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In 2016, 11,660 Australians over 55 permanently relocated overseas. While the exact number is hard to pin down, various industry estimates put the total number of Australian retirees who are now living overseas at around 90,000, a figure which has risen steadily in recent years.
The most popular retiree destinations for Australians include:
- New Zealand
Vietnam, Bali and Cambodia are also attractive because of their low cost of living.
Retiring overseas can have big implications for your super and tax and it’s wise to seek detailed financial, super and tax advice from a financial planner before you start to make plans to relocate.
Why do Australians want to retire overseas?
The main reasons for leaving Australia and retiring overseas include:
- Family ties – being closer to children or community
- A desire for travel, warmer weather or to live in a new culture
- The potential cheaper cost of some overseas countries compared to Australia
- The cost of a mortgage, inadequate social security payments and everyday living expenses in Australia
If you’re considering making the move overseas and are doing research about cost of living in different countries, visit this site for detailed analysis. International Living Australia also provides comparative data and stories on the cost of living overseas.
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Industry figures suggest that a comfortable retirement lifestyle in Australia will cost a couple about $58,000 a year. So, it’s worth checking out what it may cost you to live in your preferred country.
Pros and cons of retiring overseas
The potential advantages (dependent on location) of retiring overseas include:
- Cheaper food and living expenses, for example, utilities and transport
- Cheaper property prices, renovation costs and rent
- Accessibility to high quality, affordable healthcare
- Increase in desirable lifestyle factors, for example less stress and more disposable income
Possible disadvantages include:
- Forfeiting Medicare benefits after five years
- Cost of health insurance cover
- Tax implications for remaining Australian assets
- Inability to transfer super overseas (except to New Zealand – see below)
- Leaving behind family and friends
Can I access my super?
What happens to your super depends on your residency status, either Australian citizen/permanent resident, or a temporary resident. You won’t be able to access your super unless you meet the normal conditions of release, or if you’re moving to New Zealand, which allows you to transfer your super to a local account.
If you are a temporary resident, you may be eligible for a departing Australia superannuation payment (DASP), in which case you can contact your fund trustee to request the release of your super.
SMSFs also have strict compliance rules about trustee control being based in Australia, which may have a big impact on your fund – seek advice from a financial planner.
Compare super funds
You can still get the pension
To receive the Age Pension if you move overseas permanently, your pension will be reduced to a proportional rate based on your ‘Australian working life residence’. This is the number of years you have resided in Australia since age 16 to Age Pension age (if 35 years or more, you won’t be affected). Essentially the pension becomes an ‘outside Australia’ rate that doesn’t include the supplement for utilities, telephone etc. You must also meet the age requirements and pass the income and assets test. You can receive the pension into your foreign bank account.
There are International Social Security Agreements with at least 30 countries that enable pension payments. If you’ve lived or worked in an agreement country before, or you live in an agreement country now, you can receive a part pension from that country and also a part pension from Australia.
Decide on your tax residency status
You will also need to consider your residency and tax status if you retire overseas. Check out the ATO website information on tax residencies as this can be a complex issue – especially if you retire overseas but still earn income within Australia – for example from an investment property.
Ultimately, you need to consider whether or not you will remain an Australian resident for Australian tax purposes. More expensive countries are likely to tax your retirement income, less so for cheaper Asian countries. If you remain an Australian resident for tax purposes, you’ll typically be taxed on your global income from all sources, whereas foreign residents are only taxed by the Australian government on their Australian-sourced income.
However, as a foreign resident you’ll start paying tax on the first dollar earned here. Tax treaties with other countries affect the amount of tax you may have to pay. Investigate the tax laws of the country you want to retire to, for example in the areas of property and pensions.
Retiring overseas has major tax, super and financial consequences so always seek the advice of a financial planner. For more information, SuperGuide has a suite of articles about living overseas and accessing super.