Top Finance Tips for Aussies Moving to Saudi Arabia

Embarking on a journey to Saudi Arabia is not just a geographical shift; it’s a financial voyage that requires both financial planning and understanding. As the vast deserts and historical landmarks of Saudi Arabia beckon, so does its unique economic landscape. For Australians, this Middle Eastern nation presents a blend of opportunities and challenges. While the allure of tax-free salaries and a different lifestyle might be the primary draw, it’s essential to recognise that the financial ecosystem in Saudi Arabia is distinct from the familiar terrains of Australia. From understanding a new currency to navigating the nuances of banking, investments, and tax obligations, there’s a plethora of aspects that demand attention.

As you stand on the cusp of this exciting transition, being equipped with the right financial knowledge can make all the difference. It’s not just about making the most of the economic benefits but also about avoiding potential pitfalls. This guide aims to provide you with a comprehensive overview of the top financial considerations for Australians moving to Saudi Arabia. Through detailed insights, case studies, and expert advice, we’ll ensure that your financial journey in Saudi Arabia is as smooth and rewarding as possible.

Tip #1 – Understanding the Saudi Riyal (SAR)

When you’re in Saudi Arabia, understanding the dynamics of the Saudi Riyal (SAR) is crucial. Unlike the AUD, which is a freely floating currency, the SAR is pegged to the US dollar. This pegging means that the SAR doesn’t fluctuate freely against the dollar, providing some stability. However, when converting from AUD, you’ll need to consider both the AUD-USD and USD-SAR rates. Additionally, while credit cards are widely accepted in major cities, smaller towns and local markets might prefer cash. It’s also worth noting that Friday is a religious day in Saudi Arabia, and many banks remain closed, so plan your transactions accordingly.

Tip #2 – Choosing the Right Bank

In Saudi Arabia, banking has its unique characteristics. For instance, many banks offer “ladies sections” – dedicated areas for women to conduct their banking, keeping in line with the country’s customs. When choosing a bank, consider its network of ATMs, as some banks might offer free withdrawals only from their machines. Also, some banks offer special expatriate accounts that come with perks like free international remittances or multi-currency cards. It’s essential to read the fine print regarding any maintenance fees or minimum balance requirements.

Tip #3 – Navigating the Saudi Tax System

Saudi Arabia’s tax landscape is a blend of traditional structures and recent reforms, tailored to boost its economy and diversify its revenue streams. One of the most significant reliefs for expatriates is the absence of personal income tax. This means the salary you earn is entirely yours, without any deductions. However, this doesn’t mean the country is devoid of taxes.

In 2018, Saudi Arabia introduced the Value Added Tax (VAT) as part of its economic diversification strategy. Initially set at 5%, the VAT rate was increased to 15% in July 2020. This tax is levied on most goods and services, with a few exceptions like essential food items, medicines, and educational services. As an expat, it’s crucial to factor in this VAT when budgeting, especially for significant purchases or services.

For those venturing into the business realm in Saudi Arabia, understanding corporate tax structures is vital. Foreign companies, including those owned by expatriates, are subject to a corporate tax rate of 20%. However, this can vary based on specific industries or special economic zones. It’s also worth noting that there’s a ‘Zakat’ or a religious tax, but this primarily applies to Saudi nationals and not expatriates.

While you’re navigating the Saudi tax system, it’s essential not to lose sight of your tax obligations back in Australia. If you maintain any Taxable Australian Property, such as real estate, you’re obligated to declare any income or capital gains from those assets to the Australian Taxation Office (ATO). Ignoring this can lead to penalties and additional tax liabilities.

Tip #4 – Smart Investments for Aussie Expats

Saudi Arabia, with its vision to diversify its economy beyond oil, has been actively promoting various sectors, making it a hotspot for investments. The Saudi Stock Exchange, also known as Tadawul, is the primary stock market where you can invest in publicly listed companies. With sectors ranging from banking to healthcare, there’s a wide array of choices for potential investors.

You may want to consider investing back on the Australian stock exchange (ASX) via Exchange Traded Funds (ETFs) or even direct equities back in Australia as an alternative option, however it’s important to consider your options and seek professional advice here.

Real estate is another lucrative avenue. Cities like Riyadh, Jeddah, and Dhahran are witnessing rapid development, with both residential and commercial properties seeing appreciable growth. However, investing in real estate requires a deep understanding of local regulations, potential growth areas, and market trends. There can also be significantly greater risk factors for Australian expats, particularly if it’s not a market you’re familiar with. There could also be significant tax implications when you return, so it’s important to seek professional advice here.

Tip #5 – Budgeting and Cost of Living

While Saudi Arabia might be known for its opulence and luxury, living there doesn’t necessarily mean breaking the bank. Basic necessities like food and transportation can be relatively cheaper than in Australia. However, luxury goods, imported products, and dining in high-end restaurants can be expensive. It’s essential to strike a balance. Housing costs can vary based on location, with city centres being pricier. Utilities, especially air conditioning during the scorching summer months, can add to your monthly expenses. To manage your finances effectively, categorise your expenses, set a monthly budget, and track your spending. There are several apps tailored for expats in Saudi Arabia that can assist with this.

Tip #6 – Insurance Essentials

Navigating the insurance landscape in Saudi Arabia requires a comprehensive understanding of available options and their implications. While health insurance is mandatory for expatriates, it’s just the tip of the iceberg. A diversified insurance portfolio is essential for holistic protection.

Life Insurance: This is a cornerstone for ensuring your family’s financial security in your absence. Depending on the policy, it can cover death, terminal illness, or even severe disability. Given the distance from home and potential challenges in repatriation, having a robust life insurance policy is crucial for expats.

Total & Permanent Disability Insurance: Accidents or illnesses can lead to situations where you’re unable to work for an extended period or ever again. This insurance ensures you receive a lump sum payment, helping you manage your finances during such challenging times.

Trauma Insurance: This covers specific illnesses or injuries, providing a lump sum payment upon diagnosis. Given the varied healthcare costs and potential loss of income during treatment, trauma insurance can be a lifesaver.

Income Protection: If an illness or injury prevents you from working, this insurance ensures you receive a steady flow of income, usually up to 75% of your regular income, allowing you to maintain your standard of living.

When it comes to where your cover is held, you may wish to consider holding insurance in Australia that is specifically tailored for Australian expats, which would allow you to retain this once you’ve back in Australia. It’s important to seek professional advice on this one.

Tip #7 – Retirement Planning for Aussie Expats

While Saudi Arabia offers lucrative earning opportunities, it’s essential to keep an eye on the long-term picture: retirement. The country doesn’t have a social security system for expatriates, making personal retirement planning crucial.

Understanding End-of-Service Benefits: In Saudi Arabia, employers provide an end-of-service bonus, which can be a significant amount based on your tenure. It’s essential to understand how this can be integrated into your retirement plan.

Private Pension Plans: Several international banks and financial institutions in Saudi Arabia offer pension plans tailored for expatriates. These can be an excellent way to ensure a steady income post-retirement.

Investment Opportunities: With the potential tax-free income in Saudi Arabia, there’s an opportunity to invest in diverse avenues, be it real estate, stocks, or mutual funds. These investments can form a significant part of your retirement corpus.

Contributing to Superannuation: Even while you’re working in Saudi Arabia, it’s possible and often advisable to continue contributing to your superannuation in Australia. This ensures that you’re not missing out on the compounding benefits over the years. You can make personal contributions, and depending on your circumstances, you might be eligible for tax deductions on these contributions. It’s essential to consult with a financial adviser familiar with both Saudi and Australian regulations to optimise your super contributions and avoid any potential pitfalls.

Tip #8 – Emergency Funds

Life is unpredictable. While Saudi Arabia offers numerous opportunities, it’s essential to be prepared for unforeseen challenges. An emergency fund, typically covering 3-6 months of expenses, can be a safety net during unexpected events. From sudden medical emergencies, unexpected job losses, to urgent travel requirements, having a financial cushion can make navigating these challenges easier.

Start by setting aside a small portion of your income regularly. Over time, this can grow into a substantial fund. It’s also advisable to keep this fund in a readily accessible form, like a savings account, rather than locked-in investments.

Navigating the financial landscape of Saudi Arabia as an Australian expat can be both rewarding and challenging. From understanding the intricacies of the Saudi Riyal to making informed decisions about investments, insurance, and retirement planning, there’s a myriad of factors to consider. While this guide provides a comprehensive overview of the key financial considerations, every individual’s situation is unique, and there’s no one-size-fits-all solution.

At Ally Wealth Management, we understand the complexities faced by expats and are committed to providing tailored financial advice that aligns with your goals and circumstances. Our team of experts is well-versed in both Saudi and Australian financial landscapes, ensuring that you receive holistic guidance every step of the way.

Don’t leave your financial future to chance. Take proactive steps today to secure a prosperous tomorrow. We invite you to book a complimentary appointment with our team at Ally Wealth Management. Let us be your ally in crafting a financial strategy that ensures peace of mind and growth, no matter where your journey takes you.

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.