Dale Hoy from InterRetire presented recently at the Expat Advisors Community forum in Melbourne. Following are some key insights from his presentation and you can view the slides here.
Each year around 80,000 skilled workers leave Australia, while around 120,000 return home, often triggered as a result of children entering secondary school, company transfer or retirement.
With some having worked overseas for 5, 10 or even 20 years earning good salaries within lower tax jurisdictions; many have been able to build up substantial savings. For some expats, “one year of after tax income in Hong Kong” may equal “3 or 4 years of after tax Australian income”!
Moving between countries can create complexity with many cross border planning, tax and investment issues to address. A common theme is the need for retirement planning for internationally connected clients who may not be sure where they will ultimately live.
“Foreign Super” is a structure that may be suitable expatriates, temporary residents and business migrants as part of their retirement planning.
Companies today are much more global with operations in various jurisdictions. For example an Australian company may have executives located in the UK, US and various parts of Asia. Many senior mobile executives end up accumulating cash and assets in multiple countries.
• Temporary Residents
Executives from international companies may be sent to Australia to work on a 457 working visa. They are classified as “temporary residents” so only pay tax on their Australian sourced income. Use of foreign super can provide tax savings for both the executives and their employers.
• Business Migrants
High net worth families looking to move to Australia may have wealth in multiple countries. Planning is required ahead of obtaining permanent residency and moving into Australia’s worldwide tax regime.
What is “Foreign Super?”
The key difference between “Australian Super “and “Foreign Super” is that the trustee lives outside of Australia. A foreign super fund has a trustee, a set of rules called a Trust Deed and a regulator supervising the trustee.
There are no statutory limits on employer and employee contributions, and the key benefit is the portability of a foreign plan as the member moves jurisdictions. They can also provide flexibility in terms of plan access and retirement dates, investment choice and currency. There may also be benefits in relation to income, capital gains and inheritance planning.
If you have any clients where a Foreign Super may add value to their retirement planning, contact Dale Hoy or Joff Macleod to explore how they can help you augment your international client service offering.