Tips for Managing Finances as an Expat

Published on: February 9th, 2022

If you have lived and worked abroad, you probably know that managing finances as an expat can be complex. You must navigate tax, investments and retirement savings in two jurisdictions and making the wrong move can prove costly.

As a specialist expat financial planner, I see the opportunities and pitfalls every day. It’s my role to help clients stay on track, make the right moves and plan for the future, whether they intend to continue living overseas, move to another location or return home. So today, I’m sharing some tips for planning and managing your finances.

#1 This may be a once in a lifetime opportunity, so ensure you can make the most of it

Setting clear goals for what you intend to achieve overseas is an important but often overlooked step. Knowing what you want to do while living in another country will ensure you can plan the resources you’ll need. It’s also essential to understand the impact on your long-term goals – you want to enjoy your time overseas without compromising your future.

Review your financial plans before you go or at your earliest possible opportunity because decisions that made sense in your home country may not work in your favour once you are a tax resident of another locale. For example, if you hold a Self Managed Super Fund in Australia but move overseas for an extended period, you may find yourself in breach of ATO super laws and subject to harsh penalties.

#2 Consider when, or if, you are likely to return home 

While life can (and often does!) throw curveballs, having a plan for when, or even if, you are likely to return home is essential. Knowing where you intend to reside in the longer term will help you plan your finances to achieve life milestones, such as buying property or retiring. For example, it’s wise to build your retirement savings in the country you plan to retire in so that your funds aren’t impacted by overseas legislation or currency movements.

When and if you plan to return home can also impact your immediate decisions. For example, suppose you bought your primary residence as an Australian resident, but decide to sell it later when you are no longer a resident for tax purposes. You may be required to pay capital gains tax on the change in value from the original purchase, as it loses its tax-free status.

#3 Manage currency risk

When moving assets between your current and home country, currency exchange plays an important role, but the market is incredibly difficult to predict. Instead of trying to time the market, consider your moves from a risk management perspective. Plan to move smaller amounts over time rather than making lump sum transactions at the last minute so that your rate will likely average out.

When making exchanges, shop around for a reputable provider that offers a competitive rate. The difference can be as much as 3-4%, so it’s worth investing a little time in doing your research.

#4 Understand your tax obligations in both jurisdictions

Taxes can be complex but it’s essential to understand them before making financial decisions as making the wrong decisions can be expensive. Tax legislation can differ substantially between your home country and your current county of residence, which can have significant implications for your investments and assets.

For example, if you are an Australian expat living abroad, gains made on shares are typically not assessed while you are a non-resident for tax purposes. However, gains on investment properties are typically taxed at 32.5% – 45% on eventual sale.

Let’s face it, no one wants to pay more tax than they should, but this can be, and often is, the result, so it pays to understand your obligations.

#5 Review whether your financial products can still be held while overseas 

Some financial product providers won’t allow you to keep your account while you’re overseas, and some insurances will not cover you. It’s important to check with your providers and understand the rules and your entitlements before you leave, as it’s much easier to sort out while still in Australia.

#6 Set long-term goals to keep on track for your future

In some cases, moving overseas can lead to a substantial increase in salary and/or a significant reduction in living expenses. This can prove an excellent opportunity to get ahead on your long-term goals, so it’s important not to squander it.

Unfortunately, working in expat finances, I often see situations where people moved overseas for a fantastic earning opportunity but made costly financial mistakes. Typically this occurs in one of two ways; they overspent on a lavish lifestyle, or they didn’t invest/made the wrong investment decisions.

If increasing your income is one of the reasons you are making the move, make sure you have a solid plan to use the additional funds wisely. Of course, that’s not to say you shouldn’t enjoy life today too – it’s about finding the balance, something we call “living for today while planning for tomorrow”.

#7 Seek expert advice

These are only a handful of the financial considerations when living and working overseas, and many depend on your individual circumstances. Pensions, super, taxes, assets, investments, trusts – it can all be impacted and have far-reaching consequences, so it’s important to make the right decisions from the outset.

The best way to manage your finances as an expat is to engage experts who understand both jurisdictions, including accountants and financial planners.

Navigating expat finances can be challenging, however, it doesn’t have to be. At Apt, we have specialist financial planners who help you make the most of opportunities and avoid costly mistakes. Whether you are an Australian living abroad, or an expat in Australia we can help you ensure you meet your tax obligations while making smarter investment decisions and protecting your future. Contact Apt Wealth Partners today for a no-obligation chat.

General Advice warning

The information provided in this blog does not constitute financial product advice or a recommendation to purchase a particular product. 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 Pty Ltd is not a registered Tax Agent. You should consider your individual situation and seek tax advice from a registered tax agent before making any decision based on the content of this document. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.