Finance Tips for Australian Expats in Vietnam

Living and working in Vietnam offers Australian expats an exciting opportunity to experience a vibrant culture and potentially accelerate their financial goals. However, navigating the financial landscape across two countries requires careful planning and awareness of various regulations.

This guide is designed to help you navigate the cross-border financial issues and make the most of your time in Vietnam as an expat.

Introduction

When you make the move from Australia to Vietnam, your financial situation becomes more complex. You’ll need to navigate tax obligations in both countries, manage your superannuation, explore investment opportunities, and plan for your eventual return to Australia (or perhaps a permanent stay in Vietnam).

Getting your finances right isn’t just about compliance with the tax rules, it’s about maximising your wealth-building potential during your time abroad. Let’s explore the key areas you need to understand to maintain financial stability and take advantage of opportunities as an Australian expat in Vietnam.

Understand Your Australian Tax Residency Status

Your tax residency status determines how the Australian Tax Office (ATO) treats your income and assets. This is perhaps the most crucial financial consideration for expats, as it affects nearly every other aspect of your financial planning.

How the ATO Determines Tax Residency

The ATO uses several tests to determine your status. Under the Physical Presence Test, if you spend 183 days or more in Australia within a financial year, you’ll likely be considered a tax resident. The Domicile Test considers whether Australia is your permanent home; if so, you’ll generally be considered a resident for tax purposes unless you’ve established a permanent home elsewhere. For Australian government employees working overseas, the Superannuation Test typically classifies you and your family members as Australian residents for tax purposes.

Impact on Your Tax Obligations

Your residency status significantly impacts your tax obligations. Australian tax residents are taxed on their worldwide income at progressive rates ranging from 0% to 45% (plus 2% Medicare levy). For 2024-25, these rates start at 0% for income up to $18,200, increase to 16% for income between $18,201 and $45,000, then 30.0% for income between $45,001 and $135,000, followed by 37% for income between $135,001 and $190,000, and finally 45% for income over $190,000.

Non-residents, on the other hand, are taxed only on Australian-sourced income, but typically at higher rates. Non-resident tax rates start at 30.0% for income up to $135,000, rise to 37% for income between $135,001 and $190,000, and reach 45% for income over $190,000. Additionally, non-residents don’t pay the Medicare levy and can’t access the tax-free threshold of $18,200 that residents enjoy.

Key Tax Obligations for Australian Expats

Even as a non-resident, you must fulfil several important tax obligations. You’ll need to file an annual Australian tax return if you have any Australian-sourced income, declare rental income from Australian properties, and report capital gains from Australian assets. It’s also important to consider the Australia-Vietnam tax treaty provisions to prevent double taxation on your income.

Maintain detailed records of your entry and exit dates from Australia, as these will be crucial for establishing your tax residency status if questioned by the ATO. Good record-keeping can save you significant headaches during tax time and potential audits.

Superannuation – What Expats Need to Know

Your Australian superannuation continues to be a vital part of your retirement planning, even while living in Vietnam.

Contributing to Super as an Expat

When it comes to superannuation while working overseas, it’s important to understand that your Australian employer is not obligated to make superannuation contributions if you’re working outside Australia. However, some employers may continue to contribute voluntarily as part of your overall compensation package. You can still make your own contributions while abroad, either as concessional (before-tax) or non-concessional (after-tax) contributions to your super fund, though the tax implications will vary based on your residency status.

Tax Implications

For non-residents, concessional contributions are taxed at 15% within the super fund, which can be significantly advantageous compared to the non-resident income tax rates that start at 30.0. Standard contribution caps still apply while you’re overseas – currently $27,500 for concessional and $110,000 for non-concessional contributions annually. Staying within these limits is crucial to avoid excess contribution taxes.

Managing Your Super Accounts

While living in Vietnam, it’s important to actively manage your superannuation strategy. If you have multiple super accounts, consolidating them can significantly reduce fees and simplify management. The average Australian has 2.3 super accounts, with each additional account potentially costing thousands in unnecessary fees over time. This consolidation becomes even more important when you’re overseas and may have reduced oversight of your Australian financial affairs.

You should also review your investment options within your super fund, considering your age, risk tolerance, and the duration of your stay in Vietnam. Your investment horizon might change based on your expat plans, which could warrant adjustments to your asset allocation.

For those with a Self-Managed Super Fund (SMSF), additional considerations apply. Your fund must meet the central management and control test to remain an Australian super fund. This may require appointing an Australian-based director or returning to Australia periodically to make key decisions about your fund. Failing this test could result in your SMSF being deemed non-compliant, leading to severe tax consequences.

Managing Taxable Australian Property as an Expat

Real estate is often the largest asset in an Australian expat’s portfolio, and it comes with specific tax considerations.

Rental Income Tax Treatment

For non-residents, rental income from Australian properties is taxed at non-resident rates starting at 30.0%, which is significantly higher than the rates applied to residents. Despite this higher rate, you can still claim deductions for property expenses, which helps reduce your taxable rental income. These deductible expenses include loan interest, property management fees, maintenance and repairs, depreciation on buildings and fixtures, as well as council rates and insurance. Maximising these legitimate deductions becomes even more important given the higher tax rates applied to non-residents.

Changes to Capital Gains Tax Rules

A significant change for expats is the removal of the main residence exemption for non-residents:

• Prior to 2020, Australians living overseas could sell their former home in Australia CGT-free if it was their main residence.
• From July 2020, non-residents cannot claim the main residence exemption, potentially resulting in substantial CGT liabilities on the sale of a former home.
• CGT for non-residents is calculated at non-resident rates (minimum 30.0%) on the entire capital gain, without the 50% discount that residents receive for assets held longer than 12 months.

Strategies for Property Investments

Understanding Vietnam’s approach to taxing capital gains is essential for comprehensive financial planning.

When managing Australian property investments as an expat, strategic planning can significantly reduce your tax burden. Consider carefully timing any property sales in relation to your tax residency status, as selling while you’re a tax resident might allow you to claim the main residence exemption or the 50% CGT discount. It’s also advisable to obtain professional valuations when you leave Australia to establish a clear cost base for future CGT calculations, providing documentation that the ATO will find difficult to dispute. Some expats explore alternative ownership structures like trusts or companies, which might offer tax advantages depending on your situation, though these arrangements come with their own complexities and establishment costs that should be carefully evaluated with professional advice.

How Capital Gains Are Taxed in Vietnam

Vietnam’s Tax Treatment of Foreign Assets

Vietnam approaches taxation of foreign assets similarly to many other countries by generally taxing residents on their worldwide income, including capital gains. The standard Personal Income Tax (PIT) rate for most capital gains in Vietnam is set at 20%, which applies to gains from assets like property and business interests. For securities transactions, Vietnam employs a simpler system with a flat tax rate of 0.1% on total sale proceeds, regardless of whether a gain was actually made. This can be advantageous in rising markets but means you’ll still pay some tax even if you sell at a loss.

Selling Australian Assets While in Vietnam

When selling Australian assets as a Vietnam resident:

• You may be liable for tax in both countries
• The Australia-Vietnam tax treaty provides some protection against double taxation through foreign tax credits
• Capital gains from real estate are typically taxed in the country where the property is located (Australia)

Minimising Tax Exposure

Minimising your tax exposure across two tax systems requires careful planning and execution. Timing asset sales strategically can make a substantial difference to your after-tax returns, so always consider your residency status in both countries before selling significant assets. Maintaining comprehensive records of acquisition costs and capital improvements is essential to maximise your cost base and thereby reduce taxable gains.

In some cases, you might benefit from realising losses in the same financial year as gains to offset your tax liability. Given the complexity of cross-border taxation, it’s highly advisable to consult with tax professionals who specialise in both Australian and Vietnamese tax systems to create a personalised strategy that optimises your position across both jurisdictions.

Retirement Savings Accounts in Vietnam

Understanding local retirement options can complement your Australian super strategy.

Vietnamese Pension System for Expats

• Vietnam’s Social Insurance scheme is generally not mandatory for foreign workers
• From 2018, foreign workers with work permits valid for at least one year can participate voluntarily in the Vietnamese social insurance system
• Contribution rates for voluntary participants are typically 8% of monthly salary from employees and 17.5% from employers

Alternative Retirement Savings Options

Since the Vietnamese pension system may not be ideal for expats, consider:

• Private insurance products with savings components
• Investment-linked insurance policies
• Regular investments in diversified assets
• Superannuation back in Australia
• A diversified investment portfolio in Australia

Should You Use Vietnamese Retirement Schemes?

For most Australian expats, Vietnamese retirement schemes may not be the optimal choice for long-term savings. These local schemes typically lack the significant tax advantages that Australian superannuation offers, and the funds accumulated may be difficult to access or transfer internationally when you eventually leave Vietnam. Additionally, Vietnamese retirement products often have limited investment options compared to international alternatives, potentially restricting your ability to diversify properly.

Instead of relying heavily on local retirement schemes, most Australian expats would benefit from maintaining their Australian superannuation as their primary retirement vehicle, supplemented by investments through international platforms that offer greater flexibility and portability. Establishing regular savings in stable currencies can also provide a buffer against potential Vietnamese dong volatility, ensuring your retirement planning remains robust regardless of your future location decisions.

How to Invest in Vietnam as an Expat

Vietnam offers interesting investment opportunities with its growing economy.

Investment Options

Vietnam offers several interesting investment options for expats looking to diversify their portfolios. In real estate, foreign individuals can purchase apartments (though not land) through a 50-year leasehold arrangement, with rental yields in Ho Chi Minh City and Hanoi typically ranging from 4-6%. For those interested in equities, the Vietnamese stock market is accessible through the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX), though investors should be aware of foreign ownership limits that exist for certain protected sectors.

Bond investments represent another option, with both government and corporate bonds available at yields typically higher than those found in developed markets, reflecting both higher growth potential and increased risk. Some entrepreneurial expats consider direct business investment in local enterprises or startups, though this path requires significant due diligence and ideally local partners who understand the business environment.

Restrictions and Considerations

When investing in Vietnam, be aware of several important restrictions that affect foreign investors. In many protected sectors of the economy, foreign investors can only own up to 30% of a Vietnamese company, limiting your influence and control in these businesses. Property purchases involve navigating specific documentation requirements and obtaining necessary government approvals, which can be time-consuming and sometimes unpredictable. Perhaps most importantly for long-term financial planning, the Vietnamese dong (VND) is not freely convertible on international markets, which creates potential challenges when you eventually want to repatriate your funds or investments to Australia or move them to another country.

Getting Started

• Open a securities trading account with a reputable Vietnamese broker (requires work permit and local bank account)
• Consider index funds tracking Vietnamese markets through international brokers as a simpler alternative
• Research thoroughly and start with small investments to understand the market dynamics

Managing Exchange Rates & Currency Risks

The AUD/VND exchange rate directly impacts your effective income and wealth.

Impact of Exchange Rate Fluctuations

• A weaker Australian dollar means your Vietnamese income converts to more Australian dollars
• Property and investment values in Australia fluctuate in VND terms as exchange rates change
• Retirement planning becomes more complex with multiple currency considerations

Strategies for Mitigating Currency Risk

To protect yourself from unfavourable exchange rate movements, implement a multi-faceted approach to currency management. Setting up multi-currency banking facilities allows you to maintain accounts in both AUD and VND, and potentially USD as a stable reserve currency, giving you flexibility to hold funds in the most advantageous currency at different times. Currency diversification within your investment portfolio provides natural hedging, as declines in one currency may be offset by gains in another.

Rather than attempting to time currency markets (which even professionals find challenging), consider implementing a strategy of regular fixed transfers to average out exchange rates over time, reducing the impact of short-term volatility. For large, one-time transfers such as property purchases, investigate forward contracts that allow you to lock in exchange rates in advance, providing certainty for your major financial decisions.

Best Practices for International Money Transfers

International money transfers can silently erode your wealth if not managed carefully. Traditional banks typically charge 3-5% in hidden exchange rate markups, significantly reducing the amount that arrives in your destination account. To maximise your transfers, specialised services like Wise, OFX, or XE often offer substantially better rates and lower fees than conventional banks, sometimes saving you thousands on larger transfers. When comparing providers, calculate the total costs including both the explicit fees and the implicit exchange rate margin, rather than focusing solely on the advertised fee. For optimal rates, try to schedule your transfers when the receiving country’s markets are open, as liquidity tends to be higher and spreads narrower during these periods, potentially resulting in more favourable exchange rates.

Planning for Repatriation or Long-Term Stay in Vietnam

Whether you plan to return to Australia or settle permanently in Vietnam, advance planning is essential.

Financial Steps for Returning to Australia

Planning your return to Australia requires careful financial preparation. The transition back to Australian tax residency will significantly affect how your global assets and income are taxed, so it’s crucial to understand these implications well before you make the move. If purchasing property is part of your repatriation plan, start preparing financing arrangements early, as lenders may view returning expats with caution despite overseas income or assets. Your superannuation strategy should include evaluating catch-up contribution options if you’ve been unable to contribute adequately while overseas, potentially using the carry-forward provisions for concessional contributions. Before returning, conduct a comprehensive review of your investment portfolio to rebalance and realign with Australian tax efficiency principles, potentially realising capital gains or losses strategically before changing your tax residency status.

Conclusion

Managing your finances as an Australian expat in Vietnam requires careful planning and regular reviews. Tax rules and financial regulations change frequently in both countries, so staying informed is essential.

Working with financial advisers and tax professionals who understand both Australian and Vietnamese systems can save you significant money and stress. While the complexity might seem daunting initially, getting your finances right will allow you to fully enjoy your Vietnamese experience without financial worries.

Have you recently moved to Vietnam or are you planning to? Let us know about your experience in the comments below.

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.