With our beautiful landscape, passion for sport and most outdoor activities and our ‘down-to-earth’ approach to most aspects of life, it’s no wonder that most Australian expats are either planning to work or retire back home. When it comes to returning home, it’s not as simple as simply packing your suitcase, booking the flights and making the quarantine arrangements for your pets, there are a number of financial areas that you should consider as part of your repatriation strategy as well.
One of the most significant changes of repatriating to Australia is becoming Australian tax residents again and for many, paying a much higher marginal income tax rate than we may have become accustomed to as expats.
Over the years I have worked with many Australian expats in designing their repatriation strategy and ensuring that their finances are efficiently structured for their return home. With many Australian expats choosing to return home from Singapore and across the globe, I’ve put together my Aussie Expat Repatriation checklist for your consideration.
- Superannuation – Your Australian Retirement Savings
Despite recent changes that have been made to the superannuation system in Australia, it remains one of the most tax-efficient methods to save for your retirement, particularly if you plan on living out your golden years in the ‘lucky country’. If you hold investments outside of superannuation, whether it be direct shares, managed funds or other investment assets, you may want to consider whether it’s financially sensible to contribute some or all of these investments into your superannuation fund. This may be a far more tax effective way of holding these investments depending on your marginal income tax rate.
Depending on your role and employer, when you’re working in Australia your employer will also be contributing at least 9.5% of your salary into the superannuation fund of your choosing. It’s important to consider which superannuation fund is right for you rather than simply relying on your employer to provide it. This also prevents having multiple superannuation funds carrying multiple fees.
You may also want to consider whether a salary sacrifice strategy is right for you to boost your superannuation savings as well. With the concessional (tax deductible) contribution limit each financial year at $25,000, it may make sense for you to bump up your super contributions to this level. Here’s an example of how this strategy could look below. We’ll ignore the Medicare levy for the purpose of this illustration to keep it as simple as possible.
Without salary sacrificing
- Gross Salary $200,000
- Super Contribution $17,351.60
- Taxable Income $182,648.40
- Tax Payable ($55,423.78)
- Net Income $127,224.62
- Net Savings + Income $144,576.22
With salary sacrificing
- Gross Salary $200,000
- Super Contribution $25,000
- Taxable Income $175,000
- Tax Payable ($52,382)
- Net Income $122,618
- Net Savings + Income $147,618
As you can see, the net benefit of salary sacrificing is just over $3,000 that you’re putting in your pocket by increasing your superannuation contribution.
- Renting vs. Buying vs. ‘Rentvesting’
What neighbourhood should you live in? Where are the catchment areas for the right school/s for the children? What is the right school? Do we want to be on the train line? Should we rent or buy?
There are many considerations when it comes to deciding where you want to live in Australia, and for many expats our tastes change based on our lifestyles overseas. For many, it can often be the best strategy to move home and rent for a period of 6 – 12 months while you decide on where you’d like to live. You may then decide to purchase an investment property while renting your main residence, or simply continue renting as you’re not sure how long you’re going to stay in Australia for. While there is no right or wrong answer to whether renting or buying or ‘rentvesting’ is the best strategy, it’s often sensible to afford yourself as much flexibility as you can.
There has also been the recently proposed changes to the Main Residence Exemption for non-resident property owners. You can read more about these proposed changes here. This may also impact where you decide to live upon your repatriation home, but I would certainly suggest that you seek professional advice from your financial planner and / or accountant before deciding on such a strategy.
- Investment Ownership – Tax structuring
Now that you’re set to become an Australian tax resident again, you may want to consider your overall ownership structure for your investments. Should you consider setting up a family trust, or a private company, or should your investments be held by one member of your family rather than jointly owned. There are many considerations to factor in when it comes to the overall investment ownership strategy to ensure that you’re not paying more tax than you need to.
It’s also important to consider here that many investment structures such as discretionary family trusts and companies carry with them both initial set-up and ongoing running costs, so you need to ensure that the benefits of such strategies outweigh the initial and ongoing costs involved.
- Offshore Investments
If you’ve set up investment policies while living and working overseas, it’s important to consider how they will be treated once you’re an Australian resident again. If you plan to continue contributing to such a policy, it’s also important to ensure that you’re not being hit with exorbitant foreign exchange costs and that your investment portfolio remains aligned with your risk profile and overall financial goals.
Have you set up insurances while you were living overseas? Have you asked your financial planner whether they will continue to cover you upon your return home? You may also want to consider the currencies your insurance policies are held in depending on what they are designed to cover. It’s important that you don’t expose yourself here to unnecessary currency risks when it comes to the wealth protection aspect of your overall financial plan.
You may also want to consider transitioning your international health insurance plan to a domestic policy, particularly if you’re not planning on becoming an Australian expat again, or at least plan to remain in Australia for the foreseeable future. As always, ensure that you don’t leave yourself unnecessarily exposed or cancel existing policies before the replacements are in force.
- Keep In Touch
One of the many great aspects of being an Australian expat living and working abroad is the great friendships and relationships we make with people from all over the globe. With a return to Australia, it can be very easy to get busy and focus solely on domestic life down under and lose touch with our international connections. Consider how you’ll keep in touch and retain your connections globally, particularly if you have children. An international experience could just be one of the greatest gifts you ever give your child.
As you can see, there are many financial considerations when it comes to returning home. Ensure that you partner with the right financial planner and that nothing is overlooked for your repatriation.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group, specialist division of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian expats in Singapore.
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Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.