Offshore Bank Accounts & Repatriating to Australia
When Australian expats decide to return home, there’s often a lot to think about—housing, schools, jobs, and taxes. One question that frequently comes up is, “What should I do with my overseas bank accounts?” You might be wondering whether you can leave them as they are, or if you need to declare them to the Australian Taxation Office (ATO).
This blog will walk you through everything you need to know about offshore cash accounts when you repatriate to Australia.
Do You Need to Declare Your Offshore Bank Accounts?
The first thing to understand when you move back to Australia is that, as an Australian resident for tax purposes, you must declare your worldwide income. This means that any income you earn from offshore investments, rental properties, or bank accounts needs to be reported to the ATO.
But here’s the good news: If the money in your offshore bank account is simply savings (money you’ve already earned, not new interest or income), you don’t have to declare this amount on your tax return. The ATO only cares about the income generated from that money, such as the interest earned on those savings. So, if you’re not earning any income from that account, there’s likely to be nothing to declare.
You might think that bringing the money back to Australia could trigger a tax event, but in most cases that’s not the case. Simply transferring your savings from an overseas account to an Australian one won’t create any tax obligations. However, it’s the interest earned on that money, regardless of where the account is, that needs to be reported.
Declaring Interest Earned on Overseas Accounts
Even though your offshore savings themselves don’t need to be declared, any interest you earn from those accounts must be. This interest is considered “other foreign income” and must be included in your tax return.
Let’s say, for example, you have $50,000 sitting in a bank account in Singapore, earning 1.5% interest per year. The $750 in interest would need to be declared to the ATO, even though the $50,000 in savings does not. It’s important to keep good records of any interest earned so you can report it correctly. It’s also important to bear in mind any foreign exchange gains or losses when converting the interest into Australian Dollars (AUD).
What if you’ve already paid tax on that interest in the country where the account is held? That’s where the foreign income tax offset comes in. Australia has tax treaties with many countries to prevent double taxation. So, if you’ve paid tax on the interest overseas, you can apply for a foreign income tax offset when you file your Australian tax return. This can reduce the amount of tax you owe in Australia.
Should You Keep Your Offshore Bank Accounts?
Deciding whether to keep your overseas bank accounts after returning to Australia depends on your financial goals and circumstances. Here are a few points to consider:
- Access to Foreign Currencies: If you frequently travel for work or pleasure, it might make sense to keep an account in a foreign currency. Having access to international funds without the hassle of currency exchange can be convenient, especially if you’re still earning or spending money in that country.
- Global Investments: If you have global investments or plan to continue investing internationally, an offshore account can make managing these assets easier. However, you’ll need to be aware of the tax implications of any income earned from these investments, as they will need to be reported to the ATO.
- Interest Rates: In some countries, bank accounts offer better interest rates than those available in Australia. If you’re earning more on your money overseas than you would be back home, keeping that account might be beneficial. Just remember that any interest earned will still be taxed in Australia.
- Costs and Fees: Before deciding to keep an overseas account, check if there are any costs or fees associated with maintaining the account as a non-resident. Some banks may charge higher fees for non-residents, or they may require a minimum balance to avoid those fees.
- Convenience: Consider whether it’s actually practical to maintain your overseas accounts. If you’re planning on settling in Australia for the long term, it might be simpler to consolidate your finances within Australian banks.
Tax Considerations When Keeping Offshore Accounts
If you decide to keep your offshore accounts, it’s crucial to stay on top of your tax obligations. As mentioned earlier, any income earned from those accounts must be declared, even if it’s earned in a foreign currency. You’ll need to convert any foreign earnings into Australian dollars when reporting them to the ATO, using the exchange rate applicable at the time the income was earned.
Failing to declare foreign income can lead to significant penalties, so it’s essential to be diligent about reporting everything accurately. If you’re unsure about your obligations, it’s a good idea to speak with a tax professional who has experience dealing with Australian expats and international financial arrangements.
Conclusion
Returning to Australia after living and working overseas comes with a lot of moving parts, and your offshore bank accounts are just one of them. The key takeaway is that while you don’t need to declare the actual savings held in offshore accounts, you do need to declare any interest or income those accounts generate. Whether or not you choose to keep your overseas accounts depends on your personal situation and financial goals.
As always, if you’re unsure about what to do with your offshore accounts or need help navigating your tax obligations, it’s worth seeking advice from a professional who can help you make informed decisions.
Repatriation can be a complex process, but with the right planning, you can transition smoothly back to Australia while keeping your finances in order.
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.
