Alfred Moller

Record numbers of Australians are leaving to live and work overseas. Expat lending specialist Alfred Moller has five top tips for Australians who have made the move.

According to the Australian Bureau of Statistics, in the year ending 30 June 2018, 289,000 people left Australia to live overseas, an increase of 12,200 from 2017, the highest number on record. During the same period almost 91,000 Australian citizens decided to emigrate.

So, you’ve finally made the move. What next?

1. Find a local accountant who can operate in both the Australian and local tax jurisdiction

Finding an accountant prior to tax time will assist with education and allow ample time to plan effective tax strategies.

2. Separate your finances

Ensure that your income and expenses are separated into at least two different accounts. Not only will this make it easier for your accountant come tax time, but it will also allow transparent documentation if you pursue finance. You may also elect to keep a minimum balance in your Australian bank account if existing loans are set-up for direct debits.

3. Find a good broker

If you intend to purchase an Australian investment property or a home to return to in Australia, speak to a specialist broker, NOT your existing bank. A specialist broker will understand each bank’s foreign income policy while a bank can only recommend their own products, which may not suit you. For example, only one major bank will accept income derived from United Arab Emirates Dirham, but there are suitable second and third tier lenders who will. Let’s put that into context: John may be a director of a fortune 500 company in Dubai, however the bank may not lend to him purely based on the currency of his salary.

4. Engage a buyer’s agent to assist you in purchasing a property

Buyers agents such as Milk Chocolate help purchase established Australian property specifically for Australian expats. An efficient agent will ask questions such as the intention of the purchase:

• Do you intend to live in it when you move back to Sydney?
• Is this a holiday home, short- or long-term rental property?
• Have you considered diversifying your property portfolio with a commercial property?

5. If your relationship status changes, plan ahead

If you have met your partner while overseas have a discussion ahead of time as to whether they intend to move back to Australia with you. If it is the case, speak to an Australian migration agent such as Four Points Immigration and plan ahead of time. This will remove the headache and any unwanted surprises when you return to Australia.

Being an Australian expat can be a difficult and stressful time of your life and the population of Australian expats globally is expected to increase. By following the aforementioned tips you will put yourself ahead of the game.

By Alfred Moller, Expat Lending Specialist, Residential and Small Business Lending Specialist

Sources:
ABS: 3412.0 – Migration, Australia, 2017-18
ABS: 7.3 million migrants call Australia home

The post Being an expat and managing your finances overseas appeared first on AdviserVoice.

Alfred Moller

There are many things to consider when planning to move overseas for work.

It can be a daunting task to get your affairs in order and the following tips can ensure your financial and property affairs are taken care of before leaving Australia.

Six tips to review before becoming an expat

1. Researching suitable schools for the children prior to moving will minimise the hassle and will narrow your search options upon arrival

2. Consider how the family home will be managed:

• assess the security needs if leaving the home vacant
• consider renting the property to generate passive income
• consider leasing the property using a property manager or leasing using short-term rental managers such as MadeComfy
• consider a family member or friend managing home via an Airbnb account

3. Speak to a mortgage broker and review your interest rates (once overseas it can be difficult to negotiate an Australian home loan)

4. Revise your expected overseas income, current budget and financial goals as an expat with a financial planner

5. Inform your accountant about working overseas, nature of contract/conditions and expected duration as tax issues may need to be reviewed

6. Open an international bank account for transactional and savings capabilities. Financial institutions such as HSBC, Citibank, Deutsche Bank and Bank of America are well suited, depending on the relocation country.

By Alfred Moller, Expat Lending Specialist

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Alfred Moller

A knee-jerk reaction from the Federal Government, says expat adviser.

“The Federal government’s proposed scrapping of the capital gains tax exemption for Australians residing overseas is predicted to affect over 100,000 expats. The proposal is considered by expats to be the most lucrative government ‘cash grab’ this decade,” said Alfred Moller, Expat Lending Specialist at Omniwealth.

Working Australians who live overseas are at risk of losing their capital gains tax exemption on their Australian main residence if they sell the property while overseas. However, many argue that Australian expats deserve to have corresponding rights to dispose of their main residence without paying capital gains tax.

The legislation is yet to pass and with the June 2019 deadline looming, the stakes for Australian expat families could not be higher. The main criteria will be their residency status when the property is sold.

Three simple questions can be considered to understand whether Australian expats will be affected by the proposed changes:

1. Are you planning to move back to Australia?
2. Are you intending to move into your Australian family home, upgrade or downgrade?
3. What is your intended time frame for the above?

“Understanding your intentions and speaking to your tax adviser can reduce any capital gains tax payable,” said Mr Moller.

The post Over 100,000 expats could be affected by proposed CGT change appeared first on AdviserVoice.

Alfred Moller

Given the recent Liberal leadership spill, perhaps it’s wise to revisit the scrapping of the Capital Gains Tax (CGT) main resident exemption for non-residents. The exemption is currently sitting 29th in the queue of legislation yet to be discussed, however the current political climate causes further uncertainty.

Scott Morrison officially took office on the 24th of August 2018 after ousting former PM Malcolm Turnbull. With 2019 set to be a difficult election year for both major parties, the ability to pass legislation in both the Senate and House of Representatives will be slowed, creating uncertainty as the June 2019 CGT grace period looms. Understanding the implications of the proposed CGT change can assist Australian expats.

At present the current CGT exemption applies to expats, however if the bill passes there will be a CGT ‘Light switch’ which will grant expats a full CGT exemption or none at all. If you are planning to reside overseas permanently or if there is a slim chance of doing so, selling your main residence prior to June 2019 will avoid paying CGT on the sale proceeds.

However, if you are planning to move back to Australia, you will remain CGT exempt once you return and reside in your existing home. The CGT will be apportioned to your time as a resident.

Expat example:

You purchased your house in 2008 and moved overseas in 2010. The property is deemed to be your main residence for 2 years.

If you then move back to Australia in 2015 and reside in the property, it will not be deemed as your primary residence for the 5 years you were overseas.

If the property is then sold in 2018, 50% will be CGT exempt as you resided in your home for 50% of the time over a 10-year period.

Expats should speak to their families to understand whether moving back to Australia is feasible. If not, disposing of their Australian home prior to June 2019 will prevent unnecessary CGT on the sale.

For those planning to reside in Australia in the future, it is important to be aware of the current apportioned tax ruling, so talk to your accountant about how it might affect you.

By Alfred Moller, Expat Lending Specialist

The post Comment on CGT review of main resident exemption for non-residents appeared first on AdviserVoice.

Alfred Moller

In light of the Royal Commission there has been much scrutiny towards the banks and by mortgage brokers. One of the key findings within the Royal Commission is the lack of verification of customer living expenses from mortgage brokers and the acceptance by the banks.

The banks have always used a combination of the Household Expenditure Measure (HEM) and the Henderson Poverty Index to compare an applicant’s “Declared Expenses” to the “benchmark” average living expense. It is not hard to find an article or blog from a mortgage broker slamming the banks for increasing living expenses above what has been declared by the customer.

This seems unfair, right?

Let’s look more closely into the living expenses used by the banks and compare them to available consumer data.

HEM

The HEM considered by the banks will vary significantly depending on the household make up and the amount of income earned. From my experience, in 2017 the average declared expenses accepted by banks, not including housing were:

• Single, no dependants – $1850 per month or $426.92 per week
• De Facto, no dependants – $2,500 per month or $576.92 per week

This is interesting when compared to the Australian Bureau of Statistics (ABS) “Household Expenditure Survey, Australia: Summary of Results, 2015-16” report that outlined that both the basic household expenditure and discretionary spending has increased year on year since 1984. The average basic household expenditure was $846 per week in 2015-16 and is considered to be necessary spending such as housing, groceries, fuel, health care and transport. The average discretionary spending was $579 per week in 2015-16 and is considered to be any spending that is not necessary such as luxury and consumer goods.

The 2016-17 report has not yet been released, however the trend would suggest a continued increase in both basic and discretionary spending. Keep in mind that the ABS survey isn’t adjusted for inflation. This gives us a base understanding of consumer behaviour, noting there is a clear difference of $998.08 per week between the HEM and ABS for an individual with no dependants. Even if we consider the cost of accommodation for a one bedroom or studio apartment in Sydney of $550 per week, there is still an enormous difference of $448.08 per week which the banks would not have accounted for.

This leads to a fundamental issue which is currently being investigated by the Royal Commission.

The banks have since increased the HEM in a reactive rather than proactive way. Did the banks allow a sufficient allowance for “actual” spending in the current high cost of living, low growth environment?

Based on the above comparison, my opinion is no. Even with the stress tests and higher serviceability rates used by the banks, they have not adequately addressed the likelihood of increasing rates, cost of living, inflation and low income growth rates.

So who’s to blame?

I do feel that it is hard to point the finger at one person or entity.

Firstly, it is the banks’ responsibility to ensure the sustainability of their lending practices.

Secondly, mortgage brokers have a part to play in verifying expenses and ensuring that the loan is in the best interest of the applicant.

Finally, I believe an emphasis is required on the responsibility an applicant has in the lending process to reflect their true living expenses as opposed to underestimating them.

Mortgage brokers and banks can ask as many questions as possible, however there is always a margin for someone to lie.

An undisclosed default or expense can be detrimental by causing delays, at times resulting in a declined application and an unnecessary credit enquiry.

In this environment, brutal honesty is required by the applicant with a failure to do so impacting the entire lending process.

Although painful, the Royal Commission will shed further light into lending practices and provide a sustainable solution to the living expense crisis.

By Alfred Moller, Residential and Small Business Lending Specialist

The post Need to measure household expenditure accurately for lending purposes appeared first on AdviserVoice.

Alfred Moller

Many expats first contact their bank directly, only to be told it can’t be done. Often this creates an assumption that if their bank does not lend to expats, then no bank does.

• Alfred Moller from Omniwealth disagrees and suggests that expats work through the following points before applying for a loan:
• Lending policies can differ greatly between each other, even the Big 4 banks
• LVR’s can range from 60-90% inclusive of Lenders Mortgage Insurance (LMI)
• Due to the associated exchange rate risk, only 50-80% of foreign denominated income is accepted
• Boutique lenders have the most flexible expat policy with some considering self-employed income. There tends to be a 1% risk fee associated with the lender with many restrictions.
• Interest rates can vary from 4.5%-7% depending on the applicants requirements
• Lenders may still consider the minimum Household Expenditure Measure (HEM) for living expenses, even if your employer covers all your costs. This is a common mistake from brokers which can result in an unpleasant experience.
• Title ownership must be carefully considered when an expat and a non-Australian citizen partner wants to buy a property. Implications such as foreign purchaser’s duty, land tax surcharge and FIRB approval are common issues for non-residents.

More hurdles for expats buying local property

“It is not always beneficial for an expat/non-resident to apply for an investment loan as not all brokers understand the long-term implications.

“It is highly recommended that expats seek tax advice within their local tax jurisdiction and Australia before making an approach for funding,” said Alfred Moller, Omniwealth.

By Alfred Moller, Expat Lending Specialist

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