What Should Expats Do With Their Australian Assets If They Never Plan to Return?

Many Australian expats have worked abroad for years and accumulated significant assets in Australia, including superannuation, property, and other investments in brokerage accounts. If you’re confident you won’t return to Australia, now is the time to review your financial strategy. The decisions you make now could significantly impact your long-term financial growth, tax efficiency, and diversification.

One important point to consider is whether your current Australian advisor, while likely providing valuable guidance so far, is the best fit for your needs as an expat. Many advisors are financially licensed in Australia but may not be equipped to provide the global perspective needed to navigate international investments and tax obligations. Here’s what you should consider:

1. Reducing Tax Obligations

For expats, continuing to hold assets like superannuation and property in Australia can create unnecessary tax liabilities. The Australian tax system treats non-residents differently from residents, which may result in higher tax rates on income or capital gains. Additionally, if you plan to settle permanently outside Australia, there could be inheritance tax complications in your country of residence that you need to account for.

• Superannuation: While superannuation is typically tax-free for Australian residents, non-residents face different rules, especially when it comes to withdrawals. For example, if you’re a non-resident and withdraw from your superannuation before the age of 60, the taxable component of your withdrawal will be taxed at up to 38%, which includes both the lump sum tax and the Medicare levy. Even if you are over 60, where tax-free withdrawals apply to residents, non-residents still face a 15% tax on the taxable portion of the withdrawal. This makes it crucial to explore options like transferring your superannuation into an international pension scheme that offers better tax treatment. This could save you a significant amount over time, especially in retirement.
• Property: If you own property in Australia, you may face capital gains tax (CGT) upon its sale, especially as a non-resident. The CGT exemption on the primary residence was removed for non-residents in 2020, which means if you sell a property that was your home while you lived in Australia, you will likely face a CGT rate of up to 45% on any capital gain. Non-residents also lose access to the 50% CGT discount after 12 months of ownership, meaning they are subject to the full rate. If you plan to sell, it might make sense to sell the property and reinvest the funds to prevent further property capital appreciation creating an even larger tax liability. We can consider investments in a more tax-efficient jurisdiction, such as in Europe or the UK, depending on where you plan to retire.
• Other Investments: Australian brokerage accounts may expose you to higher taxes on dividends and capital gains. Consolidating these investments into internationally diversified platforms, such as offshore investment bonds, could help reduce your overall tax burden.
• In-Specie Asset Transfers: If you're a resident in the Middle East looking to transfer invested funds from an Australian brokerage account into an offshore investment bond via an in-specie transfer, it's important to consider potential capital gains tax (CGT) liabilities. As a non-resident of Australia, you're typically only liable for CGT on taxable Australian property (TAP), such as real estate or Australian-based assets. If your investments are not classified as TAP, the transfer may have no Australian CGT liability.

2. Boosting Growth

If you’re no longer tied to Australia and will not return, your investments should reflect your new global perspective. Keeping your assets solely in Australia may not provide the growth opportunities available in international markets. Australia offers solid investment options, but depending entirely on a single market can be limiting, particularly when international markets may offer higher growth potential.

Diversifying into markets outside of Australia gives you access to a broader range of sectors and industries. For example, markets in the US, Europe, and Asia provide opportunities in technology, healthcare, and emerging markets that may not be as readily accessible through Australian financial products.

Your current advisor may suggest that you keep all your assets in Australia, especially if they are limited to what they can offer within their domestic market. While this advice might have served you well thus far, it may not be in your best long-term interest if you’re seeking optimal growth from a global perspective.

3. Diversification

Holding all of your investments in one country, particularly one you no longer reside in, exposes you to risks such as economic downturns, market volatility, or political changes in that region. Diversifying across geographies, asset classes, and currencies can significantly reduce risk while maximising growth potential.

Some key areas to consider when diversifying include:

• Global equities: International equities, particularly in developed markets such as the US, Europe, and emerging markets like China, offer strong growth opportunities. You can gain access to high-performing sectors like technology, healthcare, and infrastructure.
• Offshore bonds: Offshore bonds provide a flexible, tax-efficient way to invest internationally. These can be particularly advantageous if you are living in a country with lower or no capital gains taxes, as they allow you to grow your wealth in a protected, tax-efficient manner.
• Global property: You may also consider selling Australian property and investing in property markets in your country of residence or in other growth markets globally. Many countries, particularly United Kingdom, offer stable property markets with better tax treatment and growth potential than Australia.

Why International Licensing and Independent Advice Matter

One of the key advantages of working with an internationally licensed advisor, such as Skybound Wealth, is the access to a wide range of investment products and markets. While Australian-licensed advisors often have deep expertise in the domestic market, they may not have the same flexibility or international reach needed to help expats maximise their global wealth.

Your Australian advisor has likely provided you with valuable advice during your time in Australia, helping you build a solid financial foundation. However, they may not be fully equipped to guide you through the complexities of international financial markets. At Skybound Wealth, we specialise in providing independent, internationally licensed advice that focuses solely on your best interests. Importantly, we do not own any funds, accounts, or investments, meaning our recommendations are entirely unbiased and designed with your financial success in mind.

Case Study 1: John’s Move from Abu Dhabi to Spain

John, an Australian expat currently living and working in Abu Dhabi, has accumulated significant assets in Australia, including a large superannuation and property in Sydney. He has also received valuable advice from his Australian financial advisor over the years, allowing him to steadily grow his wealth. Now, as he prepares to retire in Spain, John realises that his financial strategy needs to adapt to this new phase of his life.

• Superannuation: John worked with an internationally licensed advisor to transfer his superannuation into an international pension scheme, helping him avoid the tax penalties associated with withdrawing as a non-resident. This will allow him to draw on his retirement savings more tax-efficiently once he settles in Spain.
• Property: Given the high CGT rate for non-residents, John sold his Sydney property before retiring. His Skybound advisor helped him reinvest the proceeds into a Spanish-compliant investment bond, which offered tax advantages while keeping him diversified.
• Diversification: John diversified his remaining Australian investments into global equities, offshore bonds, and European property. This not only reduced his exposure to Australian economic risks but also allowed for better growth potential across international markets.

John now enjoys a tax-efficient retirement strategy that will be well-suited to his planned life in Spain, with diversified investments that continue to grow.

Case Study 2: Sarah’s Move from Riyadh to the UK

Sarah, a British expat living in Riyadh who lived in Australia for 20 years, had built a solid financial portfolio that included superannuation and Australian investments. Her Australian advisor had done an excellent job managing her assets while she lived there, but with her long term plans to relocate back to the UK, Sarah realised she needed to rethink her financial strategy to reduce taxes and maximise growth.

• Superannuation: Sarah transferred her superannuation into a UK-qualifying recognised overseas pension scheme (QROPS), allowing her to take advantage of the UK’s favourable tax treatment for expat retirees. This also ensured that her future pension withdrawals would be more tax-efficient.
• Investments: Sarah’s Skybound advisor helped her sell her Australian shares, avoiding unnecessary tax exposure, and reinvested the proceeds into an offshore bond. This bond provided her with access to global markets while offering better growth potential than keeping her investments in Australia.
• Tax Efficiency: With the help of an internationally licensed advisor, Sarah restructured her portfolio to significantly reduce her tax liabilities both in Australia and the UK, allowing her to maximise her retirement savings while preparing for her move.

Sarah is now set up for a smooth transition to the UK, with a tax-efficient and globally diversified portfolio that meets her long-term financial goals.

Final Thoughts

If you’re certain that you’ll never return to Australia, now is the time to take action to reduce taxes, boost growth, and diversify your assets. An internationally licensed advisor can offer the global expertise you need to maximise your wealth in your new circumstances.

If you need further advice or want to review your plans and wealth to ensure it aligns with your goals, feel free to book a call. It’s easy, and we can go through the best options for you and your family.