Current circumstances have many expats thinking about whether it’s time to move home. Whenever you decide to make the move, it requires careful planning. We work with expats across the globe to plan for their financial and life goals in all situations, including the move back to home shores.
Here is our guide for planning your return to Australia.
Review your goals
At Apt, we believe in living for today while planning for tomorrow, and to stay true to this, it’s important that you consider your goals when planning your move back home.
For some, moving home right now isn’t a choice, with changing global markets comes changing opportunities, but if you have the luxury of choice, it’s important to consider whether you have met your goals overseas. Living and working abroad is a once in a lifetime opportunity for many, so you want to make sure you leave with no regrets.
It’s also critical to understand how the move home will help you achieve your longer-term goals and determine the funding you will need to meet them. This is often a delicate balancing act and requires careful planning. For example, if you won’t have employment on your return, do you have the funds to continue with your current lifestyle? How and where will you live? What is the job outlook like for you at home?
Establish a timeframe
If you don’t need to move home right away, it’s best to set a timeline so that you can pick the right time to start moving your assets. This will give you time to navigate currency markets and tax issues and maximise your return.
This will also enable you to calculate and save for the costs of the move. Moving personal items and pets can be expensive, and you’ll need time to save the funds and organise the logistics. You don’t want to be relying on personal loans or credit cards to fund your return unless it is absolutely necessary.
Navigate currency exchange
Currency markets are volatile and future movements can be difficult to predict. If at some point you need to transfer assets across borders, then the exchange rate will become extremely important. If you need to convert large amounts of cash, have a strategy around this and try to plan it early.
Transferring a large lump sum at the wrong time can severely erode your capital. For those earning income in a foreign country but intending to move home in the future, transferring smaller amounts of cash home on a regular basis can be an effective strategy to move funds across borders and manage the impact of currency movement, rather than waiting until the last minute to transfer all of your assets.
Build assets where you intend to reside long term
Currency can have a huge impact on the final return on your investment. If you’re planning to fund your retirement in Australia using assets domiciled in the US, then your ultimate investment return will be heavily reliant on the US/AUD currency exchange which creates an extra layer of risk (known as currency risk).
Purchasing assets in Australia will likely make the process of moving back home easier and reduce the complexity of your finances once you return to Australia.
Understand the tax implications
If you’re thinking of building assets in Australia whilst you’re overseas, there are some opportunities and pitfalls to be aware of. If you’re a non-resident for Australian taxes, you typically won’t receive the 50% capital gains tax discount on your Australian investment property for any gains accumulated from 8 May 2012, until you become an Australian tax resident again. So the lowest capital gains tax rate on your investment property whilst you’re overseas would be 32.5% and can be as high as 45%.
Capital gains on Australian shares are typically capital gains tax-free in Australia whilst you’re a non-resident for Australian taxes (although those in the US need to be careful which investments they purchase outside the US. You can find out more in my previous blog, Aussie expats in the US: What you need to know.)
Investing in assets that offer a low tax return can help accelerate asset growth and put you in a better position to achieve your long-term goals. You need to ensure that any investment in shares or property is for a minimum of 5 years.
The tax treatment of your assets will likely change when you return to Australia, so you will need to ensure that you are well prepared and navigate the tax implications of your move back to Australia carefully. For example, if you were a non-resident of Australia for tax purposes, you would likely not be assessable for capital gains taxes on your Australian shares. You would be taken to have acquired these assets for Australian tax purposes on the day that you’re deemed to be an Australian tax resident again.
It is important to obtain a valuation on your properties when you become a tax resident to make calculations easy on eventual sale. You will also need to consider if there are any tax implications overseas when you leave. For instance, for those leaving the US, there are potential exit taxes if you were a permanent resident in 8 out of 15 years.
Speak to the experts well in advance
To give you the best opportunity to navigate the financial challenges of your relocation, you’re best to speak to an expat accountant and a financial planner that specialises in expat financial advice as early as possible.
Thinking about making the move back to Australia? Get in touch to find out how we can help you navigate your finances and stay on track with your goals.
General Advice warning
The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.
