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Expat Chat Ep 6 – Election wrap up, health insurance for expats, interest rates and EOFY

Welcome to our sixth episode of the #Expatchat podcast where we discuss the latest financial issues affecting Australian expats.

 

In today’s chat we discuss:

  • Federal election wrap up
  • Health insurance for expats
  • Interest rate cut
  • End of financial year checklist
  • Expat Insights Survey update
  • Australian expat mortgages

Topics, articles and events featured in this podcast:

 

 

 

 

Expat Chat Ep 6 – Election wrap up, health insurance for expats, interest rates and EOFY

 

Brett Evans:                        G’day expats, and welcome back to Expat Chat. I think it’s pretty safe to say that we’re off to a pretty busy start to this year.

James Ridley:                     Yeah.

Brett Evans:                        Episode six.

James Ridley:                     Yes.

Brett Evans:                        Apologies for the radio silence. As you could imagine, when we have events like elections and also, too, the end of financial year rapidly approaching, it becomes an incredibly busy time for us.

James Ridley:                     Ooh yeah.

Brett Evans:                        We saw the result on Saturday, and I think it’s a safe assumption to say that, Australian expats should be happy with the result.

James Ridley:                     Oh, absolutely.

Brett Evans:                        Just from a financial perspective. There’s obviously other things which we ain’t going to do. We’re not a political show. But, as far as the back pockets concerned.

James Ridley:                     Yeah.

Brett Evans:                        Yeah, I think it was a good result.

James Ridley:                     Oh, absolutely. And I mean, I’ve put that down as one of the things to just quickly touch base on, as the agenda. And I’ll just quickly run through the agenda, today.

Brett Evans:                        Please do. Yeah.

James Ridley:                     I want to touch base on health insurance for expats.

Brett Evans:                        Okay. Good.

James Ridley:                     What is it?

Brett Evans:                        Yep.

James Ridley:                     How it operates, is it worth it?

Brett Evans:                        Yep.

James Ridley:                     That’s going to actually lead into this funny article that I’ve seen on news.com.au.

Brett Evans:                        Okay.

James Ridley:                     Probably not the most reputable source of the news.

Brett Evans:                        The purveyor of knowledge. Yes, yep.

James Ridley:                     What some Australian expats have been doing, which I thought’s quite clever, but it’s also an issue. Election wrap up: just what it means to Australian expats, just a quick run down. Just want to touch base on Facebook groups.

Brett Evans:                        Okay.

James Ridley:                     On what you hear and see.

Brett Evans:                        Ooh, yeah. That’s a good one.

James Ridley:                     I’ve seen some nasty things.

Brett Evans:                        Yep.

James Ridley:                     And then, just a quick update on the Expat insights survey, because it’s closing soon.

Brett Evans:                        Yep. That’s right.

James Ridley:                     And then, end of financial year is approaching. Remembering that you’ve got to lodge, if you haven’t lodged, and this is your first time overseas, tax residency, those sort of things. And then, I briefly, lastly, just want to touch base on the interest rate cut that is coming.

Brett Evans:                        Yes. Yep. Well, the dollar’s showing it, isn’t it?

James Ridley:                     Exactly. And what it means for the Australian dollar.

Brett Evans:                        Bingo.

James Ridley:                     Let’s start. So firstly Brett, expat-

Brett Evans:                        Before we go there we’ve got to go through the disclaimers, remember? Yeah-

James Ridley:                     Of course, sorry.

Brett Evans:                        … we’ve got to keep the powers that be happy.

James Ridley:                     Sorry, of course.

Brett Evans:                        For those who are listening on the podcast, and not watching on YouTube or Facebook, this information is general in nature, and please don’t use it as your own personal advice.

James Ridley:                     Mm-hmm (affirmative).

Brett Evans:                        Always seek the advice of a registered professional.

James Ridley:                     Exactly right. No. Glad we got that one out.

Brett Evans:                        Yep. No, that’s right. Exactly. We’ve got to keep those people happy, you know?

 

Health Insurance for Expats

 

James Ridley:                     Exactly. So, health insurance for expats.

Brett Evans:                        Yep.

James Ridley:                     I mean, I always have consults, inquiries, asking me, “Is it worth getting health insurance for expats quotes? Is it worth getting it?” Even just inquiries, comes from on the website, saying, “I need this quote.”

Brett Evans:                        Yep.

James Ridley:                     And, It’s just like, “Okay. Well, do you understand what it is and what kind of benefit it is providing?” I don’t know too many providers in Australia, that do it.

Brett Evans:                        Yep. Look, we’ve, in the past, done a bit of work with nib.

James Ridley:                     Okay, yep.

Brett Evans:                        And it’s more like life insurance, than it is like health insurance.

James Ridley:                     Okay.

Brett Evans:                        So, when you’re a member of Medibank Private, Bupa, on those sort of health funds in Australia, that’s health insurance. And, nib is one of the few Australian companies to offer health insurance for expats.

James Ridley:                     For worldwide, yep.

Brett Evans:                        Yep. And, when you do that, what essentially happens is, that insurance is actually general insurance. And it is underwritten, at time of policy.

James Ridley:                     Oh, okay.

Brett Evans:                        So, what it means is, you’re guaranteed cover when you’re away. Now there’s always that trade off, because it’s not exactly as cheap as insurance is in Australia. You can mitigate some of the costs, by excluding the US, if you’re not going there. But, essentially, from past dealings with nib, there’s three levels of packages, like most plans, you can select your different packages.

Brett Evans:                        The benefit of using someone like nib, versus an overseas provider, is, as we know, if you have private health insurance in Australia, you can only really suspend your insurance for one or two years. And then after that, some insurers don’t let you keep suspending it.

James Ridley:                     No. No, no, they don’t.

Brett Evans:                        If you go with nib, so let’s say for example, you know in six months time you’re going to go overseas, you move your health insurance across nib, and then you can convert that health insurance into general expat cover. And then, if you’re away for 10 years, when you come back, that cover converts back into health insurance. There’s no change in loadings, there’s all these sort of things, because you have continuous cover.

James Ridley:                     So, they’ve got the record that you’ve maintained some sort of private health cover-

Brett Evans:                        Bingo.

James Ridley:                     … at all times.

Brett Evans:                        Yeah, exactly.

James Ridley:                     And even, probably claims history, as well.

Brett Evans:                        Bingo. Yeah.

James Ridley:                     Okay.

Brett Evans:                        So, from their point of view, you’re a known entity. And, that’s why they’re happy to play that game. But, we have had times where clients have sought out quotes for health insurance for expats, who hadn’t been exposed to the cost of overseas health insurance, before. And, have fallen off their chairs, when they see the numbers coming through.

James Ridley:                     Listen, I’m happy to provide a bit of an insight on the cost, to be honest. Because, I’ve had a quote about four months ago, nearly made me fall off my chair to be honest. So, it was a mum and dad, heading to Singapore, actually. Two kids. They excluded the US. The premium came to just over $12,000 Australian. So, very high. I mean, I was speechless when I saw it, to be honest.

Brett Evans:                        It is a lot, but I think what people forget, too, is the cost of health insurance in Australia has actually been going up at a rate of two or three times the rate of inflation.

James Ridley:                     Yep. Yeah, okay.

Brett Evans:                        So, I know, personally, from my… we’re with Medibank Private. And, we pay about 500 bucks a month, for the family.

James Ridley:                     Yep. Okay. Yep.

Brett Evans:                        So, 1000 bucks a month is a lot of money. But, you are getting worldwide health cover.

James Ridley:                     Yeah. Yeah, and I think-

Brett Evans:                        Whereas, 500 bucks a month, only covers for me, in Australia.

James Ridley:                     Yeah. Yeah. But I mean, also the purpose of private health, here in Australia, is the Medicare levy rebate, all those sorts of things. So, you’re more incentivized to pick it up. Whereas, you’re not going to get a tax benefit anywhere around the world, for having expat cover, even if you’re residing in Singapore, the US, wherever it might be.

Brett Evans:                        It’s peace of mind.

James Ridley:                     Yeah.

Brett Evans:                        Yeah.

James Ridley:                     Exactly right. Okay. So, it’s case by case. I mean, it’s going to be a lot cheaper for an individual, where it could be worth it.

Brett Evans:                        Yep.

James Ridley:                     And, I’d say, usually on those providers, they’ll have a list of different medical centres that you can actually go to.

Brett Evans:                        Yep. That’s right.

James Ridley:                     Yeah. And, it sounds like it’s mainly the majors, like Bupa, nib.

Brett Evans:                        Well, I know with nib, you pretty much not go to almost anyone, but you can go to anyone.

James Ridley:                     Yep.

Brett Evans:                        And then, you have a limit, and you just give them your receipt, and you claim it back.

James Ridley:                     Oh, okay. Yeah, yeah.

Brett Evans:                        So, that’s why it’s a bit different from standard health insurance, where you fund the whole thing yourself, but then you take your receipt in, and they’ll pay you a percentage back.

James Ridley:                     Oh, okay. And, this is a good segue into this article I read.

Brett Evans:                        Yeah, are they going to be able to get Bali?

James Ridley:                     I think it might’ve even been been a Facebook group in Bali.

Brett Evans:                        Yep.

James Ridley:                     So, apparently, a lot of people, a lot of expats, not just Bali, some other countries, they’ve been taking out travel insurance, but they’ve been using fake Australian addresses, so they can acquire the policy.

Brett Evans:                        Oh, okay.

James Ridley:                     And then, when they’re in Bali, or other places-

Brett Evans:                        So, they’re actually living in Bali, but they’re buying Australian insurance for travel?

James Ridley:                     Yeah. So, they lie to the individual that sets them up on the travel insurance. They have a fake Australian address, and then, if they’ve got gastro or something, they’ll go and make a claim, they’ll take a picture, send that back over to the Australian travel insurance company, and then they’ll remit them the amount.

Brett Evans:                        Okay. Yep.

James Ridley:                     But, they’re holding these travel insurance policies for a very long time, claiming on them multiple times.

Brett Evans:                        But, they’re not actually back in Australia? Yeah.

James Ridley:                     Not all. I mean, I see two issues. I mean, eventually they going to catch you out.

Brett Evans:                        Yep.

James Ridley:                     And secondly, you’re putting down a fake Australian address, and anything of that nature is ever provided to the ATO, tax residency. Tax residency issue. It calls it into question, okay they’re living over there, but hang on-

Brett Evans:                        Would it-

James Ridley:                     … they’ve just taken out a travel insurance policy.

Brett Evans:                        What your behaviours are. They matching that, I’m an Australian resident, who’s going overseas on holiday.

James Ridley:                     Exactly right. So, it’s a funny article. And, I must say, it’s quite creative, the way-

Brett Evans:                        Yep. Oh, yeah.

 

Accepting Financial Advice from Expat Facebook Groups

 

James Ridley:                     And, its quite amusing, because it’s something that’s been in these Facebook groups. Now another segue, I mean… around the world there’s all these Facebook groups-

Brett Evans:                        We should have this danger, danger sign-

James Ridley:                     Yeah.

Brett Evans:                        … flashing, every time we say, Facebook group.

James Ridley:                     Yeah. Australian Expats in Germany, Australian Expats in London. There’s plenty of them. There’s thousands of members. And, I suppose, we’ve seen pretty ugly things that have been put up in those.

Brett Evans:                        Oh, makes your blood turn. Yeah.

James Ridley:                     Oh. But, just the fact that people are happy and willing to take capital gains tax advice, from someone that’s not a registered accountant. They’re just someone that’s a member of that group.

Brett Evans:                        And, they heard it from so-and-so, and off we go, and-

James Ridley:                     And, they’ll take that advice. I mean, the scariest ones that I see, are actually, over in the US, and the filings, and the different forms. Because, yeah, that’s, you know…

Brett Evans:                        Oh look, it’s funny how… There was one that went on the other day, in one of the US groups, and it was a debate about, if you’re about to leave the US, do you have drawn down your 401(k) before you go, or after you go?

James Ridley:                     Oh, yes. Yeah, yeah.

Brett Evans:                        And, I didn’t count the numbers, but I would say 80% of responses actually said, “No, do it when you’re back in Australia.”

James Ridley:                     Ooh, okay.

Brett Evans:                        Which is the worst thing you can do.

James Ridley:                     Yeah, yeah. I mean, DT, double taxation.

Brett Evans:                        Double… Exactly. So, suddenly you’ve got ATO and the IRS to contend with. As opposed to, if you do it the US, it’s just the IRS.

James Ridley:                     Yeah.

Brett Evans:                        And, that was a classic case in point. Those people who probably thought they’re doing the right thing, their rudimentary understanding of what they’ve been through may cost this person 5, 10, 15, 20,000, depending how big their 401(k) is.

James Ridley:                     Yeah. Yeah, yeah, yeah.

Brett Evans:                        But it could be, just, that something so simple, as a question, that leads you off into something that costs you a fortune to pay.

James Ridley:                     Yeah, well I took a consult, and it’s funny they bring up the 401(k), probably, I reckon it would have been in six weeks ago. And, it was from an individual, I think that guy was 55, he’s been back in Australia for a long time, and he’s just withdrawn a 140,000 US 401(k).

Brett Evans:                        Wow.

James Ridley:                     And, I was like, “Did you get any advice before you did that?” He goes, “Oh no, I could see that I could log on, I’ve got an American bank account that I can use, so I just withdrew the whole thing.” I was like, “Well, have you done any tax planning? Have you spoken to a tax accountant?” He’s like, “No, I’m doing all that now.” I’m like, “Shit.”

Brett Evans:                        Yeah, that’s right, yeah. How do I say that? Yeah.

James Ridley:                     So, I just, listen. I just educated him the way it’s going to be taxed, IRS, first, is going to get their piece of the pie, you’re under of 59 and a half, there’s a 10% penalty tax there, non-resident alien tax, and then, yep, you’ll get a front in tax credit, here in Australia. And then, I had to get a bit of an idea of his-

Brett Evans:                        Earnings in Australia.

James Ridley:                     Yeah. And, he’s actually in the highest marginal tax rate.

Brett Evans:                        Oh, okay, so-

James Ridley:                     So, he’s on a good wicket. So, I just said, “Listen, it’s quite likely that you’re going to lose half your balance, in tax.” And, he’s like… it was a hard call, and I’m happy being honest, and just give him the situation, because now he can try and do some planning in the background. But, seek advice before you do something like that, because he’s now lost half that retirement account.

Brett Evans:                        Caught up with a colleague of ours, the other day. He does a lot about accountant work in the US. And, he was just full of horror stories about people taking action, without seeking advice. And, the and the best one he gave, was, there was a couple that had a self-managed super fund with ETFs through it, which we know is a big no-no, on the SMSF side, and also on the ETF side, with our US clients.

James Ridley:                     Yeah, okay. Yep.

Brett Evans:                        Suddenly, you’ve got a foreign grantor trust, combined with PFICs.

James Ridley:                     Yeah, yeah.

Brett Evans:                        It’s the Holy Trinity. So, they thought they’d do the right thing without seeking advice, and they did 100% drawdown of the super fund-

James Ridley:                     Yeah, okay.

Brett Evans:                        … and close the super fund.

James Ridley:                     To wind it down.

Brett Evans:                        And they said, “Good news: we’ve fixed that problem.” Problem is, when you do that 100% drawdown from your super fund, suddenly, that balance is assessable income, in the United States. So, these people drew down $750,000, and then, now have to pay income tax on that 750, in the US. And, they thought they’re doing the right thing.

James Ridley:                     Yeah. Okay. I mean, they didn’t seek any advice on it.

Brett Evans:                        That’s right. They came to on after, and they said, “You’d be proud of us, we did this.”

James Ridley:                     We thought we sorted it.

Brett Evans:                        Yeah.

James Ridley:                     No, you’ve actually just created a serious tax event.

Brett Evans:                        Great example. Good intentions doesn’t equal good financial outcomes.

 

Australian Federal Election Wrap up

 

James Ridley:                     No, not at all. All right Brett. So, I want to bring us back around now, because you and I both know we can go on tangents regarding US matters.

Brett Evans:                        Hours, yes.

James Ridley:                     Yep. So, I just want to come back to the election wrap-up.

Brett Evans:                        Yep.

James Ridley:                     You know, I mean, I’m happy being honest. I’m pretty happy that Labor didn’t get in. Because, a lot of the rules around capital gains tax, trust taxation, removing personal tax-deductible contributions, a lot of the things they wanted to make changes to, I could see it impacting our whole client base, to be honest.

Brett Evans:                        And that’s the thing, is, I think, from a political point of view, taking our personal political hats off, but from a company’s political standpoint, all we care about is Australian expats.

James Ridley:                     Exactly.

Brett Evans:                        So, whichever party has the best results, and, I said not too long ago, when Labor came out, and supported Australian expats, with regards to the main residence exemption, I was all for Labor. But, in the election, from an Australian expat’s point of view, I was all for the Libs. Because, what we’re going to see, is… And, to me, I think the reason they lost the vote, was, they tried to do too much.

James Ridley:                     Yeah.

Brett Evans:                        There was, just everyone had a crosshair on them.

James Ridley:                     Yeah.

Brett Evans:                        And, whether it was franking credits, whether it was negative gearing, whether it was trusts-

James Ridley:                     I feel like Liberal were just sitting back, as well.

Brett Evans:                        Yeah.

James Ridley:                     So, you know what, you can announce all these things. We know how it’s going to go, we how it’s going to play out, and it’s probably why there was such a safe budget, as well.

Brett Evans:                        It is. And, I think, Bill Shorten probably thought what he was doing, was an altruistic approach to the greater Australia.

James Ridley:                     Yep.

Brett Evans:                        But, I think everyone’s concern was, what price are they going to pay personally, to fund this grand vision of what he was proposing? And, we all know, right now, the cost of living is as high as it’s ever been.

James Ridley:                     Yep.

Brett Evans:                        1 in 20 mortgages are in distress.

James Ridley:                     Yes.

Brett Evans:                        People haven’t got the luxury of being able to vote for the environment, when they can’t put food on the table.

James Ridley:                     Yeah.

Brett Evans:                        So, I think, to me, Saturday’s result, double thumbs up for Australian expats.

James Ridley:                     Yep.

Brett Evans:                        Because, even though I just… I’m really sceptical of whether Libs will bring back the MRE, because they haven’t officially walked away from it, yet.

James Ridley:                     Yeah, I know. I know.

Brett Evans:                        And, anyway, we’ll see what happens there.

James Ridley:                     Yeah. Yeah, I probably won’t go into it, but MRE is just Main Residence Exemption, and how they wanted to remove it for Australian expats.

Brett Evans:                        Yep.

James Ridley:                     Yep. But, might see 2.0, or they might throw it out.

Brett Evans:                        Yep. Let’s hope they throw it out.

 

End of Financial Year Tips for Australian Expats

 

James Ridley:                     So, let’s hope they throw it out. So, no, that’s good. And now, I want to touch base on end of financial year. It’s fast approaching. And, with any new Australian expats that have recently gone overseas, this financial year is probably the year that you’ll be declaring that you’re a nonresident, and the best way to do it, is actually through the tax system.

Brett Evans:                        Yeah.

James Ridley:                     Through this tax return that you’re going to lodge, whether it be yourself, or your accountant. I always say, to any consult that I have, “If it’s your first year overseas, get an accountant to do it properly. You want it done properly, from the get-go.”

Brett Evans:                        You want a nice little bow on top. You want to tie it off perfectly. Yeah.

James Ridley:                     Exactly right. You want to make sure it’s done correctly, so you don’t have to go back five years later, and try and amend that, and go, “Oh, crap. I was never declared a non-resident-

Brett Evans:                        That’s right.

James Ridley:                     This is why I’m receiving a letter from the ATO about this income that I’ve received, while I’m in Saudi Arabia,” or something.

Brett Evans:                        Yep.

James Ridley:                     So, do it correctly. Further on that, if you’re already an Australian expat, and you’ve got a HECS debt, remember you’ve got to file. You got to file that worldwide income.

Brett Evans:                        Not only that, but you’re meant to have told them, within seven days of moving, what your new overseas conduct details are.

James Ridley:                     Yep.

Brett Evans:                        That, as well as… We meet people every week, who have HECS debts, and don’t realise.

James Ridley:                     Yeah, well, I mean, I’ve had plenty of people I’ve talked to, where they’ve been over a few years, they haven’t done a HECS lodgement, so, “Well, you’re meant to do one last year,” I was like, “I’m not going to lie, you’re going to be up for a little bit, and there’s probably going to be a fine, or maybe some interest on that, as well.”

Brett Evans:                        Yep.

James Ridley:                     Yeah.

Brett Evans:                        Big question is, is how connected the intergovernment agencies are. Certainly, I’ve heard from a number of reputable sources, that the ATO is dialled in with immigration, and their intention is, if you fly back into the country, and haven’t done this lodgement, $3,000 fine on the spot.

James Ridley:                     Yeah, okay. Jeez. Wow.

Brett Evans:                        So, yeah. And, that $3,000 doesn’t go off your HECS debt.

James Ridley:                     No.

Brett Evans:                        You got to do that, on top of what you owe them.

James Ridley:                     Yep.

Brett Evans:                        So, it’s something… Look, face up, you got schooling for free.

James Ridley:                     Yep.

Brett Evans:                        You’ve had a free kick, for many years, as an Australian expat, not to pay it.

James Ridley:                     Yep.

Brett Evans:                        You just got to pay it.

James Ridley:                     Yep. Yeah, it’s time to… Yeah, exactly right. Okay. So yeah, touching base, ATO, end of financial year, let’s get those tax returns in, don’t forget about them, because the longer you leave it, the harder it gets. Now, I want to touch base on the insights survey.

 

Expat Insights Survey Update

 

Brett Evans:                        Yes. Yeah, well, it’s a sprint to the finish now.

James Ridley:                     Exactly.

Brett Evans:                        So, what are we, 23rd, so we’re looking at eight days until the survey closes off.

James Ridley:                     Yep.

Brett Evans:                        Checked it this morning, 2,770 responses.

James Ridley:                     Amazing. Yep. Just pause on that.

Brett Evans:                        Yeah. Go.

James Ridley:                     Because, we could have first-time listeners, and they won’t know what this is.

Brett Evans:                        Okay. So, what we’re doing is, it’s essentially… a testing the temperature of Australian expats throughout the world. We’re talking on issues of career, finance, family, lifestyle, and just generally, your experiences. And, the survey really covers all bases. So, we’re asking people who are on their first expat assignment, and also veterans, as well.

Brett Evans:                        We want to hear from everyone, because for us, the thing that really boils our blood, is when we see, not only misinformation come out of Canberra, as to what an Australian expat is-

James Ridley:                     Yes, of course.

Brett Evans:                        Everyone thinks, seven-figure salaries-

James Ridley:                     I know. Yep.

Brett Evans:                        …that are travelling the world. The 2018 survey clearly have showed, that the most popular sector for work, for an Australian expat, is education.

James Ridley:                     Education, yep.

Brett Evans:                        Now, I don’t know many teachers on seven figures, but-

James Ridley:                     No, no.

Brett Evans:                        Maybe, they’re working for some sheikh , or something like that-

James Ridley:                     Yeah.

Brett Evans:                        …but, good on them.

James Ridley:                     Yep.

Brett Evans:                        But yeah, it’s really… The survey’s there for two reasons. A) So that, when we see nonsense coming out of Canberra, we have hard data, we can show them and say, “Hey guys-

James Ridley:                     Yep, throw it on them.

Brett Evans:                        … you think they’re, they’re actually Y.”

James Ridley:                     Yep.

Brett Evans:                        Secondly, there’s an Australian resident moving overseas every 1 minute and 49 seconds, according to the Australian Bureau stats. By getting this information… And we just turned around, we actually put it in a report, and we put it on our web page. It enables someone moving to Cambodia, or Dubai, or London, to see what their fellow expats are saying, about living there.

James Ridley:                     Yep.

Brett Evans:                        Is it great for the career? Is a great for their family? Is a great lifestyle? There’s a thousand blogs out there, about expats, and experiences, but they’re not always written by an Australian expat, or from that tense.

James Ridley:                     No. Not at all.

Brett Evans:                        So, the great thing that this is… And, we’re getting a collective number. Obviously, 2,770 people, lot of feedback, as to whether that country, that city is a good place to move.

James Ridley:                     Yeah. Yeah, exactly right.

Brett Evans:                        You’d rather know that before you went, or if you did know it, at least be prepared for it. And then, we also address things like, the cost of living, is schooling more expensive than Australia? Is healthcare, groceries, transport, everything? And, by breaking it down into some very easy to digest diagrams, and quick report, people can now suddenly go, “Great, okay, I’m moving to Dubai. Righty-o, salaries are good, tax is low, fantastic. But wow, look at accommodation and schooling.”

James Ridley:                     Yeah, okay.

Brett Evans:                        So, when they are preparing to go there, they’ve at least got a bit of an idea, as to what to expect. So, the survey’s they for two reasons, A) To educate the government, because they’re certainly far behind. But, B) And most importantly, to help expats not only be move overseas for the first time, but if you’re relocating from San Francisco to Shanghai, you’d want to know what Shanghai is like.

James Ridley:                     Yeah, exactly right. You want that, as I say, insight. You want to know exactly what it’s right there, on the ground. At the moment, how many countries have we got, that have… or, how many Aussie expats from different countries? So, what’s the countries?

Brett Evans:                        85 countries.

James Ridley:                     Yeah, wow, okay. And based on the hard data, how many country reports do you think we’ll be able to do?

Brett Evans:                        Yep. I think, we’ve lift the minimum reporting standard, from last year. As the numbers are going up, we got to do that as well. So, we want to make sure that the results are statistically significant. Say that after a few beers.

James Ridley:                     Yes, yeah.

Brett Evans:                        So, we’ve lifted up, now, based on the new hard floor, we’re looking at at least 25 countries.

James Ridley:                     Yeah, great, yep.

Brett Evans:                        Hoping to have, maybe 30. So, implore everyone out there, I’ll put a link in the show notes, and a link in the description below. If you haven’t done the survey, it would mean the world to us, if you just jump on, takes eight, nine minutes of your time. The responses are completely anonymous, so we’re not going to come and track you down.

Brett Evans:                        And, the only thing we ask is, at the end, if you do want to leave your details, we’ll send you a copy of the report when it’s finished. But, apart from that you can leave that blank, and fill everything else in. We’re not going to find you. The ATO is not going to find… Like there’s no-

James Ridley:                     No, no. Yeah.

Brett Evans:                        I’ve seen some conspiracy theories out there. This, to us, is an altruistic thing. It actually costs us money to do. But, we have heard, for the last eight years, time and time again from expats, and soon to be expats, about a lack of information out there. And this is, I guess, our way of trying to plug that gap, and provide a service, which we think is pretty valuable.

James Ridley:                     Yeah. Yeah, absolutely. Okay. No, that’s great. So, obviously, seven days, if you haven’t done it, please get on it, because, I mean, the data is just invaluable.

Brett Evans:                        Look, it is. It’s something that… we’ve actually had some pretty high level organisations reach out to us. Which, you’ll probably see in the press, and what we do in the coming months. And, it’s great to see other organisations who are as passionate about Atlas. We’ve talked about Advance, before.

James Ridley:                     Yeah.

Brett Evans:                        Great guys and girls, they really go out there to bat for Australian expats, and very… take things on at a… head-on, at a high level too. They’re in Canberra. They’re talking to governments, and stuff like that.

James Ridley:                     Exactly.

Brett Evans:                        So, any way that we can help them, fantastic. And, to us, it’s just getting our collective voices together, from Australian expats, to work out, is everyone happy, is everyone sad? You know what I mean? The Australian diaspora is so diverse, and so spread out, it’s very hard to get that feeling, and different cities, and different countries, we shift all the time. So, that’s the other thing about the survey, which we’ll do every year, this is our second year, is, we’ll be able to test the temperature, over 10 years, and say, “Well, Hong Kong was hot in 2018, 2019, but look, people started to leave in 2020, what was the reason? Pollution. And, like you can-

James Ridley:                     Yeah, well you’ll be able to tie it, to even legislation changes, maybe-

Brett Evans:                        Bingo.

James Ridley:                     … they’re taxing foreign residents very differently.

Brett Evans:                        Yeah, exactly.

James Ridley:                     Yeah, exactly.

Brett Evans:                        Yeah, it’s a labour of love.

James Ridley:                     Yeah.

Brett Evans:                        We don’t make any money from it.

James Ridley:                     No, no.

Brett Evans:                        But, it’s something that we’re playing the long game on, and the more data we can gather, the more information we can disseminate.

 

Australian Expat Mortgages

 

James Ridley:                     Yep. Yep. All right. Well, moving forward, I saw this random article, actually, recently, and it is something that will impact Aussie expats. And, you might’ve seen it as well, it’s about last month, Westpac Singapore, and Westpac Hong Kong started writing to their customers, advising that they are planning to completely close down their remaining mortgage business, and ask them to refinance their loans, before the end of September, 2019. So, pretty alarming for a lot of Australian expats that are using them.

Brett Evans:                        It is. Yep.

James Ridley:                     Because, I know, I’ve had plenty of consults, where people have mentioned that they’re using it, especially in Singapore.

Brett Evans:                        Singapore’s been a big one, yeah.

James Ridley:                     Yeah, yeah. So, they’re closing up shop, which means, going to have to either look back to Australia, to refinance-

Brett Evans:                        And, that follows, remember NAB came out of Singapore about a year ago, as well, too.

James Ridley:                     Yep. Yeah, yeah.

Brett Evans:                        So, they’re all starting to wind back. I mean, they’re too busy putting out bush fires in Australia, after the royal commission. So, all these little outposts that are more of a rounding error, than the revenue driver, to them.

James Ridley:                     Yeah.

Brett Evans:                        It’s just an annoyance, and they just want to get rid of it.

James Ridley:                     Yeah, it sounds like they’re getting rid of it, because it could always be, maybe a compliance risk, as well.

Brett Evans:                        That’s right.

James Ridley:                     And then, they can turn around and go, “Oh no, that rounding error’s actually just cost us millions and millions of dollars.”

Brett Evans:                        Exactly. Yep.

James Ridley:                     Yep. So, thought I’d just give individuals the heads up, just because, you just never know.

Brett Evans:                        If you do have a Westpac mortgage, in those countries, yeah…

James Ridley:                     Yeah, start-

Brett Evans:                        Might want to start the process of looking.

James Ridley:                     Yeah, start looking elsewhere.

Brett Evans:                        Elsewhere.

 

Interest Rate Cuts

 

James Ridley:                     Yeah, absolutely. And then, last item I wanted to touch base on, because it’s coming, is an interest rate cut?

Brett Evans:                        Yes.

James Ridley:                     I mean, I was reading the Financial Review, now, I mean, there’s rumours it could happen next month.

Brett Evans:                        Yeah. And, look, I think the dollar’s price that in, it was down at 0.6826 to the US. Great result for Australian expats, and repatriating capital.

James Ridley:                     Or, any Australian expat that gets paid in a currency that’s tethered to the US dollar.

Brett Evans:                        Exactly.

James Ridley:                     Yeah.

Brett Evans:                        And, whether that’s Hong Kong dollars, or Dirhams, or those sort of things.

James Ridley:                     Yep. Yeah, yeah.

Brett Evans:                        I think the also… it’s actually good for the Australian economy.

James Ridley:                     Yeah.

Brett Evans:                        We are an exporting country, by nature. Fun fact, yeah, technically speaking, we are a third world country, because we are an exporter. So, just something to throw out there, for the economic students. But obviously, when you think about our wheat, livestock, resources in terms of iron ore, and those sort of things-

James Ridley:                     Yeah, I was going to say, resources is a big one.

Brett Evans:                        And, you’ve combined the dollar, down at 0.68, and the price of iron ore, now above $100 USD a tonne.

James Ridley:                     Yeah. Yeah, yeah.

Brett Evans:                        So, BHP and Rio are having a field day right now, but because they went through that pain point for the last three or four years, they’ve actually dropped their cost of production by $20 a tonne.

James Ridley:                     Yeah, okay.

Brett Evans:                        So, they’re actually more efficient now, and they’ve got a lower dollar, and they’ve got a higher iron ore price.

James Ridley:                     They’ll be loving it. So, I mean, it’s likely that we’ll probably see, I mean, I don’t know how we would even get such data, but maybe a whole wad of money, coming into Australia, in the next six months. And, that article that I was reading, Financial Review, I mean, they were talking about three rate cuts, going as low as 0.5, for the cash rate.

Brett Evans:                        Yeah, look, I mean, I think we’ve got the benefit of hindsight, in terms of looking at what happened with Europe, and what happened in the US. When rates get down to a certain level, the rate cut loses it’s effectiveness. Look at the United States, they had to use QE to bolster that, because they cut it to zero, and still didn’t make a difference.

Brett Evans:                        So, to me, I don’t think we’ll go that hard, and I think, if anything, if it does dip, I think they’ll have their finger poised, ready to raise it at the first sign of growth. I mean, I was reading an article today, they’re talking about economic growth, getting back to 2.75% next year. So, I can’t see 0.5.

James Ridley:                     Oh, that’s huge, 0.5.

Brett Evans:                        I know there’s people who love to make a name for themselves, by making these grandiose statements, because the funny thing is, if they get it right, they’re geniuses, and if they get it wrong, people forget who said it, anyway.

James Ridley:                     Yeah. Yeah, yeah.

Brett Evans:                        So, they’ve got nothing on the line. But look, I think rate cut next week, is certainly on the cards. It will depend on employment growth, it will depend on unemployment. So, if we see a weakening of that number, lock it in.

James Ridley:                     Yep.

Brett Evans:                        But, if we see further weakening, you know…

James Ridley:                     Yep. Keep going.

Brett Evans:                        Could keep going.

James Ridley:                     Yeah, okay. And, I suppose it does give, obviously, a lot of Australian expats, that are paid in those currencies, the opportunity to send money home, they’re going to get a great return, they’re accruing wealth in their home currency. And, I mean, further on that, it’s going to translate to mortgages, interest rates. I mean, we could see interest rates at an all time low, and it could mean that there’s going to be opportunities for you to maybe go, and speak to your mortgage broker, refinance, maybe lock into a fixed period for three years, or-

Brett Evans:                        Unless you’re not a US client, remember that one?

James Ridley:                     Yeah, yeah. Yep.

Brett Evans:                        So, US clients land rebasing. So, you don’t want to pay out those loans. Yeah, look, I mean, I think Australian expats are in a bit of a juxtaposition right now, in terms of their loans, because yes, interest rates are falling, but expat mortgage rates, from what I’ve seen, are actually going up.

James Ridley:                     Yeah, well, I mean, they’re tightening… or the big four, they’re tightening who they lend to.

Brett Evans:                        Yeah.

James Ridley:                     And if you’re an Australian expat, they, regardless of you wanting to refinance, they might just say no.

Brett Evans:                        That’s right.

James Ridley:                     Yeah.

Brett Evans:                        And, in actual fact, you can’t compare an Australian expat’s mortgage rate, to a resident’s mortgage rate.

James Ridley:                     No.

Brett Evans:                        They’re two very different things.

James Ridley:                     Not at all.

Brett Evans:                        So, it’s like small business loans. There is no correlation to the mortgage rate.

James Ridley:                     No.

Brett Evans:                        They’re high, and they’ve always been high, and they won’t come down, but they’ll go up quickly, if the other ones go up. So, yeah, I think that’s the biggest thing that Australian expats are going to feel, is their loss of bargaining power.

James Ridley:                     Yeah. Yep.

Brett Evans:                        And, not being able to walk into a branch, and say, “Westpac are offering me 3%, I want 2.75 from you.” Nah.

James Ridley:                     And, it’s like, “Well actually, we’re going to make it 6%.”

Brett Evans:                        Exactly, that’s right. Yeah.

James Ridley:                     Because, I’ve seen some with 6%.

Brett Evans:                        Yeah.

James Ridley:                     And, I couldn’t believe it, to be honest.

Brett Evans:                        The last three I’ve seen, in the last week, is 5.8, 5.7, and 5.9.

James Ridley:                     Oh, it’s just ridiculous.

Brett Evans:                        Yeah.

James Ridley:                     You’d have they pay interest only, but even, then that’s ridiculous.

Brett Evans:                        Yep.

James Ridley:                     Just from the cash flow point of view, I mean, that property will be negatively geared.

Brett Evans:                        Of course, yeah. Yeah.

James Ridley:                     So, there’s not too much of a benefit, there. But yeah, I mean those Australian expats that can refinance in the coming months, I mean, whether you talk to your big four banks, or you use someone that’s experienced in that manner, it’s definitely worth just going through the pre-assessment, and finding out, because if you can lock that interest rate, which, has you at 5.8%, but then, suddenly it’s 4.8%, that’s amazing.

Brett Evans:                        Yeah, that’s right.

James Ridley:                     Yeah.

Brett Evans:                        And, I think, that’s the… when you look at the dollar difference over a 25 year loan, or a 20 year loan, or even 10 year loan—huge.

James Ridley:                     Yep. Yeah. Yeah, exactly right. And, I mean, if a lot of Australian expats right… I will say this, because it’s probably something that I’ve of people aren’t really thinking of, if they’ve got a variable interest rate loan, that’s interest only, and it’s going to drop, and it’s going to drop in line with what the cash rate’s going to drop, right now, they could have a negatively-geared property.

Brett Evans:                        Without realising it. Yeah.

James Ridley:                     And then, suddenly, that probably could accidentally become positively geared, which means, when they lodge their tax return or maybe year…

Brett Evans:                        Yeah.

James Ridley:                     Yeah. “Oh, hang on, shit, I’ve got a little tax bill. How’s that occurred?”

Brett Evans:                        Exactly. Because, it’s been negative up until now, because their mortgage cost has been so high. But now, their cost of the loan is going down, therefor the deductibles go down.

James Ridley:                     Yeah.

Brett Evans:                        And, as long as the rent doesn’t go down, then guess what? Bingo.

James Ridley:                     Yeah, exactly right. And I think if that happens, it’ll be really interesting. But, it just means, a lot of people are going to be, maybe a bit shocked, going, “Oh, hang on, why am I having to pay, maybe a few thousand taxable now?” Because, remember, non-residents 32.5%, that’s your tax rate, that’s your first tax.

Brett Evans:                        Yep. Yes. On the first dollar.

James Ridley:                     Yeah.

Brett Evans:                        There is no tax-free threshold, it is 32.5 Cents on the dollar.

James Ridley:                     Yeah, exactly. And, I find it sometimes amusing, where some people, they still think they have that tax-free threshold, and, it’s just like-

Brett Evans:                        Yeah.

James Ridley:                     … “Listen…” But, this is one thing the ATO needs to do better. Because, on the ATO website, it doesn’t say, “non-resident” tax rates.

Brett Evans:                        Nah.

James Ridley:                     Just says, “foreign resident.”

Brett Evans:                        Yep.

James Ridley:                     And a lot of people don’t realise, when you’re a non-resident, you’re foreign resident.

Brett Evans:                        They think, oh, if you’re Chinese, or if you’re British.

James Ridley:                     Exactly.

Brett Evans:                        Yeah.

James Ridley:                     Exactly. So, just remember, when you become a non-resident, the foreign resident tax rules apply to you.

Brett Evans:                        Definitely.

James Ridley:                     And, I mean, a recent case of that, was actually some clients that sold a property, sold a property in Brisbane, made a handy capital gain on it, and the foreign resident capital gain withholding tax applied to them, I think that-

Brett Evans:                        12%?

James Ridley:                     Yeah, well it used to be 10, now it’s 12.5.

Brett Evans:                        Yeah.

James Ridley:                     And, I think the capital gain, that got factored in, because they factored in the main residence exemption, was about 80 or 90,000. So, they had to send 10 to 12,000, can’t remember now, to the ATO. But, because they are Australian citizens-

Brett Evans:                        They can then-

James Ridley:                     … it’ll come out in the wash, when they lodge their tax return. I mean, the reason why it’s been introduced is, the ATO gets a little bit of the piece of the pie now, just in case that foreign resident, the Chinese investors –

Brett Evans:                        Well, that’s what was happening. They were selling up at a gain, and then taking all their money back overseas, and then saying, “Catch me if you can.”

James Ridley:                     And, not lodging that final tax return.

Brett Evans:                        Yeah.

James Ridley:                     So, that’s why it’s introduced, because it’s the way the ATO goes, “All right, I’ll have some now. And then, if it’s not the case, that I need to be taking that, then it’s going to come as a tax refund.”

Brett Evans:                        Bingo. Yep.

James Ridley:                     Yep. So yeah, exactly right. But, I mean, we’ll see what happens over the coming months, with those interest rates.

Brett Evans:                        Yep.

James Ridley:                     Yeah.

Brett Evans:                        Look, I think it’s got to be something that is very important for Australian expats to watch, because it’s going to affect, not only your loans, if you’ve got any sort of loans, but dollars, in terms of Australian dollars, these sort of things are a little bits and pieces that really do make a difference in your financial circumstances.

James Ridley:                     Yeah, exactly right. So, yeah, it is going to be interesting. And, I mean… I’d just be really interested to see if these tax bills start coming through, because the interest rate changes. Remember, there’s always ways that you can mitigate that, especially now that Liberal’s still in power, personal contribution-

Brett Evans:                        Contribution..

James Ridley:                     … and those sort of things. Still on the table.

Brett Evans:                        That 10% rule not coming in, which is great.

James Ridley:                     Yep, and I mean, they’re leaving catch-up concessional contributions, as well.

Brett Evans:                        Yeah.

James Ridley:                     So, Australian expats are going to be able to use that to offset capital gains, or even foreign super fund transfers, depending on what they’re looking at, and how they do it. So, it just means that, now that the Coalition is still in power, it’s allowing for current tax planning strategies-

Brett Evans:                        Or, three years with certainty. Call it-

James Ridley:                     Yeah, exactly right, yeah.

Brett Evans:                        Yeah. Yeah. At least we now know where the lay of the land is, for the next three years.

James Ridley:                     Yep.

Brett Evans:                        And, we can help clients navigate that. And, the catch-up contribution strategy is a great one. Balance is less than 500, you can really bank that up, and then use that deduction, when you need to.

James Ridley:                     Yeah, that’s right.

Brett Evans:                        And, if you plan ahead, you can always work it out.

James Ridley:                     Well, 125,000 at a low tax of 15%, that’s pretty handy.

Brett Evans:                        I know.

James Ridley:                     And, that’s Australian tax, out of the super fund, that’s amazing.

Brett Evans:                        Yeah. That’s beautiful, yeah.

James Ridley:                     But again, you’ve got to have that super balance under 500,000, but if you are going to do anything like that, please seek advice. We’re just mentioning it, just so you know about it.

Brett Evans:                        Like we learned at the beginning, always seek advice. And, not just pushing around barrow, talk to anyone who knows about Australian expat stuff, make sure they know about Australian expat stuff. Don’t just say, “Do you know about it?” They’ve got to understand how it works for Australian expats, because a lot of people say, “Yeah, of course we know about that,” but in actual fact, we’ve seen time and time again, people get led down the garden path, either paying for someone to do the research, or unintended consequences.

James Ridley:                     Yeah, I mean you’re just talking about match-fit. How many clients do they have on their roster, that’s exactly in your position?

Brett Evans:                        Yeah. Yeah. How many Australian expats do you look after? Yeah.

James Ridley:                     Yeah, exactly right. Brett, that’s actually all I have to run through today.

Brett Evans:                        Okay. No, that’s a good one. I think that’s a pretty good synopsis. Certainly, once again, thank you for everyone starting to leave reviews on the podcast, and also people who are subscribing to the YouTube channel. So, once again, our humble thanks. I will ask, though, those who haven’t subscribed, or those haven’t reviewed, please do it.

James Ridley:                     Yep. Jump on there.

 

Australian Expat Question on YouTube

 

Brett Evans:                        Because, we are getting feedback through. We did get a question from Daniel Borg, on the YouTube channel. Totally forgot about that. Let’s address that, right now.

James Ridley:                     I can’t remember it, can you remember it?

Brett Evans:                        Yep, I remember it.

James Ridley:                     Okay. Sorry, mate.

Brett Evans:                        I think what what he was referring to, was the six-year rule, and the temporary absence rule, and, to me, I think where the concern was, or the confusion was, was-

James Ridley:                     Yeah, because-

Brett Evans:                        … it was two subjects in one question.

James Ridley:                     Yeah, they are pretty different. Not really related, at all.

Brett Evans:                        It isn’t. So, do you want to run through quickly…

James Ridley:                     I’ll touch base on temporary absence.

Brett Evans:                        Yep, and I’ll do the six-year. Yep.

James Ridley:                     Yep. So, temporary absence rule, that’s mainly around central management control rules, regarding a self-managed super fund. So, you can still, sometimes, maintain a self-managed super fund, by being temporarily absent from Australia, and that would be within a period of two years. But, you do return to Australia for a period of, I think it’s consecutive 29 days. And, in those 29 days, that’s when the ATO would see you as doing all the daily operations, reporting, making all the important decisions of that SMSF.

Brett Evans:                        Yep.

James Ridley:                     Now, if you blow through that, and it’s over two years, you can still be determined to be temporary absent, but you need private ruling. Sometimes, private rulings can go south, and you don’t get the favourable treatment. But, essentially, two years is a general rule around temporary absence. After that, you put someone else as an EPOA, an enduring power of attorney, or you’ve put somebody else as the directors-

Brett Evans:                        Directors, yep.

James Ridley:                     … of the corporate trustees within there. But, just remember, it’s a form of rubber-stamping. The ATO frowns upon that now, and if you get audited, they find out that the individuals running that SMSF have no interest in, at all. Rubber-stamping, you could get fined, you could get wound up. It’s 50% of your balance gone, as well as the income. So, that’s temporary absence rule, in a nutshell. But, moreso relates to SMSFs, and central management control rules. Now, MRE.

Brett Evans:                        Whereas, the six-year rule, which I think Daniel’s referring to, is the main residence exemption, which applies for both residents and non-residents. And, the way it works is, let’s say for example, you had a house in Sydney, and you moved, either to Brisbane, or Barbados.

James Ridley:                     Okay.

Brett Evans:                        Okay? And, you continue to hold that property, you put a tenant in. Whether you lived in Brisbane or Barbados, as long as you didn’t buy a property in either one of those jurisdictions, that is still your main residence.

James Ridley:                     Yes.

Brett Evans:                        You can put a tenant in, and for the next six years, you can… still have to file returns, you still have to disclose the income, but you don’t accrue capital gains tax, in that period of time.

James Ridley:                     Exactly right.

Brett Evans:                        Now, at that six-year mark, you then have a decision to make, whether you want to either sell the property, and take your capital gains tax-free, or you roll it over into the different regime, which is the post–⁠six-year rule. So, very different there. Daniel, hope that answered your question. But, yeah, certainly reach out to us on the emails, as well, if you want anything further clarified. But yeah, it was temporary absence, and six-year, and I thought-

James Ridley:                     Yeah, I remember it now, and, I wasn’t confused. I think, maybe, he got it a bit confused.

Brett Evans:                        Yeah, yeah.

James Ridley:                     But, two separate rules. But, that’s essentially addressing it-

Brett Evans:                        Exactly.

James Ridley:                     … in two parts, there.

Brett Evans:                        Exactly.

James Ridley:                     So, yeah, that’s all.

Brett Evans:                        Righty, guys. Well, thank you very much. We’ve actually got a bit of some big announcements to make, in the coming weeks. So, watch this space. I think… yeah, it’s a first. And-

James Ridley:                     I’m going to call it a game changer.

Brett Evans:                        Yeah.

James Ridley:                     Yeah.

Brett Evans:                        Yeah. And, good for Australian expats.

James Ridley:                     Exactly right.

Brett Evans:                        Yeah, it’s going to be great results for Australian expats, which is all we’re about. Hope you enjoyed today’s show, and, as always, if you have any questions, please leave it in the comments below, on YouTube or certainly email us on the podcast, if you’re watching along there, or listening along, we should say. [email protected].

James Ridley:                     Yep.

Brett Evans:                        And, James, thank you very much.

James Ridley:                     Thanks, Brett.

Brett Evans:                        And, we’ll see you on Expat Chat.

James Ridley:                     Exactly right. Thanks, guys.

Brett Evans:                        Thank you.

 

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