Money Matters – Financial Safeguards for Aussie Expats

Navigating the globe as an Australian expat presents a wealth of opportunities – both culturally and professionally. But while you’re soaking up your new environment, it’s crucial not to overlook the importance of safeguarding your finances as an expat.

From assets to healthcare, let’s dive into the strategies you need to keep yourself and your family secure abroad.

1. Ensuring Both Partners Have Access to Capital

Embarking on a journey overseas brings with it a host of new experiences and challenges. One challenge that’s often overlooked is ensuring uninterrupted access to capital. Let’s paint a scenario to illustrate: You’re settling into your new life abroad when an unexpected expense arises. You think, “No problem, we’ve got savings.” But as your partner attempts to withdraw funds, they’re met with a refusal. The account’s frozen. Panic ensues. Such unforeseen obstacles can turn your expatriate adventure into a financial nightmare.

Firstly, to avoid any such hiccups, consider the benefits of both partners having unrestricted access to funds. Joint bank accounts are a popular solution, allowing both partners to have equal access to the capital. It promotes financial transparency and ensures neither partner is ever in a situation where they can’t access their own money.

But here’s an additional layer to consider: What if, heaven forbid, one partner passes away unexpectedly? In many jurisdictions, the bank might freeze a joint account upon the death of one holder until formal procedures are completed. This can leave the surviving partner without access to crucial funds, compounding the stress of an already traumatic event.

To safeguard against this, it’s a wise move for each partner to also maintain an individual account. This ensures that, even in the unfortunate event of a spouse’s passing, the surviving partner still has immediate access to their own account. It acts as a safety net, ensuring you or your partner aren’t left financially stranded in a vulnerable moment.

Of course, joint accounts have their merits, particularly when it comes to shared expenses and mutual financial goals. But an individual account acts as a buffer, a protective measure. Think of it as a financial seatbelt – you hope you’ll never need it, but it’s invaluable if you do.

2. The Significance of Appropriate Health Insurance

Navigating the unfamiliar terrain of international healthcare is more than just understanding different medical practices; it’s about ensuring you’re protected from unforeseen expenses and risks. When living abroad, it’s crucial to select a health insurance plan tailored for expats. This isn’t merely about extensive coverage but finding a policy that aligns with your needs in your new locale.

While you adjust to new surroundings, remember your ties to Australia. If you had private health insurance back home, consider suspending it. This small step ensures that if you return, you can pick up where you left off without facing lengthy waiting periods, keeping your transition smooth both medically and financially.

3. Guardianship for Children: Temporary and Permanent Plans

If you’re a parent, your child’s safety is paramount. But have you thought about their guardianship in your absence? The difference between temporary and permanent guardianship is stark. While the former is for short-term situations, the latter is a long-term commitment. Legal intricacies can vary from one country to another, so it’s essential to be thorough. Discuss the plans with potential guardians, ensuring they’re willing and capable. Document everything and keep it updated, because as life changes, your guardianship needs might too.

It’s also important to note that the Temporary Guardian you nominate would not have their employment impacted in the event that something were to happen to you.

4. Recognising and Preparing for Unexpected Changes

The thrill of living abroad comes with its fair share of uncertainties. Whether it’s an abrupt job relocation or a sudden worldwide event, the landscape of an expat’s life can shift rapidly. At the core of your preparations should be a robust contingency fund. This isn’t merely a savings account, but a lifeline in times of unpredictability.

How much should you have in it? A good rule of thumb is to calculate three months of living expenses if you’re single or a dual-income couple. However, if you have dependents relying on you, consider extending this safety net to cover up to six months of expenses. This takes into account housing, utilities, groceries, insurance, and other essentials. By having this buffer, you not only ensure financial stability during unforeseen events but also grant yourself the peace of mind to tackle challenges head-on.

Adaptability is another key trait for a seasoned expat. Embrace changes, have a ‘Plan B’ in place, and regularly update it to align with your evolving circumstances. Dive into the world of expat forums and communities. They can be goldmines of information, filled with first-hand experiences, insights, and advice from those who’ve faced similar challenges. In a world of variables, arm yourself with knowledge and a financial cushion to make your expatriate journey as seamless as possible.

5. The Imperative of Asset Protection

As an Australian expat, your assets stand as tangible testaments to your hard work, aspirations, and legacy. Whether it’s the cherished family home in Australia or investments in your new country, these assets are cornerstones of your financial security. Yet, with international transitions come challenges, particularly in understanding and navigating the intricate legal frameworks of two different countries.

For instance, how would inheritance laws in your new home affect your Australian assets? And conversely, how might Australian laws view your overseas property or investments? These questions underline the importance of a comprehensive asset protection strategy. Assets don’t just encompass property and vehicles; they also include stocks, bonds, retirement funds, and even intellectual property. Ensuring they are adequately shielded from potential legal pitfalls or unforeseen circumstances is paramount.

Engaging professionals who specialise in international asset protection is a wise move. These experts, with their in-depth knowledge of cross-border legalities, can guide you through creating robust protective measures, from establishing international trusts to drafting airtight wills. Moreover, they can offer insights into potential tax implications, helping you optimise your assets in the most efficient manner.

6. Staying Updated with Tax Implications

The realm of taxation, with its myriad rules and ever-evolving landscape, can seem like a maze for Australian expats. This complexity is amplified when recent changes come into play. For instance, Australian expats have recently seen significant shifts in their tax obligations, most notably the removal of the Main Residence Exemption. This change means that Australian expats selling their primary residence abroad can no longer avail of this previously beneficial tax exemption. The implications? Potentially a more substantial capital gains tax liability.

Another pivotal alteration is the removal of the 50% Capital Gains Tax (CGT) discount for expats back in May, 2012. Previously, this allowed Australian expatriates to claim a 50% discount on any capital gains they made if they held onto their asset for over a year. With its removal, the tax bill for selling long-held assets could be considerably higher.

Given these changes, and the likelihood of more in the future, it’s vital to stay informed. While it’s essential to grasp the basics, delving deep into the nuances of both Australian and your host country’s tax systems can be challenging. Enter tax professionals – especially those well-versed in expatriate concerns. Consulting them not only clarifies your obligations but also illuminates potential advantages or savings you might overlook.

Remember, while the complexities of international taxation can seem overwhelming, they’re navigable with the right knowledge and guidance. By staying updated and seeking expert advice, you can make informed decisions, optimise your tax position, and ensure compliance across borders.

7. Comprehensive Personal Insurances

Embarking on an international journey adds layers of intricacy to life, but it also amplifies the importance of solid protective measures. While assets and health insurance often take precedence in our minds, personal insurances like Life, Critical Illness, Total & Permanent Disability (TPD), and Income Protection play a crucial role in shielding you and your loved ones from life’s unforeseen calamities.

Life Insurance: It’s the bedrock of ensuring your family’s financial security, even in your absence. It offers peace of mind knowing that, should anything happen to you, your family won’t be burdened with financial stress atop emotional turmoil.

Critical Illness Insurance: No one anticipates being diagnosed with a severe illness. However, should it happen, this insurance can alleviate the financial strain, allowing you to focus purely on recovery.

Total & Permanent Disability (TPD) Insurance: In the unfortunate event you become permanently disabled and unable to work, TPD ensures you receive a lump sum payment, assisting with rehabilitation costs and living expenses.

Income Protection: Arguably the underdog of personal insurances but invaluable. If illness or injury impedes your ability to earn, this coverage ensures you receive a monthly income, enabling you to maintain your lifestyle and cover essential expenses.

However, as an Australian expat, there’s an added layer to consider: the global reach of these insurances. It’s essential to have policies that are internationally recognised, ensuring you’re covered no matter where life takes you. Additionally, for those who envision Australia as their ultimate destination or for those with significant financial ties to the country, the ability to hold these insurances in Australian Dollars (AUD) can also be important. It offers predictability against currency fluctuations, especially during claim times, ensuring your financial protection isn’t eroded by volatile exchange rates.

8. Estate Planning: Navigating International Complexities

Your assets and how they’ll be handled after your time is a topic many avoid, but it’s crucial, especially internationally. Different countries can have vastly different estate laws. Your assets might not automatically go to your next of kin. Therefore, invest time in estate planning. Ensure you have a will that’s valid both in Australia and your current country. Regularly update it to reflect life changes. An international estate planner can be your best ally in this complex process.

Conclusion

Embracing the expat life is an adventure of a lifetime. And while the journey is filled with discoveries and new horizons, ensuring your financial wellbeing remains a priority is paramount. The strategies outlined above aren’t just steps but lifelines. Implement them, stay informed, and remember: while you’re overseas, your financial security should never be overlooked.

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.