If you’re considering living overseas once you retire, ensure you have all of your financial ducks in a row before you leave. Whilst the Australian Government have put in place a number of structures to help Australians retire abroad, there are also some downfalls. It’s important you’re aware of the impact that moving overseas will have on your retirement benefits.
Retiring overseas takes a lot of organisation and planning. Making sure your financial situation is under control is vital – and that includes being able to access your retirement money whilst you’re overseas.
Here we provide an overview of some important issues to keep in mind including accessing your super and how your investments (both super and nonsuper) are taxed if you’re an Australian citizen living abroad. It’s good to have a broad understanding of these issues, however it’s important to understand how they apply to your particular situation and the country to which you’re relocating. Seeking expert assistance from a financial planner can help you in this regard.
One key issue to consider is your residency status for tax purposes. Under Australia’s tax laws, residents (Australians living in Australia) and nonresidents (Australians living overseas) are taxed differently – it’s vital that you know your status and obtain appropriate taxation advice so your super and non-super investments aren’t affected.
Australia has double tax treaties, or agreements, with over 40 different countries. These treaties are designed to ensure that Australians living overseas aren’t taxed twice when receiving their income payments (once in Australia and again in the country of residence).
These treaties are not the same in every country, so you should confirm the details of the appropriate country’s treaty with Australia and determine how it applies to your situation.
Remember also, that there are countries where there are no such treaties with Australia. In this case you may be liable for tax in both countries. Look at the following scenarios showing how the treaties might apply depending on the country you live in and whether you’re a resident or non-resident of Australia (remember, your situation may be different):
· If you’re a resident of a country with which Australia has a double tax agreement your Australian super pension may not be taxable in Australia, but it may be taxable in the country in which you’re living.
· If your money is still in super but you want to start a pension, the interest from your super fund may be taxable in your country of residence, even if your super is preserved.
· Trustees of self managed super funds (SMSFs) moving overseas may find that their fund loses “complying status” if you become a non-resident of Australia. This may mean you’re liable to pay 47% tax on the value of your SMSF’s assets and income.
The examples above serve to highlight the importance of ensuring you understand the implications of moving overseas on your super benefit and any pension you might draw from it. Talking to a financial adviser can help you fully understand the tax implications for your super if you’re moving overseas.
There are also a number of different rules and considerations that apply for non-super investments. For Australian citizens who are non-residents (that is, living outside of Australia), interest and dividends from Australian investments will be subject to withholding tax in Australia. In most cases, this is 10% for interest income and 15% on unfranked dividends, but there are exceptions.
· If you remain an Australian resident for tax purposes, you’ll still need to lodge a tax return whilst you’re overseas. There are a number of options available for doing this:
1. Lodge your return online between 1 July and 9 December each year.
2. Complete your tax return paperwork at an Australian Embassy.
3. Authorise a friend or tax agent to arrange your tax return lodgement whilst you’re away (remember, if you want them to sign on your behalf, you’ll need to arrange a power of attorney before you go).
Need help? Contact Avante on 1300 788 650.
