Based on our experience of advising expatriates over the last decade, the typical ways that our clients allocate their savings whilst overseas are as follows:
- Top up Australian superannuation.
- Reduce debt on Australian rental properties.
- Buy additional Australian rental properties.
- Overseas retirement fund or provident fund.
- Overseas savings fund – regular savings plan or lump sum savings plan.
- Buy overseas property.
- Speculative investments.
The last point is noteworthy in that we are often astounded by how many expats lose part or all of their money on speculative investments. In some countries there is little or no control over the financial products sold and this can lead to fly-by-nighters with all sorts of scams. It is therefore very important for you to do your homework and do your due diligence on any overseas investment you make.
In terms how to best invest your money, in our view there is no generic ‘best’ way or ideal investment. What is best for you might not be best for someone else.
What is best for you is likely to be influenced by the following factors:
- Your age.
- Your family situation.
- Level of financial commitments.
- Tolerance for risk.
- When you intend to retire.
- Whether you are returning to Australia or not.
- Currency movements.
- Tax considerations.
The financial planning process in Australia is designed around building investment strategies and portfolios designed to achieve your long term personal and lifestyle goals. The investment process is naturally more complex where you have a greater choice of investments to choose from – i.e. overseas investing versus investing in Australia – and where currency movements may be more significant in terms of the financial results achieved.
Tax is also a consideration in that you need to understand how much tax you will pay on your investments in the country where you are located and how much tax you will pay in Australia. Also, the amount of tax you pay on an investment might change when you return to Australia.
For example, if you working in a low or no tax jurisdiction while you are overseas, investing in your own name might make sense. However, when you return to Australia it might be more tax effective to invest via superannuation rather than pay the relatively high marginal tax rates that apply in Australia. Moving from a low or no tax jurisdiction into a relatively high tax jurisdiction may require you to reorganize your investment portfolio in order to achieve the best after tax outcome.