There are numerous reasons to live and work outside of Australia. Along with new experiences, for many it’s an opportunity for a higher standard of living, and the ability earn more than back home whilst possibly paying less income tax. However, most Aussie expats might not be members of any employer superannuation scheme, so it’s important for you to invest any surplus income you have, accumulate savings and grow these for the future whether you decide to remain aboard or return to Australia.
Learn how to maximise your time working outside of Australia and the pitfalls to avoid, to enjoy the retirement you desire.
Making the right investments
Ideally, your investments need to be tax effective whilst you’re living overseas and then remain so when you’ve returned home. You need to be aware that tax schemes with suggested outcomes which seem too good to be true should be avoided, and only those that work within the law, and not against it, should be considered.
Having a well-diversified portfolio of investments which provides exposure to different asset classes can help to protect your investment from market fluctuations. One option open to Australian expat investors is the investment linked life insurance policy which typically offers access to a spread of investments including collective investment schemes, equities and fixed interest, as well as the potential to generate virtually tax free returns on the money invested.
Such policies aren’t taxed on the income and gains in the policy although certain withholding taxes might be payable such as on US equity dividends.
In Australia, ‘eligible policies’ defined in Section 26AH of the Income Tax Assessment Act 1936 (the Act) can generate gains which, if not received until after ten complete policy years, are not assessable for income tax. Large additional investments into the policy can restart the ten year period.
Intelligent Investments offers investment linked life insurance policies which have all the necessary characteristics to be an eligible policy for income tax purposes in Australia. Subject to acceptance by the Australian Tax Office (ATO), and legislation remaining constant, after 10 years, clients will be able to withdraw money from the policy without being assessed for income tax.
Let’s consider the benefits, using a recent case study.
After enjoying a holiday in Asia watching the Hong Kong Sevens, rugby fans Barry (aged 46) and Samantha (45) decided to look for new career opportunities promoting rugby in Asia. Soon after, a job offer came up for Barry and the couple jumped at the chance of a life overseas, particularly as Barry’s new role provided a golden opportunity to save considerably more than if they had stayed in Australia.
Barry and Samantha arrived in Asia in 2010 and five years later in 2015 (once they had settled in Asia and were no longer tax resident in Australia), they contacted Intelligent Investments for independent, professional advice on how to best invest some of the capital they’d accumulated since arriving. As neither Barry nor Samantha had been members of any superannuation scheme during their time in Asia, their Intelligent Investments’ wealth manager recommended an offshore investment linked life insurance policy to fill their retirement funding gap and they decided to invest A$300,000.
Barry and Samantha continued to live in Asia for a further five years until June 2020 when they decided to return home to Australia to retire. At first, they didn’t need to access any capital from their policy but in March 2025, when they were firmly settled into retired life in Australia, they turned to the policy to supplement their retirement income.
By now the original investment had grown to A$380,000, meaning a bonus (gain) of A$80,000 in the policy. Barry and Samantha had the option at this point to either fully surrender their policy or take regular withdrawals each year, and they decided on the latter.
As their policy had been in place for more than ten policy years, Barry and Samantha could drawdown their investment without paying income tax on the bonus amount received; making for a comfortable retirement.
Expatriate life is one of variety, adventure, experiencing new cultures, and a chance for you to take advantage of investment opportunities which could make a real difference to your finances in retirement.
Speak to Intelligent Investments today and choose the right investment vehicle for your needs; one that offers flexibility and tax efficiency both whilst overseas and should you decide to return back home to Australia.