Top 5 Australian Expat Financial Myths Debunked

Australian Expats will often encounter numerous myths and misconceptions when it comes to managing their financial situation. From tax misunderstandings to investment and retirement planning myths, it’s essential to get the facts straight to ensure you maximise your financial journey abroad.

In this article, we debunk the top five financial myths that Australian Expats encounter when managing their financial situation abroad.

1.      Myth: I don’t need to lodge an Australian tax return as an Australian Expat

As an Australian Expat, you may still be required to lodge a tax return in Australia. This requirement is generally dependent on your Australian tax residency status and whether the income you receive is sourced in Australia or overseas.

If you maintain your Australian tax residency status as an Australian Expat, your tax obligations with the Australian Tax Office (ATO) will remain mostly unchanged and you will be required to report foreign income in your Australian Tax Return.

If your tax residency status changes to non-resident as an Australian Expat (most common), your overseas income is generally not assessable in Australia. However, you may still be required to lodge an Australian tax return if you receive Australian-sourced income such as rent from Australian real estate. Moreover, if you have outstanding Student loans, including HECS-HELP or FEE-HELP, you will still be required to report your worldwide income and make a mandatory repayment if it exceeds certain thresholds.

Australian Expats commonly believe they don’t need to lodge tax returns in Australia if they’re living abroad. In reality, depending on your income and whether you're still considered an Australian tax resident, you may still need to file an Australian tax return.

2.      Myth: Transferring less than $10,000 to my Australian bank account will ensure I am not taxed.

As an Australian Expat, where your tax residency status is non-resident, your overseas income is generally not subject to tax in Australia as it is foreign-sourced. There is a myth that by transferring amounts of less than $10,000 from overseas to your Australian bank account, you can circumvent tax in Australia. This myth comes from a misunderstanding of how AUSTRAC works, and how it reports financial transactions.

AUSTRAC (Australian Transaction Reports and Analysis Centre) is an Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism financing. As part of their role, they require Australian financial and banking institutions to report transactions exceeding $10,000 made by their customers.  

This role by AUSTRAC has been widely misconstrued by Australian Expats to mean they should not transfer amounts of more than $10,000 at a time. In reality, making multiple transfers of amounts less than $10,000 may raise the chances of your financial institution flagging your account for suspicious activity.

As an Australian Expat, where it is clear the relevant factors of your situation suggest you are a non-resident for tax purposes in Australia, you are not prohibited from transferring your income earned overseas to Australia. Many Australian Expats transfer their income earned overseas to Australia as part of their financial strategy without encountering tax implications in Australia.

3.      Myth: I need to close my Australian Bank accounts to be a non-resident

To become a non-resident for tax purposes, you do not need to close your Australian Bank account as an Australian Expat. Similarly to myth 2, where it is clear the relevant factors of your situation suggest you are a non-resident for tax purposes in Australia, you are not prohibited from keeping an Australian bank account open.

If the account is interest-bearing, you should inform your financial institution that you are a non-resident for tax purposes. This will ensure the correct withholding tax rate of 10% will be withheld from interest payments. You will then not be required to report the interest in an Australian tax return, potentially removing the need to file an Australian tax return altogether, depending on your other income sources. Australian Expats are encouraged to keep an Australian bank account open upon moving overseas due to the difficulty in opening a bank account while abroad.

4.      Myth: I should sell my main residence before moving overseas to get the Main Residence Exemption

As an Australian Expat non-resident, where you sell a property in Australia that was previously your main residence, you are not afforded the main residence exemption. This capital gains tax exemption allows those who are Australian residents for tax purposes to disregard the capital gain on the sale of their home. Because of this, there is a common myth/misconception that Australian Expats should sell their home before leaving Australia to ensure they can access the exemption.

However, Australian Expats can still gain access to the main residence exemption if they intend to return to Australia in the future. This is due to the 6-year rule. Australian Expats who sell their property when they return to Australia as a resident for tax purposes may still be afforded a full main residence exemption if the property is sold within 6 years from when the property was first rented out. If the property is never rented, and instead was left vacant or for family to reside in, a full capital gains tax concession can still apply. The rules are complex so it is important to speak to a tax professional to help you understand your own personal situation.

5.      Myth: I can’t contribute to my Australian superannuation account as an Australian Expat

Australian Expats often believe they cannot contribute to their Australian Superannuation account as it will affect their non-resident tax status in Australia. Similarly to myths 2 and 3, where it is clear the relevant factors of your situation suggest you are a non-resident for tax purposes, you are not prohibited from contributing to your Australian super fund.

Contributing to your Australian superannuation fund can be greatly beneficial for Australian Expats to boost their retirement savings. This is important as their overseas employer is generally not required to pay the mandated super guarantee (SG) to super. Additionally, there are many strategies Australian Expats can employ with their super account to offset any taxable income in Australia from property investments.

There are however some exceptions to this. The first is if you have a Self-Managed Super Fund (SMSF), as there are strict rules when moving overseas to ensure your SMSF remains compliant. Seek professional tax help where you have an SMSF. Another example is where you reside in the United States as an Australian Expat, contributing to your superannuation fund can create undue tax consequences in the US.

Australian Expats are generally able to still utilise the many tax and investment advantages that superannuation has to offer as the rules that apply to your super fund remain broadly unchanged.

Conclusion

Living abroad as an Australian expat offers exciting opportunities, but it also requires careful financial planning. The myths surrounding taxes, superannuation, investing, and retirement can lead to poor financial decisions. By debunking these misconceptions and seeking professional advice, Australian Expats can make informed decisions that pave the way for long-term financial success.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the below link:

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General Advice Disclaimer: 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.