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

 

In today’s chat we discuss:

  • What Deemed Disposal is and how it affects Australian expats,
  • What an Australian expat needs to consider if they have student (HECS, HELP & TSL) debt,
  • Should an Australian expat maintain a Self Managed Super Fund (SMSF),
  • What Labors proposed changes mean to Australian expats
  • As well as some question and answers from requests that we have received.

Topics, articles and events featured in this podcast:

 

 

 

Expat Chat Ep 3 – Deemed Disposal, Expat Student Debt, Expat SMSF’s

 

Brett Evans:                        Hi there, and welcome to the third episode of Expat Chat. James, I think it’s pretty safe to say that we’ve been pretty blown away with the feedback. We were originally planning on doing these twice a month, and this is our third one in three weeks.

James Ridley:                     Yeah, exactly.

Brett Evans:                        The feedback’s been coming through thick and fast. So thank you very much for all the questions and queries that everyone’s had, and also just the nods to us, that’s been keep it up, so gives us the motivation to keep going again.

James Ridley:                     Absolutely.

Brett Evans:                        So, just a couple of housekeeping issues, for those on the podcast, sincerely appreciate it if you could subscribe to the channel, give us a rating, and also to write some reviews. Those reviews not only help us do a better job, but it also helps other Australian expats find the podcast, so that’s a great thing. For those watching on YouTube, please hit that subscribe button, and also give us some commentary in the comments. Because once again, it’s that sort of feedback, we know what direction to take this in. All we want to do at the end of the day is provide value to Australian expats.

James Ridley:                     That’s right.

Brett Evans:                        So it’s a big thing for us. Thank you once again and let’s get this show on the road.

James Ridley:                     Well, Brett, before we jump into it-

Brett Evans:                        Yes.

James Ridley:                     … we should have a disclaimer.

Brett Evans:                        Yes.

James Ridley:                     So, obviously.

Brett Evans:                        That’s right.

James Ridley:                     Ladies and gentlemen, do not take this as personal advice; It’s general advice only. We’re not actually providing advice to your specific situation. Obviously seek, obviously, a professional advice from an individual that is actually qualified, whether it be a qualified tax accountant or a qualified financial planner.

Brett Evans:                        Yep, definitely.

James Ridley:                     So, not personal advice.

Brett Evans:                        Yep, fantastic. Happy International Women’s Day. Today is pretty auspicious day for half the population out there, which is fantastic.

James Ridley:                     Yeah, that’s right.

Brett Evans:                        Certainly as a father of two daughters… it’s great to see a lot of the things. We decided to look at the data that we grabbed from the expat insight survey last year, and come up with some pretty interesting facts, actually. So just to run through some of those, over 60% of Australian expat females are actually holding a bachelor or a postgraduate degree. So they’re smart cookies, which is fantastic. Motivation for going overseas, appears that the adventure streak runs just as strongly with females and males, with 24% of Australian women moving overseas to find a new challenge, which is great.

Brett Evans:                        The world is a big place, and we always encourage people to get out there and experience it. It certainly looks like the ladies are taking that onboard. The next two most popular ones were certainly the issue of inter-citizen marriages. We had a lot of responses there: 19% of people moving overseas because they had a foreign citizen as a spouse or partner. And the last one was: 16% of Australian women moved overseas because their partner accepted a role.

James Ridley:                     Yep. Relocating the whole family.

Brett Evans:                        Relocating the whole family. Exactly. So, picking up the whole lot and moving them across. It’s always interesting to find out the methods or the motivations behind the screens, anyway.

James Ridley:                     Absolutely.

Brett Evans:                        Destination wise, this probably didn’t come as a surprise.

James Ridley:                     No.

Brett Evans:                        The top two countries were the United States at 26%, and the United Kingdom at 16.47%. And followed after that were Canada, France and the United Arab Emirates.

James Ridley:                     France actually surprised me there.

Brett Evans:                        Well, I guess there’s a lot of Francophiles in the Australian expat community. But I think also, too, the French, when you look at their main sectors of work, there is a lot of those areas that do correlate well with the roles that Australian women are working in Australia too.

Brett Evans:                        So if we go through and look at the employment side, I think the actual… the three most popular sectors were education at 22%, and then follow that by the healthcare sector at 12, and then the hospitality sector at 9%. When you think of France, all of those sectors do correlate quite well, and we’ve probably got a bit of that as well.

Brett Evans:                        It’d actually be interesting to go and, one time when I’ve got a bit of spare time, to actually delve in deeper and see what specific sectors Australian expat women are actually working at in the United States, in the UK, in Canada.

James Ridley:                     It’d be great to forecast the growth in those sectors of women as well as they slowly take over the world.

Brett Evans:                        Definitely.

James Ridley:                     So it’d be very interesting to see. Obviously, the percentage changes year to year. And I think we’re going to grab some great data this year after the 2019 expat insights survey is actually wrapped up.

Brett Evans:                        No. Well, that’s the whole point of doing these surveys every year, so we can track the movements and see where… what country’s becoming more popular, what countries becoming less popular, more males than females moving to specific countries, jobs, the whole gamut of information. And the great thing about… And we want to say thank you very much to everyone out there for participating, for those who have.

Brett Evans:                        If you haven’t participated in this year’s survey yet, we’re going to leave a link in the description on YouTube and also in the show notes for the podcast of where you can go. Right now, I haven’t told James this yet. We’re almost going through 1670 responses from 81 countries.

James Ridley:                     Oh wow, okay. Geez. 81?

Brett Evans:                        81, yeah. So it’s pretty crazy. We had two from Iraq last week, which is pretty cool. So we haven’t had any from Iraq yet. So for those in Iraq, thank you very much. And the interesting part is, last year when we ran the survey, we got 1774 responses over the whole survey. What are we, two and a bit months? Well, yeah, a month and a bit in. And we’re about to go through the numbers we exceeded last year.

James Ridley:                     Which is amazing.

Brett Evans:                        It’s amazing, and it just goes to show that… I mean, we would love to offer prizes, we would love to offer incentives to complete these surveys. But unfortunately the rules and regulations state that we’d have to actually register as a lottery or as a prize in 81 countries. And while we do financial planning for Australian expats very well, when it comes to the navigating the government corridors, we’ll leave that to someone else.

Brett Evans:                        So all we’re doing is appealing to, I guess, that Aussie mateship, help an Australian expat out, because those who do benefit from the survey, are not only those who are about to move overseas and want more of an idea, like a coalfaced type of opinion of what it’s like in that country. But also, too, for other Australian expats who are already overseas moving to a different country.

James Ridley:                     Yeah, that’s right. Exactly.

Brett Evans:                        The data helps us when it comes to lobbying Canberra. There’s a grossly incorrect assumption of who an Australian expat is. I think they think them all as high flying executives on seven figure salaries.

James Ridley:                     No. It’s just a common Australian, Aussie, you know?

Brett Evans:                        No, exactly.

James Ridley:                     I mean, well the fact that an example of that is some of the things you just rattled off then about the stats, about how there’s such a large proportion of females in the education industry. So these are just teachers, international schools. Nothing out of the ordinary.

Brett Evans:                        Teachers, nurses, working in hotels. No different to Sydney versus Shanghai.

James Ridley:                     Yep. Exactly right.

Brett Evans:                        And that’s the… I think that what we see, and what we hear from our clients is the angst that they go through. Like, they read in the press the government’s opinion of what an Australian expat is. But it probably only applies to 1% of the Australian expat community.

James Ridley:                     Yeah. Much like the population.

Brett Evans:                        Bingo.

James Ridley:                     One-percenters. Yeah, exactly right.

Brett Evans:                        It is. So, certainly the data from the surveys does help us trying to right those wrongs with Canberra’s opinion. So please definitely continue to provide feedback because it’s all that information; We’re not making it up. We have the data at hand. We can go to Canberra and say, “Guys, you know, you want to do this. This is who it’s got to affect. It’s not going to affect who you think it’s going to affect.”

Brett Evans:                        Certainly, we’ve been using last year’s data to try to convince Canberra not to go ahead with the main residence exemption changes because they’re not going to affect the big end of town, they’re going to affect Mr. and Mrs. Smith.

James Ridley:                     Yeah, that’s right. And I mean, just on that, I think they think by introducing this piece of legislation, it’s going to have Australian expats running to the market to sell. They introduce this, if anything, it’s going to discourage them to sell.

Brett Evans:                        That’s right.

James Ridley:                     They’ll likely hold onto it until they come back to Australia where it’s likely that the old rules will still apply to them, but obviously if they rented out past the six years. We know CGT will start attracting. It’s not going to have the impact that they want it to have at all.

Brett Evans:                        And, look, judging by that commentary we saw from the treasury officials the other day.

James Ridley:                     Yes.

Brett Evans:                        You know, when very plain questions were asked of them, and they said, “Oh that’s an ATO question.” They didn’t even know what the ramifications were.

James Ridley:                     Didn’t even know how to answer it, which is ridiculous. I mean, typical politics.

Brett Evans:                        Doesn’t give you confidence at all, I know, exactly.

James Ridley:                     But anyway, let’s jump in.

Brett Evans:                        Yeah. Definitely.

James Ridley:                     Today’s agenda, a few things. Going to touch base on common reporting standard.

Brett Evans:                        Yep.

James Ridley:                     Deemed disposal. I’ve had a few inquiries the last week and I want to, I suppose, go through it, brush up on it, just to let everyone know what it is because if you don’t know what it is, you can use it and it can’t save you thousands in tax, as we know. Non-residency but around self-managed super fund, and just what to be aware of there. Briefly touch base on the opposition’s announcement of what they want to abolish and get rid of.

Brett Evans:                        Yep.

James Ridley:                     And then lastly, Q&A.

Brett Evans:                        Q&A, yep. No, we’ve got a lot of questions, so looking forward to running those through. Once again, if you do have questions, there’s a lot of avenues you can ask them. Head to our Facebook page, Atlas Wealth Management, certainly hit us… message up on there. Through Twitter, you can either use the #expatchat, or #askatlas.

James Ridley:                     Yep.

Brett Evans:                        Or just drop us an email at [email protected] I’m more than happy to bring them up on the channel and discuss them at lengths.

James Ridley:                     That’s why we’re here.

Brett Evans:                        Yep.

 

What Is The Common Reporting Standard?

 

James Ridley:                     So, Brett, what is Common Reporting Standard? Give me a run down.

Brett Evans:                        The Common Reporting Standard is essentially a unilateral effort by governments around the world to share data.

James Ridley:                     Yeah. Okay.

Brett Evans:                        So, in the past, we’ve always heard of the tax havens like British Virgin Islands, Panama. We all know what happened with Panama.

James Ridley:                     Yep.

Brett Evans:                        You know, all these nice little… Switzerland, there was the historical one. And essentially what it is, is a data sharing agreement amongst over 100 countries and territories. So what it means is, if you’re an Australian expat based in, say, UK or Denmark, then when the local, say… We’ll talk about UK. When the HMRC finds out you’re an Australian expat, they will ask your banks and your financial institutions to provide your Australian tax file number.

James Ridley:                     Yeah, okay.

Brett Evans:                        We know internationally it’s called a TIN, a tax identification number. Essentially the way it works is, these guys will then take that information and pass it straight to the ATO. So, if you’ve got money hiding anywhere in these 100 signatory countries, the ATO will know about it. Years gone by, an Australian expat could hide overseas.

James Ridley:                     Yeah, of course.

Brett Evans:                        The information, the technology, the agreements weren’t there.

James Ridley:                     Yeah. The data sharing wasn’t even there, even the data feeds. The tech wasn’t there.

Brett Evans:                        The tech wasn’t there, that’s right. There was no function to share. Whereas now, it’s amazing how interrelated the governments connectivity is. Not only domestically, but also internationally. I mean, I got a letter the other day which proved the point. So I moved house, as you know, couple months ago. And I got a letter from the Australian Electoral Commission to say that a government agency had notified them of my change of address.

James Ridley:                     Just want to make sure you’re going to vote, Brett.

Brett Evans:                        Well… And all I did was I changed the address on my driver’s licence. That’s all I’ve around to doing yet. But, just goes to show, internally, everyone’s talking. Same is occurring internationally and a lot of those people listening and viewing, you may have got notifications either online or in letter form from the banks, asking where you’re domiciled. Once they’ve got that, what it means is you’ll say, “I’m domiciled in the UK,” then that bank flags it, and then knows to pass that to the HMRC. So, the world is becoming a very small place for Australian expats.

James Ridley:                     Yeah, that’s right. I think a lot of people get scared about data sharing, and they’re like, “Okay, if they know about us that means they want to tax me on it.” I mean, it’s mainly about reporting. It’s just making sure they know you have it, and that’s it. We know with the IRS, it’s not necessarily about the tax side, it’s mainly about the reporting side. You don’t report it, you actually get fined, and that’s what actually scares the crap out of people.

Brett Evans:                        Yep. Well, this is actually the funny thing because the only major country that hasn’t signed up to FATCA… Sorry, signed up to the Common Reporting Standard, is the United States.

James Ridley:                     Do as I say.

Brett Evans:                        So you’ve heard it from here: If you want to hide money anywhere around the world, hide it in the US. Give it to Donald. He’ll look after it for you, trust him.

James Ridley:                     That’s bizarre. One thing you just mentioned there, FATCA. So does that interlink with CRS or?

Brett Evans:                        FATCA is the reverse to the CRS. The CRS means that, by law, all these countries have to share data in the signatory countries.

James Ridley:                     Okay, yep.

Brett Evans:                        FATCA is an agreement that the US has with individual countries that they must share information back to the US. It’s a great case of do as I say, not as I do. As part of that FATCA agreement, the US can share data with the Australian authorities, but they don’t have to. Reading between the lines, when you go through and look at the legislation – I don’t encourage anyone to look at it – virtually what it says is, “If there’s criminal proceedings and those sort of things, we’ll share it; But apart from that, no.”

James Ridley:                     No chance.

Brett Evans:                        No chance. There’s actually been a massive repatriation of capital back into the US, so that’s quite smart by them. If you want to hide money anywhere in the world, just buy something in the US.

James Ridley:                     Yeah, yeah. Very unusual.

Brett Evans:                        It’s just a big warning because the ATO will know more about you. We’ll talk about the HECS and HELP debt situation because this is where it’s going to really tie into that because they’re virtually going to know: you say, “I earned X,” and your local tax agency in the country you live in says you earn “Y”, the ATO can come back to you and say, “Hey, no. You’re wrong.”

James Ridley:                     “We know this.”

Brett Evans:                        Yeah.

 

Managing Australian Expat Student Debt

 

James Ridley:                     Well, I mean, that’s a good segue. I didn’t actually put it on today’s agenda, but HECS. HECS repayments, when you’re a non-resident, we know that they’re compulsory now.

Brett Evans:                        Still meeting people who don’t know anything about it. I was talking to a lady in Bahrain three days ago, and sort of knew something about it, but didn’t have a clue. Just to run through to the viewers and the listeners, 1 July, you have to report your overseas global gross income to the ATO.

James Ridley:                     Yep.

Brett Evans:                        Do that two ways. You can either do it through an accountant or through the my.gov.au website.

James Ridley:                     Yep.

Brett Evans:                        The problem is, is, A, most don’t know about it. And. B, there’s a lot of confusion as to what you have to disclose. So quickly running through it, the threshold is about $54,136. But it’s about to change.

James Ridley:                     I think it actually recently got changed, it’s dropping down to 45 now.

Brett Evans:                        Yes.

James Ridley:                     I think if you’re over 45, or if you’re in that first tier, 45 and-

Brett Evans:                        It’s 1%.

James Ridley:                     1% of your income.

Brett Evans:                        Yep. And then above 54, it’s 4%.

James Ridley:                     Yeah. It goes up again.

Brett Evans:                        Yeah. The problem is, is people assume that, A, they earn below that, and then they work out, especially if they’re earning US dollars, the US Australian dollar’s fallen a lot.

James Ridley:                     Yes.

Brett Evans:                        So suddenly they’re getting bumped up into-

James Ridley:                     First category.

Brett Evans:                        … the first category.

James Ridley:                     Yeah.

Brett Evans:                        And when you do the declaration, you have to go off a standardised average on the ATO website that actually says, “You can’t pick the best exchange rate at the time, you have to actually take our exchange rate,” which is a combination of 12 months worth of exchange rates, and they’ll average it out. People are saying, “Oh, no, I’m fine,” because they worked it out on the back of a cornflakes packet when the exchange rate was good. But, now, the exchange rate is bad from an Australian point of view so that could push them up.

James Ridley:                     Yep.

Brett Evans:                        Even if you weren’t above the threshold, you still have to report. I think it’s called a non-disclosure report. I can’t remember the exact verbiage. I’ll put a link to an article we wrote in the show notes and also in the description below. With those notes… Sorry, with that declaration, there’s virtually two declarations you have to make underneath the threshold. The first one is saying, “Look, I earn, I think it’s about $14000. I’m good.” The other one says, “I am between 14 and the lower threshold. I’m still okay, but I’m just letting you know this.” And then the other one’s above that again. I’ve met a lot of people who haven’t actually made any declarations regardless of that.

Brett Evans:                        Certainly talking to people over the last couple of weeks saying, “Look, this is coming up.” And they’re like, “What’s coming up?”

James Ridley:                     Yeah. ATO is going to start clamping down on this because ATO wants to get paid back its money. If you don’t disclose, then they’re happy to fine you $500. They’ve got no issue with this fining. So, yeah, obviously get your disclosures in. But just on talking about declaring worldwide income, if you’re going through an accountant, the accountant can use three methods. There’s obviously the simple method where you decide this is my income, this is my proof of it, they’ll go and lodge it.

James Ridley:                     If you don’t really have any deductions, then they can use, I suppose, a standardised method where, based on your industry, your job role, they can apply a standard worldwide deduction to your income to bring it down a tiny bit.

James Ridley:                     Then the next method is the complex and comprehensive method where if you’ve got, say, a property that’s negatively giving back to Australia, they’ll just essentially encompass everything like they’re lodging a tax return. And then based on that net income amount, that’s obviously will fall into the tier. There’s three methods you can use. I mean, if you’ve got bits and pieces, it’s obviously more beneficial to go to the complex method, if you’ve got some relevant deductions. But, yeah, start lodging, because otherwise you’re just going to get fined.

Brett Evans:                        Yep. And that’s where… I remember reading an article that the ATO was pointing out, that a non-disclosure can cost you up to 75% penalties of the amount of tax owed.

James Ridley:                     Oh, wow. Okay.

Brett Evans:                        So, I’ll see if I can find that for you guys and also put it in the description in the show notes. But, it’s gone from a, “Yeah, it’s good to pay off your HECS debt,” to, “You have to pay of your HECS debt. And if you don’t it’s going to cost you a lot more money.”

James Ridley:                     Yeah. And I guess, to those people, Bahrain being one of them, all in these tax free zones, you know, middle east, the Gulf, part of the GCC countries, it’s going to come as actually a bit of a rude shock, to be honest, because if they’re on good income, and the ATO wants a 7% repayment, that’s, I think, the highest tier, or 10% repayment-

Brett Evans:                        No, no. It’s up to 10 now.

James Ridley:                     Yeah. So 10% of, say you’re making 300,000, and you’ve still got a fair bit of HECS debt because you’re a lawyer or whatever, that’s a rude shock.

Brett Evans:                        The other thing too that causes a lot of confusion, it’s 10% of your salary.

James Ridley:                     It’s not of the HECS debt.

Brett Evans:                        Not of the HECS debt.

James Ridley:                     Not of the HECS debt.

Brett Evans:                        So, people are going, “I’ve got a $50,000 HECS debt, but I’ve got $200,000 the salary.” They go, “Well, 10% of 50, that’s fine.” You know, you’re not paying five grand.

James Ridley:                     No, no. Not at all. Your income… You’re spot on, actually. I think a few months ago, someone was like, “Oh, I’ve only got this left, so I’m only going to have to pay back probably 1500.” I was like, “Uh-uh, this year, you’re paying back the full amount.” So, yeah, you’re spot on, on that. That’s something that people are not aware.

Brett Evans:                        They don’t. And they get caught all the time. I think, just spending a bit of time, get on the front foot, putting a bit of money away on a monthly basis.

James Ridley:                     Yeah, that’s right.

Brett Evans:                        It’s the easiest way to solve it. You know roughly… and we’ll also put the thresholds in the show notes, and the description as well. It’s very easy to see roughly where you’ve got to be. You know what your salary is, so just make a quick calculation. Say, “right-io, I’m going to need to pay back $10,000 this year.” Divide that by 12 and put that away.

James Ridley:                     Yeah, exactly right. One thing people don’t understand and realise is that, let’s say you do the HECS lodgement, the ATO says, “Listen, we want $10,000. We want it now,” you can actually put yourself on a payment plan where, if you’re using an accountant, that’s fine. If you’re using the online My Gov system, they require a minimum of 10% down payment on that, and then you can put yourself on a payment plan over the next few months. If it’s a case where your cash flow is short at the moment, you can always do that. Don’t stress too much. But if you don’t pay it all, don’t let the ATO know, then it’s likely they’ll put general interest charges on it.

Brett Evans:                        That’s right.

James Ridley:                     Why not fine you at the same time? So just all these things in the background that can still go wrong.

Brett Evans:                        And those interest charges aren’t at the same rate as a mortgage.

James Ridley:                     Not at all.

Brett Evans:                        They’re a lot higher.

James Ridley:                     I think they range between nine and eleven percent.

Brett Evans:                        Yep.

James Ridley:                     Yeah.

Brett Evans:                        It’s a lot of money.

James Ridley:                     Oh, yeah, absolutely, absolutely. And that can apply to even land tax and everything like that. Anyway, that’s another time.

Brett Evans:                        It is, it is.

 

What Is Deemed Disposal & How Does it Affect Australian Expats?

 

James Ridley:                     Anyways, Brett, let’s move on to deemed disposal. I mean, it’s shocking how often I come across an inquiry, a console, and I mention deemed disposal.

Brett Evans:                        It’s weekly, almost daily.

James Ridley:                     Well, it is daily. The fact that even those people’s accountants don’t mention it to them, it’s almost like the accountants don’t even know about it. It’s probably because they’re not providing advice to internationals very often, or Australian expats very often, so why would it be in their repertoire?

Brett Evans:                        Goes back to episode two when we talked about picking the right advisor and right accountant; Someone who’s match fitting initially because this stuff is, it’s like picking up a rock to us. It’s that easy.

James Ridley:                     I’ll run you through a hypothetical that I had this week, and I feel terrible for the bloke, but it is what it is. Deemed disposal is essentially a capital gains tax event that you crystallise when you leave Australia. So, hypothetically, if I’m leaving at the start of April, and I’m holding a share portfolio, because it only applies to non-taxable Australian property, so that’s shares-

Brett Evans:                        Manage funds, ETFs, listed investment companies.

James Ridley:                     Spot on. You can only do it on those type of assets. Essentially what it means is, the day that you leave Australia, you’re saying to the ATO, I’m selling these assets.

Brett Evans:                        On paper.

James Ridley:                     On paper. If I’m making a gain, you will have to pay some capital gains tax. If I’m making a capital loss, you’ll get the benefit of carrying forward that capital loss… capital gains… sorry, capital loss. It then means that no further capital gains tax is going to accrue on the growth of that asset. Now, let me paint a picture for you. I work for a tech company here in Australia. I’ve been vested thousands of shares over the 10 year period. I leave Australia. I ask my accountant, “Is there anything I need to do about these shares or… ” You know. The accountant, not being experienced in that situation just says, “No, no. They’ll just keep growing, you don’t need to sell them, that’s fine. You know you can look at selling when you’re overseas or when you come back but normal capital gains tax will apply.”

James Ridley:                     I then find out, seven months later, after my tax returns already been lodged, about deemed disposal. The shares have done an IPO. I’ve done all these… Sorry, I’ve had all these rights, so I’ve executed them. I’ve made a huge capital gain. Now, because I didn’t do deemed disposal on the shares I was already holding, that capital gain is now taxable. If I sell the portfolio down, it’s taxable at non-resident marginal tax rates.

Brett Evans:                        Which no tax-free threshold.

James Ridley:                     Nothing.

Brett Evans:                        32 and a half cents on the first dollar.

James Ridley:                     If I want to hold that share portfolio whilst I’m overseas as a non-resident, I can’t even apply the 50% CGT discount method for the period that I hold as a non-resident. If that keeps going up, up to you know several million dollars, that’s a huge CGT event that I’ve got, and I can’t get out of it.

Brett Evans:                        And, look, it’s amazing how, I would say, eight out of every ten people that we meet who have some sort of shares outside of Super haven’t heard of this.

James Ridley:                     No.

Brett Evans:                        And sometimes you get lucky where they might hold a poor performing stock in their portfolio that can offset some of the CGT that is liable when you do the deemed disposal.

James Ridley:                     Yeah, absolutely.

Brett Evans:                        But, as a classic case in point, when you own something that’s $50 a share, yes, there’s a bit of pain, but if that $50 share goes to $250 a share, that’s all tax free. Now, it could be a potential double bunger, and I’ll throw the US applications here as well. If you were to sell those shares – you’re in tech, so more than likely you’ll be in San Fran – if you are in San Francisco, and you were to sell those shares, not only would you owe the ATO a truck load but the governor at California state is going to put his hand up for California state taxes as well.

Brett Evans:                        That’s something you don’t want to have to deal with. You want, okay, yes, the California state takes their bit, but not on top of the ATO. So, suddenly, you’ve gone from making a great gain to now paying out, probably potentially over half of the portfolio in just capital gains tax. Yeah, look, deemed disposal’s incredibly important for a lot of people because, these days, it’s very common for people to build a small investment portfolio: shares, manage fund, ETFs. They’re so easy to buy these days. But they don’t realise that if they were just to take the proper time before they moved overseas to sell these on paper, pay the capital gains tax at that point, then all depending what jurisdiction you’re in, but from an Australian point of view, you don’t owe the ATO any capital gains tax on that growth.

Brett Evans:                        To me, it’s that side of it. Cash is awesome, big part as well. People are nervous about moving cash around. We did have this question which we’ll go into towards the end, but it’s amazing how either people just don’t have a clue, or they’ve heard urban myths about what may happen to it, and we’ll hopefully answer some of those ones down the track as well too.

James Ridley:                     Yeah, exactly right. Just to finish off on the deemed disposal side, if you’re doing deemed disposal, yep, great, the shares go up in value if you’re not crystallising any capital gains events, you’re not making a tax event on that portfolio in your other domicile. Then, when you come back to Australia, that’s when your cost base will essentially reset on those shares. You can still hold on to them, that’s great. When you reenter, usually the closing prices are that day, they’ll start to form the cost base going forward. That’s how you go about it. But just to be clear, if you’ve gone overseas, and you haven’t done deemed disposal, but you’ve lodged that final tax return, you can’t go back and amend that.

James Ridley:                     The reason why, because obviously you’re producing quite a large financial benefit. You’re gaining from this.

Brett Evans:                        In hind… Like, going back in time. You can’t do that.

James Ridley:                     Exactly right. It’ll trigger an audit with the ATO. ATO will just be like, “Uh-uh (negative).” So you can’t go back and order… or amend those sort of things. Sometimes, yeah, obviously seeking advice with someone that’s match fit, they’ve got clients that are Australian expats, always the way to go.

Brett Evans:                        That is probably question number two that we ask people: Do you have any shares? Did you do deemed disposal? That’s actually on our client profile form.

James Ridley:                     Yeah it is, you’re right.

Brett Evans:                        Simple things like that. It’s all these little things, like we said in episodes one and two, the little things done early and right gives you the best results. The ones that you hear the horror stories of Australian expat stories, are the ones who didn’t seek advice, and they’ve tried to go back in time.

James Ridley:                     Case in example, the individual I spoke to earlier in the week, he worked for a tech company, now the portfolio’s worth a few million, he can’t really sell it. If he sells it he’s going to get absolutely smashed by capital gains tax. He could look to wind it down over a few years, that’s probably the only way he can go, but now he’s just sort of stuck, yeah. What do you do? I’ll move on.

Brett Evans:                        Yeah, definitely, yep.

 

Australian Expat Self Managed Super Funds (SMSF’s)

 

James Ridley:                     Move on to our next point on the agenda. A self-managed super fund, what is it first? Let’s educate people quickly, what is it?

Brett Evans:                        Yeah, look, I think there’s a lot of confusion out there about what an SMSF is. A self-managed super fund is a fund that, not only are you the beneficiary of, but you’re the trustee. Let’s ignore the jargon, you’re the one pulling the levers. We’re not just talking about investment selection, but the actual compliance itself of the SMSF. You’re sitting there making sure that the investment strategy’s up to date. You’re making sure the audits are getting done. You’re making sure… The biggest problem we find, especially over the last five year, is there’s been this rush of people to get SMSFs. They’re not sure why, but they get it. Then they don’t realise that when they go overseas, the goal posts are in a completely different direction.

James Ridley:                     Yeah, that’s right. I mean it’s pretty rare that you don’t know… You’ll know if you have a self-managed super fund. I mean you’ve got to do an annual tax return like you’re running a business almost. So you know if you have a self-managed super fund. When you leave Australia and you become a non resident, you really need to be careful. Some things that I’ve come across in the last few weeks about other individuals holding SMSFs, I wanted to sort of touch base on it because it is a big issue.

Brett Evans:                        So we’re going into central management control.

James Ridley:                     Yeah, exactly. So, central management control is essentially… The central management control of a self-managed super fund needs to be maintained by a normal Australian tax resident at all times. Now, there is something called “rubber stamping”. Rubber stamping on a self-managed super fund is essentially: I’m a non-resident, I’ve got a Self Managed Super Fund, but I know about central management control. I know I’m not allowed to be the one pulling the strings on it anymore. I go over and contact my brother, I go, “Mate, I need to put you on my self-managed super fund. I know it’s all my assets.”

Brett Evans:                        So he becomes the trustee.

James Ridley:                     He becomes the trustee. I’ve got a corporate trustee within it, so he becomes the director, POAs, everything. On the surface, if the ATO looks at him, he’s like, “Oh, no, he’s a normal Australian tax resident, that’s fine. This is compliant.” But if they go to my brother and say… and they ask him questions about my SMSF, he doesn’t know anything. He doesn’t know what’s going on. That’s what we call rubber stamping.

Brett Evans:                        And we know that, right now, the ATO is actually going out to the trustees of self-managed super fund, not just for Australian expats, but everyone in genera to make sure and ensure that they understand what they’re doing.

James Ridley:                     Exactly.

Brett Evans:                        If your brother were to get that correspondence from the ATO, what’s he going to say?

James Ridley:                     He wouldn’t know what to say, and this is what’s happening. There was a case in example, I think it’s tax determination 5/2018, and it made everything about rubber stamping where the exact same case, SMSF existed, they put on their family members to act as, obviously, the trustees, the directors. They actually had no idea what was going on with the SMSF. You could still see, behind the scenes, they were still pulling the strings, making the decisions. They found email threads to the accountants saying, “Do this.” Essentially, the ATO was lucky, in that, the ATO gave them one opportunity to wind it up straight away, and it’s very rare that that happens.

Brett Evans:                        Yeah, usually it’s like straight non-compliance.

James Ridley:                     Yeah, exactly. Usually, what happens if they deem it to be none compliant, you no longer get the tax concessions that a self-managed super fund has. What they means is your tax rate of 15% is pulled off. They let… sorry. They levy a new tax rate at 47%, and that’s on the assets as well as the income. So you essentially lose half of your balance straight away.

Brett Evans:                        Half the balance is gone. Yeah, it’s an expensive exercise. I think the important distinction to make is too, when you’re appointing someone, you can’t just tell your accountant or financial planner, “Okay, you’re it.” We’re talking about the over arching-

James Ridley:                     Yep, everything.

Brett Evans:                        … the hiring and firing of accountants and financial planners and the whole… And I think the other point of distinction too is regarding beneficial ownership inside of SMSFs.

James Ridley:                     Well, this is another thing the ATO looks at as one of it’s tests. Why would I be running… or why would my brother be running my SMSF when he has not one dollar in there? It doesn’t make sense. I think that’s where a lot of people get caught up, it’s like, “Yeah, listen, I’ve taken care of that. I’ve nominated some other directors and stuff.” And it’s just like, well, that’s just rubber stamping. That’s a band aid. That’s solving a problem for another problem later in life. It’s usually a case that the other problem comes around in 12 months time. Just on that though, I want to touch base on the temporary absence rule.

Brett Evans:                        Yes, good one.

James Ridley:                     I think it’s the two year rule on SMSFs. So if you’re still coming back within a period of two years-

Brett Evans:                        Within two years.

James Ridley:                     … they say, “Listen, okay we can see that you were only temporarily absent, therefore, we’re happy that central management control is still held by you.” But what’s unusual about temporary absence rule, if on the surface, on the facts, that you’ve… they can see that you’re permanently gone, but you’ve had, due to some event overseas, you’ve had to come back, but it looks like you’re going to be gone forever, even if it’s under two years, they’ll say, “Non-compliant.”

Brett Evans:                        Non-compliant, yeah.

James Ridley:                     “Because we can see, based on the facts, you were gone.”

Brett Evans:                        Yeah, you were severing all ties.

James Ridley:                     Yeah, yeah. Whereas, sometimes it can go the other way. “Oh, we can see that you were gone for just over two years but we know, we realise that there’s an intention to come back.”

Brett Evans:                        Yeah, you own your property here, you weren’t renting it out, all those sort of things, or your family might have been still in Australia.

James Ridley:                     Exactly right. So they say, “Listen, we’re happy for the temporary absence rule to apply here.” so it’s still… CMC’s okay. It’s a very fine line, the temporary absence rule, and it just seems like it depends on what kind of mood the ATO’s in.

Brett Evans:                        Also I think it goes to show, like we talked about last week in episode two with the Harding case, not every determination will apply to every single person. It really comes down to your personal circumstances. Your neighbour could be an Australian expat as well, but just because they got away with it doesn’t mean you can. There’s a lot of stuff that’s under the hood that really comes into working out whether it’s relevant or not, so…

James Ridley:                     Yeah, and as we touch base, hopefully the board of taxation comes up with some new residency rules and something easier.

Brett Evans:                        “183 day rule”, wouldn’t that be a nice little Christmas present?

James Ridley:                     Yeah, yeah, absolutely. You could actually essentially become a non-resident quite easy.

Brett Evans:                        Exactly.

James Ridley:                     But, yeah, they’re not going to make it that easy, let’s be honest.

Brett Evans:                        Yep, no, exactly right, exactly right.

James Ridley:                     All right, Brett, so that’s self-managed super fund; non-residency, don’t do it, That’s my own advice.

Brett Evans:                        Look, unless you’re holding a physical asset that-

James Ridley:                     Property.

Brett Evans:                        Property, that makes it very difficult; you can’t sell a balcony off, those sort of things. It may not be the smartest idea to do that. Then you may hold it. But it’s still not a solution. It’s a band aid.

James Ridley:                     Yeah, exactly right. If you’re intending on going away for three plus years, you shouldn’t have a self-managed super fund.

Brett Evans:                        Not at all, no.

James Ridley:                     You can’t contribute to it while you’re a non-resident because that breaches the active members test.

Brett Evans:                        Members test, yep.

James Ridley:                     There’s a whole suite of tests. But just don’t do it. It’s just not worth it. That’s your retirement, losing 47% of it, it’s not worth it.

Brett Evans:                        Good advice.

 

How Does Labors Proposed Changes Affect Australian Expats?

 

James Ridley:                     All right. Well, Brett, let’s move on. I want to touch base on oppositions proposal.

Brett Evans:                        Yes, this is what Mr. Shorten was talking about in the lead up to the election.

James Ridley:                     Exactly right. He’s mentioned quite a lot of things.

Brett Evans:                        A laundry list.

James Ridley:                     It’s a laundry list. When I read through them I was actually quite nervous for expats.

Brett Evans:                        Because initially we thought, oh, it shouldn’t affect them too much. But when you go through and look at the detail-

James Ridley:                     Look under the hood, I was like, “Shit, okay.”

Brett Evans:                        We’ve got five pages of stuff here, so…

James Ridley:                     Yeah, exactly right. First one I wanted to touch base on, which we mentioned briefly last week, was the negative gearing. As we know they’re looking to make a change to negative gearing. No idea what date they’re going to set. It could be actually retrospectively, so they could throw a date back as of the first of January 2019. Essentially, you will no longer be able to use negative gearing on second hand properties to offset future wage income or anything like that. Second hand properties can go against current investment income, so from dividends and those sort of things. If you want the benefit of carrying forward a net income loss, you’ll need to actually make sure that you buy a brand new property.

Brett Evans:                        Off the plan.

James Ridley:                     Off the plan – exactly right – which is easy enough to understand, but when you’ve got a current property portfolio, there’s not too much guidance on how that’s going to be treated, especially if you’ve got a few hundred thousand dollars worth of net incomes.

Brett Evans:                        It is there’s like grandfathering or those sorts of things.

James Ridley:                     That’s right, so they’ve announced that. It’s quite a scary rule because, as we know, Australians have a love affair with property, Australian expats just the same. I suppose that’s where the MRE’s come from as well. That’s one scary proposal.

Brett Evans:                        What’s the scenario? Fred Smith moves to Dubai in 2020, these rules are enacted and enforced, he buys a second hand property in Balmain that is, for all intents and purposes, negatively geared– e.g. the cash flow’s negative – with that amount that he’s putting in out of his own pocket to top it up, that’s money gone.

James Ridley:                     Or doesn’t receive any tax benefit. He might get to segregate the net income losses on that property to apply to future investment income only. But if he’s someone that’s not interested in doing other investments, he’s not going to get the benefit of it at all. So, ideally, if you’re doing the negative gearing scenario on second hand property, you’ll either have already another property that’s positively geared, or you’ve got other sources of income, whether it be from other investments, essentially. Other than that, that kind of strategy just doesn’t work.

Brett Evans:                        No. Virtually, we could see a big change in the landscape, or the Australian expat community here, on that benefits of buying a property because they’ll be paying money out of their own pocket.

James Ridley:                     For no reason.

Brett Evans:                        For no reason.

James Ridley:                     Yeah, no reason. That’s simple as it is. The next one that I want to talk about, non concessional contribution cap. At the moment when we contribute to Super, two types of caps.

Brett Evans:                        Concessional, non concessional.

James Ridley:                     Yep. Concessional, when we put it in, 15% contributions, tax comes out as 25,000 a year. Non concessional, treat as an after tax contribution: goes in, no tax comes out of it, and at the moment it’s 100,000 per year. They’re looking at reducing that to 75,000 per year.

Brett Evans:                        Okay. They don’t want people to put more money into Super?

James Ridley:                     No, no, no. They want to tax it.

Brett Evans:                        Yeah, that’s right.

James Ridley:                     That’s what’s happening. It essentially means, if you trigger the Bring Forward rule, you can only put it up to 250,000 rather than-

Brett Evans:                        300,000.

James Ridley:                     That’s actually quite big, especially if you’re selling a house, and you’re wanting to get as much into Super before you retire at 65 or whatever it might be. Bit of an issue there. Just something that, obviously, Labor wants to get in.

Brett Evans:                        Look, I think it’s almost like seeing around a corner, you can see the government’s focus is to reduce the ability to put money into Super. If you do have plans or are… an inkling of topping up your Super account, more earlier than later, because, just to explain a scenario, if… the bring forward rule, essentially by the age of 65, and you’re working, you can put in three years worth of non concessional contributions in one go. If they were to change that, and your three year rule straddles the change… Let’s say, for example, you put in $300,000 on the first of July this year, triggering in the next two financial years, but they change the rules as of first of August, you’ve actually been pretty clever because-

James Ridley:                     Yeah, you have. Absolutely.

Brett Evans:                        Just consider those options, people, because it… in a landscape that is changing so quickly like Canberra is, we don’t know what it’s going to be in 12 months time, let alone six.

James Ridley:                     Yeah, exactly right. That moves me on to the next point where… catch up concessional contributions. So they’re only effective as of this financial year. Catch up concessional contributions state that: we can accumulate our non-used concessional contribution cap. If I put in 10,000 this year, I can carry over 15,000 next year.

Brett Evans:                        To the following.

James Ridley:                     So that means next year I can put in 40,000.

Brett Evans:                        40,000, yep.

James Ridley:                     And so on and so forth, over a five year rolling period. As long as my superannuation balance is under 500,000. Now, Labor being the fun party that they are, they want to remove it straight away. As of 1st of July 2019, if they get in, they’re actually going to remove that rule which means, if you’re saving up this year’s concessional contribution for next year to offset a capital gain on shares, property or whatever it might be, you’ve just wasted a year that you haven’t been able to get anything in for Super. It’s another one. It’s another pain point that I think Australian expats are going to feel because the ability to accrue these concessional contributions over five years means that, if I haven’t done deemed disposal on a share portfolio and I’ve got a large capital gain on it, I could sell it down in that final year.

Brett Evans:                        Use the proceeds from the sell down to the shares to contribute as a concessional catch up contribution into Super, and then the tax deduction that you get from the concessional contribution, you then offset against the capital gain from the shares.

James Ridley:                     Absolutely, and the difference in that is, no tax free threshold for non-residents, so our effective tax rate is 32 and a half percent. After 90,000, it tiers up again to I think 37. If I’m making a capital gain of 125,000, putting that straight into Super, I know that’s only going to get taxed at 15%, which is amazing.

Brett Evans:                        It is, yeah.

James Ridley:                     That’s one thing that’s a pain point for Australian expats in the future. It’s a scary piece of legislation.

Brett Evans:                        Yeah, no, it is.

James Ridley:                     Yeah. So that’s that point. I suppose the last one, which I think is a huge one is the removal, or the potential removal of personal tax deductible concessional contributions.

Brett Evans:                        That ties in with the last conversation, doesn’t it?

James Ridley:                     It does, it comes straight back over. It essentially means we can’t use it to offset a capital gain or anything. A common strategy might be: I’m living in Dubai, I’ve got two investment properties, they’re positively geared, on the surface they’re producing, say, $20,000 net income, and I can actually look to put that into Super, as long as I fill out the right forms and I contribute in the right manner.

Brett Evans:                        And claiming that as a deduction, yep.

James Ridley:                     Can claim as a tax deduction that’s taxed only at 15%, compared to 32 and a half percent.

Brett Evans:                        On the 20, yep.

James Ridley:                     Saving self 17 and half percent, just making sure I do it correctly because I’ve seen people do it, and then they can’t actually claim because they haven’t done it correctly.

Brett Evans:                        Yeah, or they’ve made non concessional instead of a concessional.

James Ridley:                     That’s right, that’s right. So they sort of get surprised by that, “What do you mean I can’t claim it?” So, essentially, they want to remove that and reinstate the old rule where you almost had to be self-employed to be able to do that. The 10% rule, which I think I believe it’s stated that you had to have personal service income over 10% to be able to make such a contribution. The removal of that means that it’s almost going to guarantee the Australian expats that have positively geared properties will almost always pay 32 and a half percent.

Brett Evans:                        Because they can’t claim any deductions.

James Ridley:                     Or they can’t put it in. They could put it in as an after-tax contribution but there’s not really a tax benefit there for that year.

Brett Evans:                        Why be limited to 25 as a concessional, when you can put it up to 100 as a non concessional, so…

James Ridley:                     Yeah, exactly right. That’s really scary, I think that’s huge, and watch this space because we’ll wait and see what happens.

Brett Evans:                        Well, it’s amazing because that law was abolished back in 2017. It’s not even dead yet, you know?

James Ridley:                     Exactly right. Now they’re just flipping it back over, “No, we actually like that one, let’s put it back.” We’ll definitely wait and see and, yeah, I’m pretty nervous about it to be honest.

Brett Evans:                        Yeah, no, no, Rightly so, rightly so.

 

Australian Expat Question – Pay Tax On Transfers Back to Australia

 

James Ridley:                     Right-io, Brett, that’s what I wanted to cover on the agenda today. I want to move into a few questions now.

Brett Evans:                        Definitely.

James Ridley:                     Bit of Q&A. The first one we had was making a gain, or a capital gain, overseas and then sending money back, or…

Brett Evans:                        Well, it was sort of cash assets, moving money around, perceived beneficial gain due to foreign currency exchange. I guess the first thing I would like to answer this is: the massive misnomer that it is illegal to transfer money back to Australia, which it’s not.

James Ridley:                     Yeah, okay.

Brett Evans:                        That’s the first one. The second one is, do not transfer $9,999.99 because it’s below the 10,000 threshold.

James Ridley:                     Yeah, okay, yeah.

Brett Evans:                        You’re more likely be flagged at that level than if you’re transferring $500,000 back. Their computers are watching all amounts, from $1 to $100 million. If something looks suspicious, they will flag it. I think it’s that Big Brother looking that’s sort of almost frozen Australian expats into fear. They don’t want… “Oh, what should I do?” Long story short – and like we talk about in previous episodes about your behaviours matching that of a resident – if you are in Dubai and… would a Dubai resident buy property in Australia? Yes. Would a Dubai resident buy shares in Australia? Yes. Just the fact that you’re an Australian citizen that happens to be in Dubai is the same thing. That’s probably the first mistruth I’d like to get rid of because, time and again, we get people who, they’re sitting on a pool of funds in an overseas bank account, which we now know, thanks to CRS, the ATO’s now going to know about it anyway.

Brett Evans:                        They’re sort of not sure what to do with it. This money’s not getting any earnings, there’s no growth, but they don’t have the comfort to invest in other markets because they don’t understand them.

James Ridley:                     Well, I know in Isle of Man, that’s a common one that a lot of people love using.

Brett Evans:                        We see that every day unfortunately. It’s something that I know I’ve talked in the past, and we might actually do a more concrete blog post about the questions you should ask because, based on the questions that we wrote out in the past, I would hazard a guess to say that probably 80% of offshore financial advisors would fail this questionnaire because of all the convoluted fees, you know opaque structures, time constraints, the list goes on.

James Ridley:                     Sounds like you’re referring to international bonds of some sort.

Brett Evans:                        Could be, yeah.

James Ridley:                     Some sort of international product, yeah okay.

Brett Evans:                        So, I think that’s the big thing that they sort of steer towards because they hear a smooth talking salesman who knows the pain points. But the biggest thing with cash… moving cash around, whether it’s from Australia, overseas or overseas back to Australia, it depends on where you’re domiciled at the time. So let’s say, for example, you move overseas, you move some money overseas to fund that lifestyle, not a problem at all. You live overseas, you build up cash, you move back to Australia, you leave that cash over there. Now, you got two problems, A, that cash is now assessable from an ATO point of view.

James Ridley:                     Absolutely.

Brett Evans:                        And, B, if the currency happened to move in your favour, what would happen?

James Ridley:                     Well, you’d make a gain, wouldn’t you?

Brett Evans:                        Exactly, so, once again, CGT event.

James Ridley:                     Foreign currency gain.

Brett Evans:                        That’s right. So when we’re talking about our expatriation, repatriation with clients, the key thing is always try and map your movements as a result. If you’re in Australia, why would you leave money overseas?

James Ridley:                     Yeah, yeah exactly right.

Brett Evans:                        I think that’s the biggest concern that people have about… they almost get frozen by fear, they just leave stuff there, when in actual fact, it creates a problem.

James Ridley:                     Yeah, exactly right.

Brett Evans:                        I mean, it’s a great thing to have to pay tax because it means you made money. But if you can avoid it, even better.

James Ridley:                     I suppose that moves on to when you’re repatriating, try to come back in a clean manner, not leaving assets and bits and pieces, trying to do it all within, I suppose… or before, trying to get that money back to Australia, setting yourself up, or if it’s regarding an overseas foreign super fund, six month rule, all those sort of things. But, yeah, so there is no issues around… if I’m in Dubai, and I’m a non resident, I can send money back to Australia.

Brett Evans:                        Yeah, of course you can.

James Ridley:                     I’m not going to get hit by some exit tax that I didn’t know about.

Brett Evans:                        Yeah, that’s right. And I think we’ve seen in the case in the past where people have had their salaries paid back to Australia, that is a no-no.

James Ridley:                     That’s suspicious, and I definitely wouldn’t because it’s just, like you said-

Brett Evans:                        Would a Dubai resident have their salary paid into Australia? No they wouldn’t.

James Ridley:                     No they wouldn’t, exactly. They’d have a local bank account. I suppose that’s one area that is hard for those type of seconded employees which are in those unstable financial-

Brett Evans:                        They may not want to have a bank account in their country, and we saw that case with the Saudi engineer seven years ago, he didn’t have a Saudi bank account because of the problems in Saudi, so his salary was paid into an Australian account, and look at the problems. He won the case, but look at the problems it created for him.

James Ridley:                     Oh, absolutely, thousands and thousands.

Brett Evans:                        Because that’s how he jumped on the radar with the ATO because they saw this monthly, and it actually had salary written on it. They’ve gone, “Well, clearly you’re an Australian resident because your salaries getting paid into Australia.”

James Ridley:                     Yeah, so big no-no.

Brett Evans:                        Big no-no. Long story short, when it comes to moving money around, if it is perceived to be doing it for a gain, then don’t, because you will get taxed on it. I’ve found Australian expats in the past almost like to collect bank accounts like stamps in a passport. One client bragged to me once he had nine bank accounts in about seven countries, I think it was, or six countries.

James Ridley:                     I hope he wasn’t a US tax resident as well.

Brett Evans:                        Well, he wasn’t, but as I said to him, I said, “What’s the reasons for keeping all these bank accounts?” And he’s like, “Oh it’s a bit of fun, you know? If I ever want to move back there, the account’s up and going.” And I said, “Do you mind telling me what fees you pay?” Because Australian expat bank accounts are quite high on the annual fees.

James Ridley:                     Yeah they are.

Brett Evans:                        I think we worked out, by closing down… He wanted to keep four, which I said, “Okay, that’s fair enough.” By closing down the remainder, I think we saved something like $500 a month. Just by doing that. Let’s just say, that exercise wasn’t easy, closing those accounts, then either.

James Ridley:                     No, it wouldn’t have been, especially when you’re in other countries.

Brett Evans:                        It is. When you’re managing your money, act like a local, is probably the best way to describe it. You can certainly invest, there’s no problems at all about investing, but make sure behaviours act in the same sort of way.

 

Australian Expat Question – Should An Existing Australian Expat Use our Pre Departure Review Service?

 

James Ridley:                     Yep, okay. That’s pretty straight forward then. Moving on to the next question, this is actually about one of, I suppose, the services we offer about the pre-departure review. Now, I’ve had a client ask, “Is that beneficial doing it, even if I’m already living overseas and as a check up, as in, have I missed anything?” Obviously, it will allude you to the fact, that yeah, you potentially probably have missed something. Have you got this? Have you done that with it? I’ve gone back and said, “Yes. Regardless, it is always beneficial even if you’ve been overseas for a year, two years.”

Brett Evans:                        Yeah it is, you don’t know what you don’t know.

James Ridley:                     Exactly right.

Brett Evans:                        The government does a very poor job in outlining what an Australian expat has to take into account.

James Ridley:                     Yes.

Brett Evans:                        So, unless you’re talking to someone like ourselves, more often than not you might Google some stuff and you might get one, two, three points, but you may miss five others.

James Ridley:                     Yeah, yeah exactly right.

Brett Evans:                        The great one is if you’ve got HECS, HELP or TSL debt, you have seven days from the day that you move to that country to notify the ATO of your new address.

James Ridley:                     ATO wants to know.

Brett Evans:                        Most people are too busy unpacking their suitcases and everything to do that.

James Ridley:                     Last thing you think about.

Brett Evans:                        That’s one big one with the HECS side. The other one is the insurance conversations on Super. Most people don’t know they’ve got it there. They’ll just keep paying for insurance that may or may not be valid.

James Ridley:                     Yeah, exactly right. So, yeah, look I think… it’s not expensive. It’s $285, but you get the benefit of everything that we’ve been able to build and absorb, our library of knowledge, over the space of close to eight years, in a very, personalised, customised report that you can look and go, “Great, okay. I’m done.” It’s more about buying peace of mind than buying an answer.

Brett Evans:                        Yeah, exactly right. Yeah, no, exactly right. Okay, well, mean, so, yes. I mean it’s clearly beneficial.

James Ridley:                     Yes.

Brett Evans:                        Okay, second question, this is more of something that would be targeted towards an accountant. I might field this question.

James Ridley:                     Yeah, yeah, definitely.

Brett Evans:                        Tax audit insurance. It’s something that a lot of accounting firms offer, and it essentially covers you, and covers that accounting firm for the costs of going through an audit with the ATO.

James Ridley:                     Now, a lot of accountants, they usually offer it for businesses, companies, self management funds, all those ones. It’s rare that you’ll find them offering it for individuals, but it does exist for individuals. It’s going to range from anywhere between $50 to $330 for an individual. But that’s what it’s… it’s buying that peace of mind that in the event you get audited, okay, that accountant that you used can go lodge a claim on this. Therefore, that’s going to help cover soliciting costs, time and efforts and their cost for going through and preparing all the relevant documents for the audit. So that’s what audit insurance is.

James Ridley:                     Yes, it can be beneficial. If you’ve got a lot of bits and pieces that you left back in Australia, and you want to make sure if you do get audited, you’re safe, you’re good, then you know if your accountant offers it, absolutely. It’s worth opting into.

Brett Evans:                        If you had an Australian expat overseas, the ATO challenges their non-residency.

James Ridley:                     Oh, great example.

Brett Evans:                        Would that cover it?

James Ridley:                     Yeah, absolutely. It’s essentially, it’s triggered an audit, they want to know, they’re going to obviously look at your residency details and, therefore, your current account that you use that you’ve bought that insurance through, will go and lodge and claim on the audit insurance, and then it’s likely that the provider will pay out an amount to help cover soliciting costs, obviously all the relevant tax preparation, as well as relevant documents for that case. It is beneficial. Otherwise, if you don’t have it, you’re the one that’s going to have to pay the accounting firm and pay the solicitors.

Brett Evans:                        Which is very expensive.

James Ridley:                     Oh, absolutely, I’d hate to see what they-

Brett Evans:                        Especially if solicitors get involved and… yeah.

James Ridley:                     Well, imagine the fees that… the Harding case.

Brett Evans:                        Mr Harding, yeah. It’d be six figures.

James Ridley:                     Yeah, absolutely. He’ll be paying that down now the next few years. So, yes it’s worth it. You’ve just got to ask your accountant if they offer it.

Brett Evans:                        So there’s a tip guys, audit insurance. Have a chat to your accountant to see if they offer it, and if they do, grab it with both hands.

James Ridley:                     Absolutely. That’s all I’ve got on today’s agenda, just those few questions and those few other things, so…

Brett Evans:                        Look, I think that’s a good, probably, place to wrap it up. We could go on for hours at an end but, as you’ve seen, there’s a lot of different topics that we’re going to try and bring into this. A lot of them are layman’s questions that we see on a daily basis from everyone,

James Ridley:                     Yeah, exactly right.

Brett Evans:                        From James and I, I just want to say thank you very much for dialling in and don’t forget to either subscribe to the channel and give us some feedback and also review us on the podcast as well, and make sure you subscribe as well, because being a… I don’t want to say a “vanity person”, but when we see those numbers go up, it’s amazing how we go, “Okay, let’s do some more.”

James Ridley:                     Yeah, exactly right.

Brett Evans:                        We want to do this as much as possible, and it’s great affirmation from our point of view. When we see those numbers coming in, we think, wait a minute, let’s do some more. So, keep it up guys, we’re loving the feedback, we’re loving the commentary. You have a great day, and we’ll talk to you next week.

James Ridley:                     Speak to you soon.

Brett Evans:                        Thank you.

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest