Best Investment Options for Australian Expats

I previously discussed the best investment options for British expats, Canadians and American expats. In this article, I’ll speak about the best investment options for Australian Expats.

This post is aimed at Australians who have embarked on a career in another country. It is worth mentioning this to avoid confusion because the term ‘Australian expatriate’ is sometimes used to refer to non-Australian citizens who live and work in Australia.

So, if you are an Aussie who has moved abroad and who wants to consider the best investment options — both at home and abroad — then this article is for you.

Before I begin, though, it is worth mentioning that I am not a professional tax advisor. Although the issue of tax will come up frequently in this guide, my expertise lies with tax-efficient investments.

I have been living and working overseas for many years. My expertise can help Australians no matter where they are residing and regardless of whether they see themselves returning to the mother country any time soon, if at all!

If you like the idea of tax-efficient investing while working abroad but do not have the time to read this article, then feel free to reach out to me.

Please use advice@adamfayed.com, contact me via WhatsApp (+447393450837) or use this page.

I am always pleased to discuss investment options with people who are no longer residents in their home country.

For now, however, we will look at the three main options that Aussie expats have when dealing with their investments. They are:

• Making localised investments in the country you are living in at the moment.
• Looking for sound investment opportunities back in Australia.
• Investing in a third country — the so-called portable option.

I will take you through the pros and cons of each option later, making particular reference to matters that will be of special interest to expat Australians.

It is worth examining the Australian expatriate community a little more closely to determine exactly who we are talking about.

Before beginning, it should be noted that whilst nothing written here should be considered as tax or any other kind of advice, we believe the information is correct at the time of writing.

Where Are Australian Expats located?

These days, well over 1% of the total number of Australian citizens live outside of the country. As you may know, the Trans-Tasman Travel Arrangement means that Australians are freely able to migrate to New Zealand, but this only accounts for about 70,000 Aussies.

In fact, over a third of all Australians living in another country are currently in the UK. Significantly, they are dispersed in each of the four constituent parts of the country, not just England.

The next largest group of expat Aussies are working in the US. This is also hardly a surprise when you consider the common language in these countries.

Taken as a whole, however, the European Union accounts for about 100,000 overseas Australians with many residing in Greece, primarily due to family ties in that country.

Hong Kong, Canada and Lebanon also have significant numbers of Australians living there. South-East Asia is also popular among Aussies with most working in countries like Vietnam, Singapore, and Thailand.

As per the latest estimates, there are also roughly 15,000 Australians who currently live in China and there is a similar number in the United Arab Emirates.

So, as you can see, the Australian diaspora — as the expatriate community is sometimes called — is fairly diverse. Some people are only working a few years overseas while traveling. Others have laid down significant roots and may even have started families in their adopted country.

Some will have plans to return to Australia while others may continue to hop around the globe until they reach retirement age. Others may decide never to come back.

What this means in terms of investing is that there is no single piece of advice that will make sense to every Australian expat. Everyone’s individual and financial circumstances will be unique for starters. Then, there is the issue of what financial goals you might have compared to someone else.

This is why tailored advice on investing can be so beneficial.

Not only will it help you invest in a way that suits your current lifestyle, no matter where in the world you happen to be working, but it will also mean achieving financial ambitions that will complement your future plans, whether or not they include a return to Australia.

That said, there are three main options for Australians who are currently abroad to weigh up. As previously mentioned, they involve investing at home, in the adopted country, or a third country.

Which might be right for you?

Investing In Your Country of Residence for Australian Expats

What are the benefits of local investing?

This option may sound like it is the most straightforward. It certainly can be for some Australian expats but there are disadvantages to consider, too.

But first, let’s look at why this can be a favourable approach.

Investing in your adopted country or a third country will often be a tax-efficient way to proceed.

This is certainly the case in US where the IRS, the federal tax authorities there, make it harder to use investment brokers outside of the country.

It may also be that investing where you live and work makes sense because you are earning in the local currency and do not want to go to the expense of exchanging your earnings into another currency so you can make regular, monthly investment contributions.

Equally, you might have an employer who makes localised investments more attractive. For example, you might be invited to join a company pension scheme to which your employer will also make contributions that match any money that you put into it.

Some people will also find that they have settled in their adopted country and want to make longer-term investments where they live. This might be the case if you have married a local, for example, and want to buy property and lay down some roots.

In such cases, you are really living the lifestyle of an immigrant than an expat but you could, of course, retain the idea of eventually returning home, perhaps once your children have grown up and flown the nest.

You might also be living somewhere that means localised investments in stocks and shares is particularly attractive. Certainly, Australians living and working in the City of London might consider it to be only natural to make such investments, especially if they have some experience of the financial sector.

Note that tax efficiency cannot be guaranteed by investing where you are residing. The level of personal tax you might pay on your earnings in the UK, Canada, or the EU could change at any time making local pensions less attractive, for example.

In addition, some countries which have less developed financial institutions will often not be regulated as well. This could mean that potentially attractive savings accounts and other investment vehicles are not as great as they seem.

Of course, expats who know they will want to move to another country in a few years’ time or return home to continue their careers in Australia won’t want to tie their money up in one location.

Building in a degree of portability with finances is important to all expatriate communities but especially to Australians who have a reputation for going walkabout, after all.

Then, there is the issue of what might be referred to as growth yield. All too often Australian expats working in developing countries can have their heads turned by what might look like tremendous investment returns at first but which, in reality, turn out to be high-risk options.

It is also worth bearing in mind that some brokerage systems will mean you have to sell an investment in an adopted country if you no longer live there. This can lead to further financial exposure to things like local capital gains tax.

Another downside of local investments is that they are sometimes priced in a way that diminishes their benefit. Investment brokers in some countries that Australians work in can charge hefty fees for their services.

Finally, tax-efficient investments in overseas countries tend to only work out that way if they are made for the long term.

If you want more flexibility in your life — either to start a family or to move to another part of the world — then it is likely that the investment structure will not be as efficient as it otherwise could be.

This last point should be of particular interest to Australians who might want to continue exploring the world as well as those who know in their heart of hearts that they will return home at some point in the future.

Investing in Australia as an Expatriate

What are the pros of investing in Australia as an Expat?

There are some attractive things about investing at home while living and working in another country. These will vary depending on whether or not you are considered a non-resident for tax purposes.

Since a large proportion of Australian expats will fall into the non-resident tax category, I will proceed on that assumption but bear in mind that the rules are very different for Australian tax payers who happen to live and work overseas for part of the year.

To begin with, investing in shares in Australia can be tax-efficient if you continue to reside elsewhere. Non-residents can also avoid some of the Australian Tax Office’s rules on capital gains tax while you are outside of the country.

Furthermore, the rules surrounding Australian expatriate superannuation investments are the same for non-residents as they are for people at home so long as the investment vehicle used meets the requirements of the law as laid out in the Superannuation Industry (Supervision) Act.

Of course, investing in financial products in the Australian market also makes a great deal of sense if you know that you are going to return home in the next few years. This will mean that your finances are set up to meet the requirements of your lifestyle as it will soon be.

What about the cons of Investing in Australia as an Expat?

Aussie expats will also find that there are notable downsides associated with investment portfolios that are put together at home.

It is important to note that some types of property investments in Australia are not as tax-efficient as they might seem when you start looking into the detail of them.

True, it is possible to accumulate tax credits on properties that cost more to maintain than they earn in rental yields, for example. However, many such investments that are run profitably will come with a tax bill that makes them less attractive than they seemed to be at first.

Investing in property in Australia often requires a great deal of localised knowledge. If you have been out of the country for a while, then what you think you know about a local property market may well be out of date which could lead to poor investment decision making.

Of course, non-residents of Australia who work overseas may complicate their status if they make certain types of investment, especially those which require you to return to the country on a frequent basis to manage them.

This can complicate your tax issues both at home and in your adopted country of residence. In the worst cases, it is even possible you end up being liable for tax in both countries and effectively pay twice!

Some investment brokers are not geared up for the additional needs of the expatriate community. Indeed, some will simply turn down non-residents or charge them a premium for their services.

You can find specialist financial services in Australia that cater to the needs of expats but it is worth bearing in mind that the advice on offer is not always in the best interests of Aussies living abroad given that their plans may not remain the same in the future as they appear to be now.

Investing in Another Country (third country) as an Aussie Expat While Working Overseas

This is where our service, which you can apply for here, makes sense.

The third main option available to expatriates is to invest in a third country, neither Australia nor the adopted one.

This is something that is becoming increasingly popular among expat communities all over the world, not just with the Australian diaspora.

I specialise in putting together investment portfolios for expats from Canada, the UK, South Africa, the US and other developed countries, including, of course, Australia.

One of the main reasons to explore this sort of investment route is that many of the negative factors associated with portfolios in the home country or the adopted one simply disappear.

For instance, if you choose to remain in the country you are currently working in, then having your investments in a third country, not in Australia, should make no negative impact on your changing plans.

Equally, if you choose to move to another country — or even return home — sooner than you had originally intended, then you won’t face any undue issues related to localised investments because they will already be held for you overseas.

You won’t have to worry about selling investments before they have matured. Nor will you face the common problem of losing out by needing to convert your investment portfolio into another currency and, perhaps, place it under a new tax regime.

Another major plus point of a more portable investment solution is that it means you can pay into your investment portfolio when it suits you.

Thanks to modern technology, you can make payments into third country accounts online and often with any currency you like, so it is the ideal way forward for Aussie expats who plan on moving from one country to the next.

Even if you are more settled where you live, this flexibility will allow for changes in life circumstances, such as taking a break from work for a while or wanting to put more away for your future following a promotion and pay rise, for instance.

Moreover, capital gains taxes are commonly applied at the end of the investment when you close your account. So, on the assumption that you hold your investment, as I’d recommend, you can invest in a highly tax-efficient manner.

If you happen to reside in a country with no capital gains tax, such as many in the Middle East and on the Asian Pacific rim, you can legitimately avoid this form of tax by taking this option. This provides Aussie expats with a significant advantage compared to either localised or Australia-based investment options.

Finally, many of the investment platforms that offer this sort of portable service are geared up to support expatriates. In most cases, this means being able to obtain specialist advice for those who live outside of their home country.

Taking action has become more important due to skyrocketing inflation.

Whilst there are benefits associated with investing locally if you live in the US, or back in Australia if you plan to go back home after a few months or years, there are countless benefits associated with portable (third country) investments in the expat niche.