If you’re a British expat in Australia, you’ll know only too well there are financial issues involved with moving yourself and your family from one country to another. These matters can be complicated and often require a lot of extensive planning.
Moving forward, it’s good to have an idea of the financial environment and how some issues such as pensions, savings, and investments compare between the UK and Australia.
It’s easy to make mistakes that could be irreversible and therefore expensive. So, read on for some key financial tips if you’re a Brit and you have moved to Australia.
1. Your pension contributions in Australia
As in the UK, one of the most tax-efficient ways of saving money for your retirement is through a pension arrangement. In Australia this is known as superannuation, or more colloquially as “super.”
From a taxation perspective, there is one fundamental difference between UK and Australian pension arrangements:
- In Australia contributions to super funds are taxed, but at retirement you can potentially access the whole fund free of tax.
- In the UK contributions are incentivised with tax relief, but you’ll pay tax on any income you take out, apart from the 25% of your fund you can normally take tax-free.
In the UK you can access your pension fund from age 55 (rising to 57 from 2028). In Australia you can start drawing from your super at your preservation age, or age 65, whichever is sooner.
2. Transferring your UK pension to Australia
If you’ve accumulated a pension fund in the UK and are planning to retire in Australia, then it can make sound financial sense to transfer your accrued fund into an Australian super.
Doing this can potentially create a very advantageous tax situation. You’ll have made tax-efficient contributions to a fund in the UK, and then draw from the fund free of tax in Australia.
However, you should be aware that the transfer process is not straightforward, and not every UK pension can be transferred.
We would strongly recommend you take a look at our guide on this subject and seek expert advice when considering transferring your fund.
Also be aware that it’s not possible to transfer the UK State Pension. A previous article looked at this in more detail and you may find it useful to read.
3. Moving other financial assets to Australia
If you’re planning to stay in Australia for an extended period, you may want to transfer some, or even all, of your UK-based assets here.
Be aware that, as with any financial decision, there are advantages and disadvantages to moving assets from the UK to Australia.
Most importantly, there are two different tax regimes to consider. Because of this, timing the transfer of assets is crucial.
If you make a wrong decision regarding the sale of a particular asset, you could end up receiving an unwelcome tax bill from either the Australian Tax Office (ATO) or HM Revenue & Customs (HMRC) that you could have avoided.
As with transferring your pension, we’d strongly recommend you seek professional advice when considering the management of UK and Australian assets and investments.
4. Dealing with your UK property
A key part of your planning will likely involve the potential sale and purchase of residential property.
You may still have property back in the UK you haven’t sold yet and are unsure of what to do with it.
If you’re not sure at this stage if you’ll be returning to the UK in the future, it may well be good to retain it as a base and permanent link to the UK. It could remain as a potentially appreciating asset that can also provide you with a rental income in your absence.
If you do decide to rent it out, we would strongly recommend you appoint a property management agent to act on your behalf. They will be able to deal with any issues that arise, as well as ensuring that the property is effectively maintained in your absence.
Bear in mind that you’ll pay UK tax on any rental income, and it will require the use of the double taxation agreement between the UK and Australia to claim your tax credits.
5. Make sure you have a will and Power of Attorney set up in Australia
Wills and Powers of Attorney are different in each financial authority, so it makes sound financial sense to set up different arrangements for the UK and Australia.
For example, if your Australian assets are willed to children or relatives who live in the UK, they may find that Capital Gains Tax (CGT) will be chargeable on the assets they inherit. Such a tax bill could result in them having to sell the assets.
You should have a separate will in each country covering the assets in each. We would, again, strongly recommend that you speak to an estate planning expert who can advise you of the best way to set these up.
6. Australian saving and investment options
When it comes to saving and investing your money in Australia, there’s very little difference to the opportunities back in the UK in terms of the choices available to you.
There are straightforward savings accounts, similar to the UK. As in the UK, it’s prudent to shop around for the best rate, including introductory rates and fixed-interest options.
When it comes to investments the most straightforward way to invest is through an online investment platform.
One key fact to remember is that there is no direct equivalent of an ISA in Australia. This means that there’s no specific investment vehicle where profits are exempt from CGT or Income Tax.
Profits from the disposal of investment assets are taxed in the same way as your income. If you’ve held the assets for less than 12 months you’ll pay tax at your marginal rate, whereas if you’ve held them for longer than a year, you’ll only pay 50% of your marginal rate on the profits.
You’ll declare profits when you file your tax return with the ATO. You can use losses to offset the tax payable on gains, and you can carry forward losses to future years.
Get in touch
If you have any queries regarding your financial planning or any of the important issues you’ve read about in this article, 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 HMRC legislation, which is subject to change.
