For many British expats, moving to Australia is never intended to be permanent. You may be on a fixed-term employment contract or have always planned to retire back in the UK.
Returning to the UK after years in Australia can be exciting, but it’s important to realise that relocating involves far more than simply booking flights and arranging for your possessions to be shipped home.
Years spent living overseas will have left you with strong Australian financial ties, as well as assets left back in the UK. Bringing these together into a single plan, along with considering the other financial implications of your move, requires careful planning.
Here are seven important financial planning issues to consider before you return to the UK.
1. Understand the tax implications of returning to the UK
Reviewing your tax position well before your return home can help you identify tax planning opportunities and avoid unexpected liabilities.
Depending on your circumstances, you may become fully subject to UK tax while still retaining investments, pensions, and other assets in Australia. Income from these assets may be taxed differently once you become UK resident, so it’s important to understand how the respective tax systems interact.
Returning to the UK may also open up valuable tax-planning opportunities worth taking advantage of.
For example, under HMRC’s new Foreign Income and Gains (FIG) regime, if you have been a non-UK resident for at least 10 consecutive tax years, you may be eligible for 100% relief on qualifying foreign income and gains during your first four tax years of UK tax residence.
Timing is another important consideration. The tax treatment of certain transactions can vary significantly depending on whether they are completed before or after you re-establish UK tax residency, so planning could make a meaningful difference to your overall tax position.
2. Review your pensions and superannuation
You are likely to have accrued retirement savings in Australian super funds, as well as UK workplace or personal pensions built up before you moved overseas.
Because of this, you should put together a schedule showing your funds, where they’re held, how they’re invested, and any charges you’re paying.
It’s equally important to understand the tax implications of accessing your retirement savings in the future. The way benefits are taxed can vary depending on where they’re held and where you’re tax-resident when you draw them.
A specialist cross-border financial adviser can explain your options and help ensure your pension and superannuation arrangements support your long-term retirement plans back in the UK.
Find out more: 6 key takeaways from our recent webinar about accessing your super from the UK
3. Get expert advice if you have set up your own Self-Managed Superannuation Fund
If you established a Self-Managed Superannuation Fund (SMSF) while living in Australia, it is important to be aware of what happens when you leave the country permanently.
An SMSF must meet certain residency conditions to remain compliant with Australian tax law — one of these is that the fund’s management and control must be based in Australia. If you depart Australia with no intention of returning, your SMSF will have a two-year grace period before it risks becoming non-compliant. A non-compliant SMSF may be subject to significant tax penalties, so it is essential to plan ahead.
One way to extend your fund’s compliant status beyond the two-year period is to appoint a trusted person in Australia under an Enduring Power of Attorney (EPA). This allows that person to manage and oversee your SMSF on your behalf while you are overseas, helping the fund continue to meet its residency requirements.
We strongly recommend seeking specialist SMSF advice before departing Australia to ensure your fund remains in good standing.
Find out more: The pros and cons of managing your own Self-Managed Super Fund
4. Review your investment portfolio
As with your pensions and superannuation, it’s important to have a clear picture of your investments before returning to the UK.
Prepare a schedule showing what you own, where your investments are held, and how they fit within your overall financial plan.
Your return to the UK provides an ideal opportunity to review whether your existing portfolio remains appropriate, with particular reference to factors such as:
- How diversified your portfolio is
- The danger of currency risk
- The charges you are incurring on your investments.
Taking a holistic view of your investments can help ensure your portfolio remains aligned with your goals, rather than simply reflecting where you happened to be living when you made them.
Find out more: 4 important facts that can help guide your cross-border investment strategy
5. Consider your property strategy
Property is often one of the biggest financial decisions facing returning expats.
If you own a home in Australia and sell it after losing your Australian tax residency, you will no longer have access to the main residence exemption. This means the sale may be subject to Capital Gains Tax (CGT) on the portion of time during which you were a non-resident.
Given this, it is worth carefully considering whether it would be more financially beneficial to sell your property before you leave Australia, or alternatively, to retain it as an investment property. At the same time, you may be planning to purchase a property in the UK, which requires careful consideration of affordability, mortgage availability, and the timing of any sale and purchase.
Reviewing your property strategy as part of your wider financial planning can help ensure your decisions support your long-term objectives.
6. Mitigate the effect of currency risk
In addition to moving yourself and your family back to the UK, your return could also involve transitioning significant sums between Australian dollars and UK sterling.
Whether you’re moving savings, selling investments, or purchasing property, exchange rate movements can materially affect the value of your money once it’s converted.
Clearly, it’s hard to anticipate changes in the AUD-to-sterling exchange rate. But planning ahead and working with a currency expert, rather than making large transfers at the last minute, can help you maximise the value of the assets you are transferring.
Currency considerations should also be part of your ongoing investment strategy if you expect to continue holding assets in both countries after your return.
Find out more: Why expats need to take currency risk seriously
7. Review and update your wider financial plan
Returning to the UK may be one of the biggest financial transitions you’ll experience. Rather than considering tax, pensions, investments and property separately, it can be helpful to review them together as part of a single financial strategy.
It’s also worth revisiting your financial goals to ensure they still reflect the life you want to build back in the UK.
Your priorities may have changed significantly since you originally moved to Australia. For example:
- Your children may now be approaching university
- Retirement could be much closer than you’d previously expected
- You may have elderly relatives now in need of financial support.
Furthermore, while you were living and working in Australia, your wealth may have evolved differently to how you had originally envisaged.
Because of this, reviewing your wider financial plan can help ensure your decisions continue to reflect your current circumstances and future aspirations.
Get expert advice well before you move
Returning to the UK after spending years in Australia can create both opportunities and complexities. Decisions relating to tax, pensions, investments, property and currency transfers are often interconnected, and the timing of those decisions can make a significant difference to the outcome.
Seeking specialist advice before your return allows you to work through the key issues you have read about here and ensure that finances are organised well in advance of your relocation.
With careful financial planning, you can make the transition as smooth as possible and ensure the wealth you’ve built during your time in Australia continues to support your long-term goals.
Get in touch
At bdhSterling, we help clients navigate these challenges through specialist cross-border financial planning. If you’re considering a return to the UK, we’d be happy to discuss your plans and help you prepare for the transition with confidence. Please get in touch with us today.
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, it does not take into account your personal objectives, financial situation, or needs. 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 and ATO legislation, which is subject to change.