Common Financial Concerns for Australian Expats in Dubai

If you’re an Australian expat in Dubai, navigating your financial landscape can often feel like walking through a labyrinth of choices. Whether it’s for a career boost, the allure of tax-free income, or the vibrant lifestyle, Dubai attracts a significant number of Australians each year. As you settle into your new life, it’s crucial to make informed decisions about your finances to ensure a secure and prosperous future.

This guide will dive into some of the most pressing financial questions you might face, such as the optimal currency for savings and investments, whether to continue contributing to your superannuation, and understanding your tax residency status. By addressing these concerns, you’ll be better equipped to make decisions that align with both your immediate needs and long-term goals.

1. Choosing the Right Currency for Saving and Investing

One of the first financial decisions you’ll face as an expat in Dubai is determining which currency to save and invest in. With options ranging from the Australian Dollar (AUD) to the UAE Dirham (AED) and even the US Dollar (USD), the choice can seem overwhelming.

Why does it matter? Currency choice affects not just the potential return on your investments but also your financial stability. Currency fluctuations can significantly impact the value of your savings and investments, especially if you plan to return to Australia or move to another country in the future.

Factors to Consider

• Exchange Rates: The AUD/AED exchange rate can be volatile, influenced by factors such as commodity prices and economic indicators. A strong AUD means you get more for your money converting back from AED and vice versa.
• Economic Stability: The USD is often seen as a ‘safe haven’ currency due to its stability and global acceptance. Considering the economic outlooks of Australia, the UAE, and the global market can help you decide if investing in USD might shield you from currency risks.
• Future Plans: Your future plans play a crucial role in this decision. If you intend to stay in Dubai long-term, saving in AED might make more sense. However, if you plan to return to Australia, maintaining savings in AUD could be advantageous.

Expert Tips

• You may wish to consider diversifying your currency exposure to mitigate risks. For instance, maintaining savings accounts in both AUD and AED could protect you from adverse shifts in exchange rates.
• Consider consulting a financial adviser who understands both Australian and UAE markets. They can offer tailored advice based on your personal circumstances and financial goals.

2. Superannuation Contributions While Abroad

Superannuation is often an essential component of any Australian’s long-term financial health, designed to provide you with a pension once you retire. As an expat, the decision to continue contributing to your superannuation fund back home should not be overlooked.

Understanding Superannuation from Abroad

• Continuing Contributions: In most cases, you can continue to contribute to your super fund while living in Dubai, but it’s essential to understand the rules and limits for voluntary contributions, which may have changed since you moved.
• Tax Benefits: Concessional (before tax) contributions to your super are taxed at a concessional rate of 15% in Australia, which is generally lower than personal income tax rates, however may not be lower than your tax rates in Dubai. These tax benefits, however, should be weighed against other investment opportunities in Dubai that might offer better returns or tax advantages. You can also make non-concessional contributions to your superannuation fund, which are not taxed at 15% upon contribution.
• Timing of Contributions: You may also wish to monitor expiring concessional super contributions under the carry forward concessional contribution strategy via your myGov account, as well as whether you should use the bring forward non-concessional super contribution strategy.

Should You Keep Contributing?

• Return to Australia: If you plan to return to Australia eventually, continuing your super contributions can be a wise choice to ensure you don’t fall behind in your retirement savings.
• Staying Overseas: If you decide to remain abroad or retire outside Australia, you might want to compare the potential returns of your super fund against other global retirement saving options.

Practical Steps

Check with your super fund about any changes in contribution rules for expats.

Assess the financial implications, including the tax benefits and potential returns, with a financial adviser familiar with both Australian and international finance laws.

3. Tax Residency Status and Its Implications

Determining whether you are a non-tax resident of Australia is pivotal in managing your financial obligations and can impact your income, investments, and savings. Understanding your tax residency status will help you comply with tax laws and plan your finances more effectively.

What is a Non-Tax Resident?

A non-tax resident of Australia generally does not pay tax in Australia on foreign income. This status depends on several factors, including the purpose and permanence of your stay abroad, your residential ties to Australia, and your social and economic connections to Dubai.

Why is it Important?

• Tax Obligations: As a non-tax resident, you’re only taxed on Australian-sourced income, such as rent from properties you own in Australia. This status can significantly reduce your tax burden, depending on your sources of income.
• Financial Planning: Knowing your tax residency status helps you make informed decisions about investments, property ownership, and income management, considering the tax implications in both countries.

Determining Your Status

The primary test for tax residency is your intent and purpose for leaving Australia. Suppose your move to Dubai is temporary or for a fixed term, you might still be considered a tax resident. However, if you have established a permanent home in Dubai, it’s likely you will be considered a non-resident. Documentation and records, such as a signed lease in Dubai, employment contracts, or schooling arrangements for children, can help establish your residency status.

Next Steps

Consult with a tax professional who can provide guidance based on the latest Australian Taxation Office regulations and your personal situation. Keep detailed records of your movements and financial transactions between Australia and Dubai to support your residency status claims.

4. Managing Your Australian Mortgage from Abroad

Managing an Australian mortgage while living in Dubai presents unique challenges and opportunities. The decision to either maintain, sell, or pay off your property in Australia is not just a financial one but also emotional, considering it might represent a tie back home.

Should You Pay Off the Mortgage?

Interest Rates: Consider the interest rates on your mortgage versus the potential returns from investments in Dubai. If the interest saved by paying off the mortgage is higher than what you could earn from other investments, it might be financially wise to pay off or reduce your mortgage.

Cash Flow: Analysing your cash flow is crucial. Ensure that you have enough liquidity for your daily needs and emergencies before locking away your money in property.

Tax Implications

• Rental Income: If you’re renting out your Australian property, you need to understand the tax implications. As a non-tax resident, your rental income is subject to non-resident income tax, but you are also allowed to claim expenses like interest on loans, property management fees, and maintenance costs.

• Capital Gains Tax (CGT): Non-residents are subject to CGT on any Australian property sold. The absence of the main residence exemption for non-residents since 2019 means potentially significant tax liabilities on the sale of former homes.

Expert Insights

Engage a financial adviser or a tax specialist who understands both Australian and UAE tax laws to optimise your property investment strategy. Consider refinancing options, as securing a lower interest rate could significantly impact your decision on whether to sell, hold, or pay off the property.

5. Validity of Estate Planning Documents in Dubai

As an expat, ensuring that your estate planning documents are valid in both Australia and the UAE is critical. Estate laws vary significantly between the two countries, and proper planning is necessary to avoid legal and financial complications for your heirs.

Understanding Estate Laws

Australia: Typically, your will in Australia covers your assets there but might not automatically apply to assets or circumstances in another country.

UAE: The UAE follows Sharia law for inheritance matters for non-Muslim expats unless explicitly stated otherwise in a legally recognised will.

Steps to Ensure Compliance

• Draft a Local Will: Consider having a separate will drafted under the laws of the UAE, especially for any assets or interests you hold there. This is crucial to ensure that your wishes are respected in both jurisdictions.

• Legal Consultation: Regularly consult with legal experts in both countries to ensure that your estate plans are aligned with current laws and your personal circumstances. Changes in one country’s laws could impact how your assets are handled in the other.

Practical Tips

• Keep detailed records of all your assets in both countries, including property, bank accounts, and investments.

• Communicate your plans clearly with your family to avoid any confusion or conflict after your passing.

Conclusion

Navigating the financial landscape as an Australian expat in Dubai involves understanding and making informed decisions about currency management, superannuation contributions, tax residency, mortgage management, and estate planning. Each decision carries its own set of complexities, and what works for one might not suit another due to different personal circumstances, goals, and financial situations.

As you consider these aspects of your financial life, remember that consulting with financial and legal professionals can provide clarity and direction, helping you to make decisions that best suit your long-term interests. The peace of mind that comes from well-managed finances is invaluable, especially when you are far from home.

Don’t navigate these complex waters alone. Reach out for professional advice tailored to your specific needs and circumstances. Whether it’s a consultation on your superannuation options, a discussion about your tax residency, or a review of your estate planning documents, the right advice can make all the difference.

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.