Australian Expats and Financial Planning
The true value of financial planning, which is to put a strategic framework around all your financial activities and decisions, is particularly important for Australian expatriates for a number of reasons, including:
Effective Tax Planning in Australia and Overseas
Expats will usually have relationships with at least two tax regimes and two currencies - significantly increasing the complexity of their affairs. For example, the fact that you are tax non-resident also does not preclude you from liability for Australian capital gains tax, or for submitting a tax return if, for example, you have an income producing property. Yet, you may still be liable for tax in your current host country. Additionally, while Australia does not have an inheritance or estate tax, different capital gains tax rules can apply to non-resident Australians and these may need to be considered as part of any estate planning.
A failure to actively manage your tax position both in Australia and your host country, usually because of the apparent complexity, will often represent a costly "lost opportunity".
Depending on your circumstances, your time as an expatriate can represent your best opportunity to amass real wealth by virtue of a higher income and a reduced tax base. Sensible financial planning can ensure that you both enjoy the experience of being an expatriate and take full financial advantage of your time overseas. Also, some investment instruments commonly sold overseas to expatriates – such as so called "investment wrappers" – are not necessarily suitable for Australian expats for tax reasons and care needs to be taken in choosing investments structures such as offshore trusts and companies.
Aditionally, expatriation almost always gives rise to issues with respect to currency management, including ensuring that you are not over-exposed to particular currencies and that your exposure is consistent with future plans. For example, if there is a clear desire to return to Australian in retirement but a major portion of an individual's assets are in foreign pension funds, then investment planning and selection can often provide an indirect hedge against adverse AUD currency movements ahead of any return to Australia.
Additional Expatriation Costs
Initially, new expatriates will probably experience some dislocation, and this can extend to finances and mean that you will not make the best use of income flows. Conversely, there are also some areas where there can be substantial, long-term increases in costs, such as with education and health, which need to be reflected in your financial arrangements; particularly in terms of life insurance and investments.
Whilst overseas you will invariably be faced with making decision about what investments you should make and whether they should be offshore or in Australia; the optimal answer will probably depend very much on your personal circumstances, such as your age, the time until you become an Australian resident again and your current host country tax environment. Relatively recent changes to Australian superannuation, reducing the level of non-concessional contributions, means that many Australian expatriates need to consider long-term planning to ensure they make full use of their superannuation entitlements.
On the other hand, it may be very tax effective to make contributions into local pension schemes and then transfer those schemes into Australian superannuation – if the transfer arrangements are clear and the exit costs low. In many cases, however, there are significant complexities attaching to the transfer of overseas pensions into Australia - and the costs of "getting it wrong" can be substantial.
There are quite a few issues which can arise on return to Australia which are significant from a financial viewpoint and deserve to be treated professionally; these include the repatriation of any pension funds and the (tax) treatment of any funds or investments which have been amassed offshore. Australian expats almost invariably return to Australia, rather than settle overseas, and this makes it important for them to properly structure their affairs with the Australian financial system in mind so that you do not miss out on opportunities and ensure that decisions are tax effective.
Making an Inquiry
Most Australian financial planners are focussed entirely on the domestic Australian market and we have a network of planners who have both a continuing interest in the expatriate market and cover specific areas of expatriate concern - integrating well with other specialists such as tax advisors, lawyers and actuaries, as required, to provide broad advice.
All planners welcome inquiries from expatriates and are happy to have an initial discussion with expatriates on a no-commitment basis, whether over the phone, skype or in person, to discuss their individual situation and see whether they can provide assistance in their area of concern.
Financial planners are expected to work on the basis of providing full disclosure to the client of all remuneration. Where the planner is remunerated on a fee basis they will provide a quotation in advance for any services or advice after having thoroughly discussed the scope of work required with the client.