The latest personal finance tips and insights for Australians at home and abroad

Australian Expat Guide to FX Transfers

Financing Strategies Banner - Ally Wealth Management

X As Australian expats, we’re more than likely going to be transferring funds to one country or another over time, whether it be transferring back to Australia or elsewhere overseas.

While the costs associated with transferring funds around the world has certainly seen a steep decline over recent years, there are still many pitfalls and myths surrounding this area.

This week our team at Ally Wealth Management takes a look at some of the common myths regarding foreign exchange (FX) transfers, and what you really need to consider before making a transfer. Outlined below are the most common questions we faced regarding FX and our answers.

“Does my tax residency impact my decision to transfer funds back to Australia..?”

It’s important to first consider if there is a Double Tax Agreement (DTA) between your current country of residence and Australia. You can view the full list of Income Tax Treaties with various countries here. This is important for a key reason in determining whether you should transfer the funds, and what the tax impact could be once you’ve done so.

If you’re residing in a country whereby there is a DTA in place, such as Singapore, then once you’ve transferred the funds back to Australia in Australian Dollars (AUD), then you would not be taxed again on the funds once they arrive back home. If you were to invest in Taxable Australian Property (TAP), such as an investment property, then this could create tax exposure for any net rental income and capital gains, however, if you’re a non-resident of Australia for tax purposes, then you would not have exposure to capital gains tax on the growth while you’re living abroad.

If you’re in a country where there is not a DTA in place, however, this could be a different story, and you may find that you’re paying more tax than you expected. Simply being out of Australia at the time, does not automatically cut your tax exposure to the country. Given that we’re discussing personal taxation here, it’s important to highlight that you should seek professional advice from your accountant and/or tax specialist.

“Does the size of the transfer really matter..?”

This one is certainly one of the more common myths, that anything below $10,000 won’t be noticed by AUSTRAC and the Australian Tax Office (ATO). Unfortunately, this is completely false and the $10,000 limit really only determines whether or not you need to declare the cash if you’re bringing it into or taking it out of the country.

AUSTRAC is the Australian Government responsible for collecting, analysing, and assessing financial data from reporting entities looking for any issues or potential cases of money laundering, tax evasion, and terrorist financing. Given this, the size of the transfer is not important, but the purpose and the source of the funds certainly are.

“Do I have to declare how I obtained the funds..?”

For most Australian expats, they will be generating their salary offshore such as in Singapore, New York, or London, and sending money back home to potentially pay off a mortgage, contribute to superannuation or build up other assets back at home. In these cases, the source of funds is quite evident and unlikely to raise any red flags with AUSTRAC or other authorities.

Ensure that you seek professional advice here and that your tax obligations are met, and you’re fully aware of any future tax obligations created by transferring funds back to Australia.

“My bank told me they don’t charge a fee, should I just use them for my FX transfers..?”

There are two key costs when it comes to FX transfers, which are as follows:

  • Fixed / Flat Fee: This is where the bank or FX broker charges a flat fee per transaction, such as $20 for each time you transfer funds.
  • FX Spread: This is the margin on top of the FX spot rate at the time, which is often how the banks will be generating their revenue here.

Let’s assume for example, that the exchange rate between the US Dollar (USD) and Australian Dollar (AUD) is 1.32, and you’re looking to transfer funds back from the United States to Australia from USD to AUD. You call your bank and they advise that they’ll transfer your funds at a rate of 1.30. This 2 cent difference is where the bank is picking up its margin, even if they’re not charging you a fee, and is why it’s important to shop around.

There are a few great options out there to check out which charge very low to no flat fees, and very minimal FX spreads. We’d suggest doing your homework here ensuring that you’re aware of the costs involved and check that they’re licensed in the relevant jurisdictions.

Be sure to do your homework, and check what the current spot rate is at the time that you’re looking to make a transfer. This will ensure that you know exactly what your bank or FX broker is charging you here.

If you have any questions at all about FX brokers, transferring funds around the world, reach out to our team today.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.

Share on:

You might also like

Should You Participate in Your Employee Share Purchase Plan

If you’re an Australian expat, navigating the world of employee benefits in a foreign country can feel like charting unfamiliar…

Share on:
Read more

Top Ways to Invest for a Rising Australian Dollar

As an Australian expat, your financial well-being is often closely tied to the fluctuations of the Australian Dollar (AUD). With…

Share on:
Read more

Navigating Work Visas for Australian Expats in Hong Kong

Are you an Australian expat eyeing Hong Kong as your next career destination? If yes, then understanding the ins and…

Share on:
Read more

Start your financial advice journey with Ally today.