.

Aliyah or Tourist Visa: The Threshold Decision

Everything else flows from one choice. Do you make aliyah and become an Israeli citizen, or do you try to live in Israel as a long-term visitor?

Israel has no retirement visa. A B/2 tourist visa is granted for up to three months and may be extended at the discretion of the Population and Immigration Authority, but it brings no healthcare entitlement and no security of tenure. Living in Israel on rolling tourist extensions is precarious and, for a retiree, usually a poor idea.

Aliyah under the Law of Return 1950 is the standard path for a Jewish Australian. It confers citizenship, the right to remain indefinitely, immediate access to the national health system, and the financial benefits reserved for olim. The practical steps of making aliyah from Australia are involved, especially the documentary proof of Jewish descent, but for someone intending to live out retirement in Israel it is the route that makes the rest of this guide work.

One caution that catches retirees: becoming an Israeli citizen does not, by itself, end your Australian tax residency. The two questions are decided under different tests. You can hold both passports and still be assessed by the ATO if your circumstances point back to Australia, so the move needs to be made cleanly on both sides.

The 10-Year Tax Exemption

The single largest financial reason to make aliyah at retirement is the new-immigrant exemption.

Under Section 14(a) of the Income Tax Ordinance, an individual who becomes an Israeli tax resident as a new immigrant is exempt from Israeli income tax on all foreign-source income and gains for ten years from the date of immigration. The exemption is broad. It covers the Australian Age Pension, lump-sum and pension withdrawals from superannuation, dividends and interest from Australian investments, and rent from an Australian property. It applies regardless of amount and does not depend on the money staying outside Israel.

For a retiree whose income is entirely Australian-sourced, the practical result is that Israel collects no income tax for a decade.

In Practice: Under Section 14(a) of the Income Tax Ordinance 1961, a new oleh's foreign income is exempt from Israeli tax for ten years from the date of becoming an Israeli resident. An Australian retiree drawing AUD 70,000 a year from superannuation and the Age Pension, equivalent to roughly NIS 170,000, pays no Israeli income tax on it across the full ten-year period. The exemption is administered by the Israel Tax Authority (Rashut HaMasim). For olim who became Israeli residents from 1 January 2026 onward, the income remains exempt but must be reported on an annual return, which the Authority expects to be filed by the standard deadline in the year following the tax year. Treating the exemption as a reason not to file at all is the error that turns a clean ten years into an audit.

The reporting change matters. Until recently the exemption came with an effective reporting holiday as well. That holiday has ended for new olim, so even though no Israeli tax is due, the foreign income must now be declared each year.

Your Australian Age Pension in Israel

The Age Pension is portable, which means Centrelink continues to pay it after you settle in Israel. The amount, however, is not guaranteed to stay the same.

The rules sit in the Social Security Act 1991 and are administered by Services Australia through its international services. For the first 26 weeks after you leave Australia, the pension is paid at the full rate you were receiving. After 26 weeks of absence, the rate becomes proportional to your Australian Working Life Residence, the number of years you lived in Australia between age 16 and pension age, measured against a benchmark of 35 years. Someone with 35 or more years keeps the full rate; someone with 25 years of working-life residence receives 25/35 of the rate once the proportional rule bites.

In Practice: Under the portability provisions of the Social Security Act 1991, an Age Pension is paid at the full rate for 26 weeks after departure from Australia, then at a rate proportional to Australian Working Life Residence over a 35-year benchmark. A retiree who lived in Australia for 28 of those years receives 28/35, around 80%, of the means-tested rate after the 26-week point. Services Australia administers the change and requires that you notify it of your overseas address and any change in circumstances within 14 days. Because there is no social security agreement between Australia and Israel, years of residence in Israel cannot be added to lift the proportion back up.

That last point is the sting. Australia has social security agreements with more than thirty countries, but Israel is not one of them. So unlike a retiree moving to, say, Italy or New Zealand, an Australian in Israel cannot draw on a treaty to count Israeli residence toward the pension, and cannot use Israeli National Insurance contributions to plug gaps. The proportional rate, once it applies, is the rate.

Keep two practical habits. Tell Services Australia your Israeli address and bank details, because pensions paid overseas are usually paid into an Australian or nominated account on a different cycle. And respond to Centrelink review letters promptly, since unanswered reviews can suspend payment regardless of entitlement.

Superannuation and Leaving the Australian Tax Net

For most retirees, superannuation is the main asset, and the news here is reassuring. Australian super for a person over 60 drawing benefits is generally tax-free in Australia, and CGT event I1 does not apply to superannuation, so leaving Australia does not deem your super to have been cashed out. The Israeli ten-year exemption then covers any super income on the Israeli side. For the first decade, super income is effectively untaxed in both countries for a typical retiree.

The rest of your assets are a different matter. Ceasing Australian tax residency triggers CGT event I1, a deemed disposal at market value of assets that are not taxable Australian property. Foreign shares and many managed investments fall into this category; Australian real estate does not and stays in the Australian CGT net even after you leave.

In Practice: Under CGT event I1 in the Income Tax Assessment Act 1997, ceasing Australian residency is treated as a disposal of non-taxable-Australian-property assets at market value, with the gain taxed at marginal rates up to 47% in your final Australian return, subject to the 50% discount for assets held over twelve months. An Australian who elects instead to defer, keeping the assets in the Australian CGT net until an actual sale, postpones the tax but keeps the assets exposed to Australian CGT as a non-resident. The election is made in the departure-year return lodged with the ATO. For an Australian making aliyah, deferral can interact with the Israeli ten-year exemption, since a sale during the exemption window may face no Israeli tax, so the choice is worth modelling before departure rather than after.

This is the decision most worth professional time before you go. Whether to trigger I1 or defer it depends on the size of your unrealised gains, your expected Israeli position, and when you are likely to sell. Once you have ceased residency, the election is locked into that year's return.

Healthcare: The Gap Australians Do Not Expect

Australians assume Medicare follows them, or that some arrangement covers them in Israel. Neither is true. Australia and Israel have no Reciprocal Health Care Agreement, so Medicare pays nothing toward treatment received in Israel, and the Israeli public system extends nothing to Australian visitors.

If you make aliyah, the picture changes completely. New olim are entitled to enrol in Israel's national health system from arrival under the National Health Insurance Law 1994. You register with one of the four health funds (kupot holim), and olim who are not working can receive up to six months of free basic coverage before the income-based health levy begins. Most retirees add a supplementary plan through their fund for dental care, faster specialist access, and medicines outside the standard basket. The detail of what Australians can and cannot access is covered in the guide to healthcare in Israel for Australians.

If you do not make aliyah and live as a long-term visitor, you must carry private or international health insurance for the whole stay, and premiums for applicants in their 60s and 70s are not trivial. This is one more reason the tourist-visa route rarely makes sense for a retiree.

One Australian-side detail to plan for: leaving Australia for an extended period can affect your Medicare enrolment if you ever return, and re-establishing it is straightforward but not automatic. Keep your Medicare records and Australian identity documents accessible.

What Frequently Goes Wrong

Common Mistake: Australians often time the move so that a large superannuation withdrawal or share sale happens in the same Australian financial year they depart, without checking which side of the residency line it falls on. A capital gain realised while still an Australian resident, or caught by CGT event I1 on departure, is assessed in Australia at marginal rates even though the person is about to enjoy Israel's ten-year exemption. Sequencing the disposal a few months later, after Israeli residency has begun and while the Section 14(a) exemption applies, can change the tax on a single transaction by tens of thousands of dollars. Because the I1 election and the residency end date are fixed in the departure-year return lodged with the ATO, the planning has to happen before you leave, not when you file.

Practical Checklist

• Decide between aliyah and a long-term visitor stay early, since healthcare, tax, and pension outcomes all turn on it
• Confirm your Australian Working Life Residence figure with Services Australia so you know your proportional Age Pension rate after 26 weeks
• Notify Services Australia of your Israeli address and update your payment details before you leave
• Model the CGT event I1 decision with an Australian adviser, including whether to defer, before you cease residency
• Time large superannuation withdrawals and share sales around the residency change and the start of the Section 14(a) exemption
• On aliyah, register with a kupat holim on arrival to start your six months of free basic coverage
• If staying as a visitor, arrange private or international health insurance covering your full stay
• Plan to file an annual Israeli return reporting your exempt foreign income if you became a resident from 1 January 2026
• Keep Australian identity and Medicare records accessible in case you return to Australia later

Speak With an Israeli Attorney

Retiring to Israel as an Australian works best when the Israeli aliyah and tax steps are coordinated with the Australian pension, superannuation, and CGT decisions, in the right order and before you depart. Getting the ten-year exemption to line up with your Australian disposals, and your healthcare sorted from day one, is what turns a complicated cross-border move into a smooth one.

Contact us for a confidential initial consultation.