Is your company offering you a once-in-a-lifetime opportunity to work in the Tokyo office? Have you always wanted to spend a few years as a Berliner? Or is the madness of this year’s presidential election making you mull a move to Montreal?
Photo by Daryan Shamkhali.
This post originally appeared on LearnVest.
There are myriad reasons why you might be entertaining the idea of becoming one of the one million Australian expats who live overseas. But before you pack your bags and move halfway across the globe, you have to consider the impact on your finances.
After all, there’s a lot of planning involved with taking a plunge into international waters. Between work visas and figuring out what to do about taxes, the amount of coordination and paperwork involved can be enough to make your head spin.
So before you begin daydreaming about an office with a view of the Eiffel Tower, start getting your ducks in a row and take a peek at our list of important financial things to know about that expat life.
#1 Finding a Company to Sponsor Your Employment Will Make Things a Lot Easier
Tempted to move first, worry about landing a job later? Not so fast, says Megan Fitzgerald, founder of international career consultancy Career by Choice. “The challenge of securing a work permit can be anywhere from not so bad to completely impossible, depending on your situation,” says Fitzgerald, who works with expats worldwide remotely from Singapore. “Things change all the time, so I would never advise someone to just go to a country, show up and think, ‘Oh, I’m going to be able to get a job.'”
In many cases, foreign governments won’t issue you a work visa unless you already have an offer of employment lined up, so give yourself time to job search and get hired by a company that will help deal with the paperwork for you. We know, that’s easier said than done. But the key is to highlight the talents you have that will be hard to find in the local market, Fitzgerald says. “What I do with my clients is help them understand their unique value and how to communicate that effectively and in a culturally relevant way,” she says. “[That way], companies can clearly see the benefits of investing in their unique combination of qualifications and skills that others, particularly local talent, just can’t offer.” So research talent shortages in the countries you’re targeting and see where your skill set could fill a need.
One note: If you’re married, check to see what the local laws are about granting spouses work visas. Typically, an expat employee’s work visa does not extend to a spouse, and he or she would have to obtain one separately. And in some countries, your spouse may not even be permitted to work, according to Fitzgerald. “So one of the biggest challenges with families going overseas is oftentimes [they are part of a] dual-income household, and then they get an opportunity to go abroad but only one person is guaranteed work permission,” she adds.
#2 Even if You’re Just Moving to a New Office With the Same Company, You Might Have to Renegotiate Your Employment Contract
What if your job is with an Australian company that is sponsoring and paying for your relocation abroad? Be sure to go through the terms of the contract with a fine-tooth comb before signing on the dotted line, says Jonathan Lachowitz, CFP, founder of White Lighthouse Investment Management, which specialises in cross-border financial planning.
Make sure there are certain provisions in your contract, such as a clause that brings you back home in case you lose your job while overseas, protections that guarantee repatriation expenses once your contract is over and an allocation for an independent tax advisor, since your taxes will get complicated. Also, says Lachowitz, don’t assume your employer’s human resources department or the relocation specialists they have hired will have all the answers you need.
“Some relocation specialists are ok, but a lot of them get paid to make referrals, so [they may say], ‘Oh, go to this bank’ or ‘Go to this insurance agent,'” he says. “Do your own independent investigation. And find a colleague who made a similar move recently. You can learn a lot from other people who have crossed the border before you, and they can tell you what didn’t go right on their move.”
#3 You’ll Have to Be Prepared to File Two Sets of Tax Returns
Think filing your Australian tax returns is a pain? Well, once you move abroad, your tax situation will get a lot trickier. “People don’t realise the complexity of their tax situation [once they become expats]. They tend to think, ‘Oh, I just have a simple situation,'” Lachowitz says. “And they assume, well, hundreds of people must have the same situation, so how do they deal with it? [But] the facts and circumstances of each individual situation is different.”
What makes your taxes particularly complicated is that you’ll need to file local taxes in your new jurisdiction, which means learning the tax laws and regulations of your anticipated country of residence, says Lachowitz. But on top of that, you’re also still required to file an Australian tax return — which means you may end up owing taxes back in Australia, too. Foreign income you receive as an Australian resident may be taxed in both Australia and the country from which you received it.
According to the Australian Taxation Office (ATO):
“You must report all your foreign employment income in your Australian tax return — both assessable income and exempt income. You must do this even if tax was taken out in the country where you earned the income. Foreign employment income is income earned by an Australian resident working overseas as an employee. It includes salary, wages, commissions, bonuses and allowances. It may be paid by an overseas or an Australian employer.”
Australian defence or police force workers and those who are employed by an organisation that is involved in overseas aid work may be exempt from paying tax on their foreign income.
Also, your Australian employer must withhold tax from non-exempt foreign employment income if they continue to pay you while you’re overseas.
#4 You May Have to Change Financial Service Providers
The internet and mobile apps have made remote banking easier than ever, but that doesn’t necessarily mean you’ll be able to use the same bank, credit card providers or brokerages that you used stateside.
According to Exfin, a professional and financial services firm specifically for Australian expats:
“At the present time, we do not believe that any of the Australian banks has the geographic spread or capacity to provide a true International banking experience to Australian expatriates. The exceptions are expatriates in New Zealand, PNG and some countries in the South Pacific where some Australian banks retain a retail presence – and in South East Asia and China where ANZ has a small footprint, although not always as a retail bank.
Having said that, Exfin recommends retaining a relationship with your existing bank in Australia so that you can pay and receive money in the country. Just remember that any interest earned will automatically attract a witholding tax of 10%.
So before you go overseas, research the local banking situation and your ability to open a foreign bank account there or if your current Australian bank offers expat services.
#5 Your Retirement Savings Could Be Affected by an Overseas Move
And what about your superannuation? You can still contribute to your superannuation fund even if you’re not living in Australia and Exfin recommends that you do that if you want to retire here or “if the taxation on Australian superannuation is more attractive than the country of residence.”
In some countries you may also be required to contribute to the local retirement or pension plan, Serrato says, but that can bring up its own set of issues. Namely, those contributions may be considered tax-free in that jurisdiction, but may not be for Australian tax purposes.
Tempted to Move Abroad? 5 Things You Need to Know First [LearnVest]
Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice, either in Australia or in any foreign jurisdiction. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation.