Emigrating from one country to another can create wonderful opportunities. You can experience a different culture, and it’s a chance to start a totally new life for yourself and your family.
However, unless you’re uprooting completely and divesting all your assets in the country you’re moving from, it’s likely you could face issues with managing your financial affairs in two places thousands of miles apart.
As a specialist advice firm with offices and clients in both the UK and Australia, we have a wealth of experience in helping people move, and the ongoing management of their finances once they’ve relocated.
Find out about some of the key issues, and some tips that you could find useful.
1. Managing your property
Having residential property in two countries can be reassuring. You’ll know that, regardless of what happens in your new life, you have a tangible asset and a permanent presence back at “home”.
You’ll also know that you have somewhere familiar to live if and when you decide to return, even if you currently have no immediate plans to retrace your steps. You also retain a source of income if you decide to rent your property out while you’re abroad.
It’s important to be aware of the tax implications of the income you earn. For example, rental income is often taxed differently to your salary. Furthermore, in the UK, profits on the sale of the property if you’re not planning to live in it again are usually liable for Capital Gains Tax (CGT).
You should use the services of a tax expert to advise you on how best to manage the property.
We would also strongly recommend you ask a professional property company to manage it for you in your absence.
As well as being able to deal with any potential issues as they arise, you’ll benefit from your property being maintained and required repairs carried out promptly. Not only will this help retain the value, but it also means you’ll be able to move in as soon as you return rather than face a big outlay bringing it back up to scratch.
They can also help ensure that long periods when there is no tenant are less likely. This can assist in helping you maintain a consistent income stream.
2. Setting up wills for each different jurisdiction
If you have assets in the UK and Australia, you should ensure you have a will in place for each tax jurisdiction.
You should also ensure your spouse or partner has them.
Without them, apart from ensuring assets go to who you want them to, wills can help speed up the probate process and reduce potential legal wrangling for your family.
Dying without a will, known as dying intestate, creates challenges in both countries. The period after your death will be a time of stress and emotional upheaval for your family, so having one less thing to worry about will give them valuable peace of mind.
3. Your estate planning process
As well as ensuring you have wills set up that specify how you want your assets distributed to your intended beneficiaries, you should also consider your wider estate plan.
It’s important to carefully manage your assets and be aware of the value of your respective estates in both countries.
For example, in the 2022/23 tax year, Inheritance Tax (IHT) is payable at 40% of the value of your UK-based assets above your nil-rate band (NRB) of £325,000, plus the residential property nil-rate band (RNRB) of £175,000 if you plan to leave your home to your direct descendants.
These allowances will automatically pass to your surviving spouse or civil partner on your death, meaning a total of £1 million could pass to your heirs, free from IHT.
It’s a different situation in Australia where there is no IHT. However, tax will be payable by your beneficiaries as a result of receiving the inheritance.
For example, the income from any of your investment assets that are inherited will be subject to tax.
Likewise, CGT will be payable on your individual assets. Depending on the circumstances, the cost base may be based on the value of the asset:
- When the deceased acquired it
- When they died.
In view of this, it makes sense to consider your estate planning arrangements carefully and have separate plans in place for UK and Australian assets.
4. Saving for your retirement, and where you plan to retire
Regardless of where you’re living, you should make a priority of maximising your pension savings as much as possible. This will help ensure you have a retirement fund in place to help you live comfortably when you stop working.
Beyond that, one key issue you need to consider is where you intend to settle once you do retire.
UK pension assets can often be transferred to an Australian arrangement and used to help fund your retirement.
Doing this can create a highly advantageous tax position whereby you’ll have benefited from accruing a pension fund tax-efficiently in the UK, and then transfer it to Australia where you can take it free of tax.
The other side of the coin – moving from Australia to retire in the UK – is less straightforward. Your super can’t be transferred into a UK pension. So, when you come to start taking income from your super, you need to ensure you use effective planning methods to minimise the amount of tax you pay.
Again, we’d strongly recommend you seek expert advice when you’re considering your retirement plan.
5. Your financial record-keeping
It’s always sound practice to keep your financial records up to date. With assets in two different countries doing so becomes close to being imperative.
For one thing, it means you’re less likely to miss important deadlines such as insurance renewal dates, and could save yourself money.
With different end of tax year dates in the UK and Australia, managing your paperwork effectively also means you’ll be in a good position to maximise your tax efficiency and make the most of any short-term opportunities that may arise – possibly as a result of changes in tax legislation.
We would also recommend that you keep details of your Australian assets separate from those in the UK.
Get in touch
If you have any queries regarding any aspect of your financial planning, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of ATO and HMRC legislation, which is subject to change.
