4 Superannuation Tips for Australian Expats – Australian expats are sometimes confused about how to make the most of their superannuation funds whilst living and working overseas.
In article we are going to give Australian expats 4 tips to help keep your Australian Superannuation growing.
1.Make sure your Super Fund is expat friendly – When you moved overseas hopefully you advised your Super funds of your new offshore address, and they will continue to send through correspondence.
In our experience some funds are more expat friendly than others. Some don’t want your account at all and will ask that you roll over your balance to another fund.
Or some funds will have life insurance offers only valid for residents of Australia, potentially leaving you uninsured if they don’t know you are working and living overseas.
We work with several funds that are expat friendly so get in touch if you need some help in this area.
2. Make Contributions – You should be aware of any retirement contributions that your employer is contributing on your behalf. You should consider the adequacy of this amount considering the 10% of salary your Australian friends are receiving each year.
In our view you should probably be trying to match these contributions (at least). There are two types of Superannuation contributions, concessional (tax deductible) and non-concessional (after tax contributions).
Unless you have taxable income in Australia the concessional contributions really won’t do anything for you. The non-concessional contribution is funded from an after-tax source and the limit this Financial Year is AUD$110,000 per member.
If you own property in Australia that is positively geared, then any concessional contributions into an Australian Super fund will reduce the tax you would pay on any income accrued by the property. You should determine the appropriateness of this strategy with professional advice.
3. Make sure your Super is properly invested – Superannuation is not some kind of magic black box investment delivering astronomical returns over all time horizons.
Most Super funds require member input on investment strategy and choice.
The 4 deadly sins of investment management in no particular order are;
- There is either too much or too little diversification
- Not enough exposure to Risk assets. If you are more than 10 years to retirement you should consider 60% allocation to growth assets (shares and property) a starting point.
- Too much exposure to Risk. If you are 5 years or closer to retirement don’t have 60% or more invested in risk assets unless you can afford to see capital losses or are happy to continue to work.
- Overbearing or limited investment options. We assist clients be sustainable and ethical, or invest in the sectors they believe will outperform the markets as a whole but you must maintain a sensible asset allocation and appropriate diversification .
4. Check to make sure you have a compliant fund – There are strict rules around control and operation of Self-Managed Super Funds (SMSF’s) and for the fund to be compliant it needs to pass three tests;
- Central Management and Control
- Active Member Test
- Establishment and Australian Assets Test
If you have a SMSF and you are non-resident we offer a FREE Second Opinion Service (SOS) on whether your funds meet the residency rules and what you need to do next to avoid non-compliance.
If you want your Superannuation to be biggest asset that can be in retirement don’t neglect it just because you are overseas. A little bit nurturing and attention can make an enormous difference in balance size at retirement.