4 FINANCIAL MISTAKES TO AVOID BEFORE MOVING OVERSEAS

Hindsight is a wonderful thing, it makes experts of us all.  But unfortunately at the wrong point of time. Many people come to us AFTER they have made bad decisions.  In many instances its then too late or too costly to do anything about it.

We have listed in this blog some examples we have seen over the past year of mistakes people have made.  Lets learn from others and not become hindsight experts.

1 Problem

This story comes from a friend. A person living in Thailand had a minor heart attack.  Thankfully he was ok as it was relatively minor.  He held insurance through his Super Fund, which included Trauma cover of $69,000 that covered heart attacks.  Unfortunately his policy did not cover him while he lived overseas and the insurer chose not to pay the claim.  This scenario is far too common.

Hindsight

Before moving overseas check whether your policy will pay a claim if you chose to live overseas. Many policies held within super funds do not.  If your policy does not pay as a non-resident of Australia, either change to a super fund that have insurance policies that do, or alternatively cancel your insurance through super and take out a policy in your own name, with an insurer that do pay claims for non-residents.  And get that in writing.

2. Problem

This story comes from an email we received. An Australian couple living in Thailand wanted to apply for the Age Pension for the husband (wife already received the age pension). They had been living in Thailand for 16 months.  The husband is eligible for approximately $426 per fortnight Age Pension payments.

He is unable to apply for the Age Pension whilst living overseas and must return to Australia for two years over the period he applies for the Age Pension.

Hindsight

Wait 16 months, apply for the Age pension then move to Thailand.  Once in receipt of the pension they could move overseas and continue to receive the payments.  They would not need to return to Australia for two years to apply.

During the past 16 month period they could have spent large amounts of time living in Asia as tourists without adversely affecting his Age Pension application

3. Problem

Running out of money. This problem is also far too common. A gentleman contacted us to enquire about ‘ways to make more money’.  He retired 5 years ago, had a small but decent lump sum payout from his employer at retirement, his home fully repaid, and about $278,000 in Super.

He chose to rent out his home in Australia, move to the Philippines and ‘live well’.  He lived too well, and he thought his money would last forever.  Five years into retirement and he is down to $160,000. At Age 67 and in good health he worries about running out of money well before he should.  He would like to keep his home in Australia (not sell) as a security measure for the future, so his remaining $160,000 is very important to him.  Rightly so.

Hindsight

Have a financial plan from the start.  Know financially where you are always.  Understand how much you can spend over a long period of time and be able to track this on a regular basis.

Another mistake made was that as he was in retirement, he figured to play it safe with his super funds and invested very conservatively (in low return assets).  As the share and property markets have achieved some very good results over the past 5 years he has not greatly benefited from these rises.  With a better investment strategy he could easily have been over $20,000 better off (even by using a typical ‘balanced’ fund)

4. Problem

This one is a ticking time bomb that will catch out many Australians currently living overseas.   You may lose your capital gains exemption on your own home if you sell whilst living overseas and are a non-Australian tax resident.

This little gem has only recently been introduced to catch foreign investors in Australian property, but unfortunately it also catches some Australian citizens that live overseas.  Although we do not have a specific example as yet, we do help people in assessing whether they should remain an Australian tax resident or not when choosing to move overseas.  This typically comes down to tax savings and depends on assets held and where they receive their income.

Australians will be caught out with this one in the future.

In future

If living overseas seek advice before you sell  your Australian property.  Continue to choose a tax residency status that best suits you. If you are a non-Australian tax resident it may be more beneficial to become a tax resident once again in the year that you decide to sell your home.  Your home should then be tax free.  But the key here is to seek advice before signing any contracts.

Join our NEW Facebook Group, the Retire to Asia Community

We’ll soon be launching a new Facebook Group, which will allow you to interact with us on any topic you desire.  If you have questions about any of the issues raised in this blog (or anything else for that matter) please join us in the Retire to Asia Community.

In the meantime if you’d like to find out more about retirement planning both in Australia and overseas, please feel free to call 1-800-830-763 or email info@retiretoasia.com.au and let the team at Retire to Asia help make your dream lifestyle a reality.

2 replies
  1. Paul
    Paul says:

    I am very confused!
    When retiring overseas with children, finances and residential property all remaining in Australia, do you retain Australian Tax Residency status?
    Just because you can become a non-tax resident of Australia does not mean that you should.
    Are you free to elect to retain your Australian Tax residency or is it a matter of fact and a matter of law that depends on your circumstances.

    Reply

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