“Success is where preparation meets opportunity”
– Bobby Unser
You’ve made the shift to Singapore from Australia, and you’ve now officially joined the ranks of being an Australian expat. You’re quickly making new friends on this little red dot, travelling around the region, experiencing new cultures and wondering why you didn’t make the move sooner, and equally why more people don’t do the same. The simple truth is that Singapore is an easy city to fall in love with, both for work and your career, as well as the safety and many culinary delights that the city has to offer. While it’s a great city to both live and work, it’s important to consider whether you’re making the most, financially, of your time abroad.
I’ve outlined below the 8 BIGGEST financial mistakes that I see Australian expats make, whether they’re new to expat life or having lived offshore for many years. These are most commonly areas that the clock can’t simply be wound back on and only if they’d have known sooner, could they avoid the unnecessary time and finance wasted.
1. Ignoring or even forgetting their superannuation
Investment into superannuation is open to anyone with an Australian Tax File Number, which is a relatively painless process to apply for. Depending on your age and personal circumstances, contributing to superannuation may be an important element of your overall wealth accumulation strategy, and can even be utilised to reduce your Australian tax liabilities, such as from rental income. It’s also important to review consolidating your superannuation if you have multiple accounts, as this could significantly reduce your fees and unnecessary administration.
Pro Tip: Before simply consolidating your multiple superannuation accounts into one, ensure that you or your financial planner conduct a thorough review of your existing accounts. You may find that you have valid insurance inside one which would be in your best interest to retain, or you may be a member of a fund that is no longer available and carries with it certain benefits.
2. “I’ll start saving for my retirement next year..”
It is an all too common occurrence to see many Australian expats earning a substantially higher income than they were in Australia and yet still managing to spend it all, or even finding ways to spend more than they’re earning. The common response when asked about their savings, is that they will start saving next year when they’re earning more, or when some other variable changes, which of course never eventuates. We often find that human behaviour will ensure that as our income rises, we’ll find our expenses rise commensurately.
Pro Tip: It’s important that you identify your savings and investment strategy for your retirement early and remember, pay yourself first. Whether you’re working with a financial planner or managing your own finances, ensure that your financial goals are clear, and that you continue to monitor both your progress toward achieving them and your overall asset allocation.
3. Literally ‘pissing’ away the disposable income
While the price of a reasonable bottle of Australian Sauvignon Blanc or New Zealand Pinot Noir has declined over recent years, we all agree that drinking on a regular basis in Singapore can be a significant element of our budget. If you’re heading out a few nights each week with your friends or colleagues for a couple of drinks or more, you’ll find that this can very quickly add up. Ensure that you pay yourself first and spend the remainder to ensure that you have peace of mind when you’re out for your next round of drinks, and don’t need to worry about there being nothing left for your retirement savings.
Pro Tip: Check out the Happy Hour specials in Singapore, of which there are plenty every night of the week. This can be a significant saving and also allow you to check out new places in this city state. Also consider Dry July or an equivalent month of going alcohol-free – you may just surprise yourself with how great you feel and how much more is left in your bank account at the end of the month.
4. Not filing their tax returns in Australia
When you become a non-resident of Australia for tax purposes your financial assets will be taxed at a different rate by the Australian Taxation Office (ATO). Update your residential address with the financial institutions who administer these investments, including both your Australian banks and any share registries with whom you have investments, ensuring the correct amount of tax is withheld. If you have a stockbroker or financial planner in Australia, ensure that they update your address and contact details to your Singapore information.
Pro Tip: If you own one or multiple investment properties in Australia, it’s also important to look at your cash flows and consider strategies to reduce your tax liabilities with clear financial strategies. As a non-resident of Australia for tax purposes, we do not have access to the tax-free threshold and instead must pay tax from 32.5% on the first dollar.
5. Forgetting to ensure their children are protected
If you have children, you should appoint a temporary guardian to take custody if both parents were to pass to ensure that your children have immediate care. It’s also important to have Permanent Guardians nominated and make sure that they’re aware of the nomination and have the children’s’ ID documentation on file to bring to Singapore in the event that it’s required.
Pro Tip: Speak to your financial planner or lawyer and ensure that you have the right documentation in place for both Temporary and Permanent Guardians. This is a seamless process and will provide you with some peace of mind about your children’s future.
6. Ignoring their personal insurance needs
Many Australian expats ignore their insurance needs and for even forget that they can place their Life and TPD cover through their superannuation fund. A common reason for overlooking insurance needs is also due to uncertainty about where you will be based going forward. This is why it’s particularly important to have the right level of cover in place and ensure that it’s both globally portable and flexible if you need to cancel it due to a better option being available in your next location.
Pro Tip: Consider setting up your insurance policy in the currency of your future destination and where the majority of your expenses would be. For example, if your insurance is to cover a mortgage and education costs in Australia, and your partner is more likely to move to Australia if something were to happen to you, then consider setting up your policy in Australian Dollars (AUD). Speak to your financial planner if you’re not quite sure how to go about this.
7. Becoming an FX expert overnight
As new Australian expats, we all typically become overnight foreign exchange experts. Whether it be transferring money back to Australia or elsewhere to cover mortgage repayments, or taking out multi-currency loans, many will try and play the ‘FX game’, with some ‘winners’ and those that face the negative repercussions of combining leverage with non-mark-to-market assets. Potential interest rate savings and the ability to switch between currencies may look appealing with multi-currency loans, however you must be aware of the potential pitfalls. Carefully consider all outcomes before committing to this type of loan. There are many other factors to consider when taking out multi-currency loans such as loan-to-value ratios, margin calls and otherwise.
Pro Tip: When planning for your retirement or long-term financial goals, start accumulating your wealth in that particular currency and take advantage of any movements in your favour as they arise. For example, if you plan to move back to Australia in the short to medium-term, buy a house upon repatriating, and retire in Australia, then start accumulating wealth in Australian Dollars (AUD). Remember, nobody has a crystal ball when it comes to foreign exchange, and even the experts can get it wrong.
8. Wasting the opportunity to accelerate your finances
Chances are, your disposable income is much higher than it was in Australia, particularly when you consider the tax rate difference. You’ve been given an opportunity to put yourself years ahead of your peers in Australia financially and you need to ensure you’re making the most of it. Map out your financial goals early, track them regularly, speak with a qualified financial planner, and explore how you’re going to ensure that you make the most of your time on this little red dot.
To your financial success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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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.