Are You Overwhelmed When Managing Your Assets As An Expat? – We see a lot of clients who are returning to Australia with no financial payoff for their time spent overseas.
It is hard enough managing your finances when you are living in Australia but when you add the complexity of living overseas as an Australian expat on top of economic events like the Covid-19 Pandemic and geopolitical events like the Ukraine conflict you could for forgiven for taking the easy path and doing nothing.
We call this “analysis paralysis”.
There are many reasons for this, but some are common enough to warrant further investigation.
- No defined financial goals – If you don’t clearly and precisely identify what you are working, saving, and investing for, there is very little chance that you achieve anything meaningful on the financial side. Thankfully, a lot of expats will see the light after 12-18 months of living the good life and scale back the expenses and start saving and investing.
- Not seeking professional advice – we see a lot of Australian expats managing their assets in the same way they did when they were living in Australia even though they are living overseas and the rules are completely different. On the face of it that doesn’t seem to be a disastrous idea! BUT everything changes when you become a non-resident for tax purposes. Your SMSF won’t work in the same way and the consequences of getting it wrong are very serious (non-compliance and a 46.5% penalty tax on the funds’ assets). If you invest in real estate, you will be treated the same way as any other foreign investor in Australia with extra land taxes, stamp duty on purchases and no CGT discount on sales.
When you first chose to move overseas the prospect of a new adventure that would also assist you in furthering your career would have been a driving factor.
However from our experience in working with Australian expats just like you over the last 10 years another motivating factor is that when it comes time to return to Australia you want to return having maximised the financial opportunities of living overseas and have a bank balance that is greater then when you left.
“She’ll be right” isn’t a money management strategy that will help you achieve those financial goals when managing your assets as a expat.
Where preferable it is always a good idea to obtain financial advice on the consequences of moving overseas, but if you have already moved and have assets in Australia like Australian property, superannuation, SMSF’s and investment accounts then it isn’t too late.
The other big issue we see is Australian expats seeking advice from advisers fitting into one of the following categories:
- Local investment advisors who have zero licensing and understanding of the Australian tax and financial rules,
- Advice from Australian advisors operating offshore who have not maintained their Australian licensing so they legally they cannot continue to advise on Superannuation and Australian domiciled investments but they continue to do so. You must ask yourself why they didn’t maintain their Australian licenses which are widely regarded as the most stringent in the world.
- Advice from either a licensed professional who you worked with when you were living in Australia or engaged someone back in Australia whilst living overseas. These professionals, the majority of the time, provide very good services to Australian residents but when it comes to providing specialised advice to Australian expats as they aren’t operating in the space 24/7 they may not be aware of all of the options that are available to you.
The Australian Financial Services industry is widely regarded as one of the best regulated and managed in the world despite the misconduct exposed in the recent Royal Commission.
In fact, the conduct exposed in the Royal Commission is the normal conduct we see from advisors around the world.
The most common inappropriate advice we see is:
- Advising clients not to make Super contributions whilst overseas.
- Advising clients to sell non-taxable Australian property such as shares and managed funds and to reinvest into high commission bond products with cashing restrictions.
- To not consider that Australia might be the best place to invest for someone returning to Australia to retire.
- Clients not understanding the fee structures on products offshore which can easily exceed 5% per annum.
To be fair it isn’t the offshore Financial Advisors fault that they don’t know about some of these issues. They haven’t had to comply with the strict education and licensing requirements that are imposed on those who are regulated by the Australian Securities & Investments Commission (ASIC) nor do they understand the complexities you face when managing assets as a Australian expat.
The fact is that what they are selling is frequently wholly inappropriate and unlikely to meet an Australian expat clients financial goals which isn’t a major consideration for them.
For all of the above reasons we have created our Second Opinion service for Australian expats.
This service allows you to speak to a specialist expat financial planner where you can explain your situation, the advice that you have received, and to see if you are maximising all of the opportunities available to you.
Its only 25 minutes of your time but in one of these calls you will work out very quickly whether you are on the right path or if more can be done to ensure you are making the most of your time overseas.