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How To Manage Your Money As An Expat In Australia

On top of excellent career opportunities, Australia offers a very good quality of life, beautiful natural scenery, a lovely climate and impressive cities.

This means that are lots of reasons to spend money and enjoy the opportunities available.However, expats should also appreciate that gaining a temporary residence visa, or even a long stay business visa, will depend on the job type and the salary being paid. Not meeting these requirements may mean a visa is not granted. Australia has strict criteria about who is able to move there.

It is possible to access a skilled migration visa (SMV) but most expats will utilise a nominated or sponsored visa option (NVO), under which an employer sponsors the expat’s visa request.

While many of us have to manage our finances on a daily basis, moving to a new country with a unique culture and a thriving economy means care has to be taken so the expat doesn’t overspend and can enjoy their time in the country.

Organising finances

In many ways, it’s a good idea for expats to organise their finances before they land in Australia. If possible they should open a bank account before arriving and transfer money into it. They will need to make an appointment with the bank soon after arrival with their identification documents and to sign various forms.

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There are a number of excellent Australian banks available with the biggest being Australia Bank, ANZ National, Westpac and Commonwealth Bank. There are also other well-known names, including HSBC and AMP as well as ING Direct, operating in the country. All of them will charge a variety of fees and the expat should find out what the account will cost to run.

To open a current or checking account, the expat will need proof of address while living in Australia plus official identification, either a passport or driver’s license. Some banks may also insist that the expat provides a reference from their current bank.

Australian banks operate a points system before they will allow an account to be opened though expats who take their passport along for an appointment within six weeks of arriving in the country should have no problems opening a bank account. It’s also possible to open an online bank account and the process for this is straightforward.

Whichever method is used to open the account, the bank will want to see a ‘tax file number’ which identifies the expat to the authorities and which they can get from their nearest tax office.

Which Australian bank accounts are best

As part of their research into which Australian bank accounts are best, the expat should really consider how much they will be charged for currency conversion transactions, not just for changing money from their home country into Australian dollars but also in reverse.

This is the first point that potential expats should be wary of – the need to beware of currency transaction fees. This is important so that they don’t rack up large amounts in charges. Expats should shop around to find a reputable company that offers a reasonable exchange rate.

Obviously, banks can offer reasonable currency transaction fees as well and many expats will be happy to use them for the convenience. It’s also possible to hedge against a currency moving against the expat so their money is not worth less than they thought.

This means finding a foreign currency transfer firm that will allow an expat to lock into a current rate to protect against any currency falls.

While many expats will be looking to take cash into the country, they need to be aware that if they take more than AU$10,000 then they’ll need to declare this to the customs. They will not, however, need to pay any tax on the cash they are taking in.

Earnings vs spendings

While many expats will earn a reasonable amount of money, they will soon come to realise that Australia is a huge country. Even the cities are spread out over large areas, and many expats find that they need to buy a car to get around comfortably.

This means finding a reliable car (side note: around 70% of vehicles in Australia have automatic transmissions) and potentially applying for a personal loan. Many expats will find this difficult though high-earning expats have a better chance of being accepted by a lender. All expats applying for a loan will also need to note that the loan’s term needs to be shorter than their temporary residence visa will be for.

Expats should also know that car insurance is mandatory and will cost around $300 per year for third party cover.

To help an expat, there are personal loan brokers available in Australia who can quickly assess whether an expat is eligible for a loan and help them find a suitable lender. One of the biggest issues is that they don’t have a credit history within the country. They need to be wary of not making too many loan applications since these will be recorded against their credit history and a lender could see these as a potential risk.

Some expats may settle down quickly in Australia and decide to buy property but they will find that the home loan market is very different to most other countries. Lenders are conservative and there is a lot of paperwork to be completed.

Australian lenders also undertake a thorough check of an applicant’s financial situation to ensure that they are able to repay the loan.

Expat-specific lenders

Again, there are specific lenders who are geared up for lending to expats, particularly those who can stump up at least 20% of the home’s value as a deposit.

Expats working and living in Australia should know that they will need to pay tax on their income which will mean they need their tax file number. Having a tax file number also means they can pay capital gains tax on any profits made from investments in Australia while they live there.

All employees in Australia are taxed on how much they earn with those earning more being taxed more – just like most other countries. The tax-free threshold is $18,200 and tax bands range from 19% for those earning between $18,201 and $37,000 and up to 45% for those earning more than $180,000.

Some expats may find it easier to handle their money by using the services of an accountant who can help them deal with tax payments and any potential tax-deductible items that are allowed, for instance buying computers and mobile phones.

Many employers also use salary sacrifice schemes, so an expat could effectively pay for a car using this service or even buy themselves a new computer which then brings their taxable income down which could mean moving into a lower tax bracket.

The Australian pension system

Expats will also need to appreciate that the Australian pension system is very good and they will have money deducted from their income to ensure the contributions are made.

Under the system, which is known as superannuation in Australia, employers pay 9% of the expat’s income into a registered fund, which can be accessed when they retire. Expats can have this money paid as a lump sum or as a retirement income or, as many opt to do, take the fund home with them to place with another pension provider.

There are various rules about moving pension funds between countries and the advice and services of a specialist financial adviser who understands how the Australian pension system works and the system for the expat’s home country should be sought.

When it comes to making the most of their income in Australia, expats will find that cities like Melbourne and Sydney are expensive to live in whereas smaller towns and cities offer more for their money. This should not come as a surprise since Australian cities often feature on lists detailing the world’s most expensive cities to live in. A four-bedroom house will cost up to $1,800 a month to rent.

While rents aren’t cheap in big cities, the utilities are fairly reasonable. Renters usually pay for water, electric and gas on a quarterly basis while the landlord pays council rates.

Budgeting for utilities

Expats should budget for utilities between $50 and $100 a month, depending on where they live and the size of their home. Mobile phones will cost up to $60 per month and a broadband and telephone package can range from $90 to $140.

While we have already mentioned tax, expats will discover that the tax rates in Australia are high and the tax system is difficult to navigate. In addition, expats will be paying around 1.5% of their income towards the country’s national healthcare plan, known as Medicare.

While the Australian Medicare system is good, it doesn’t provide for everything and private healthcare cover is encouraged with the use of tax rebates. For instance, private health insurance for an expat and their family will be around $220.

However, expats are also required to buy comprehensive private health insurance cover their stay in Australia. Failure to do so could lead to some hefty medical bills since care is not cheap.

Expats looking for home insurance cover can expect to pay around $80 a month.

Despite the country being enthusiastic about socialising, eating and drinking out can be quite expensive, as can other entertainment and cultural pursuits. For instance, a trip to the cinema for two adults and two children will cost $45. However, a visit to the beach is free!

Expats will also need to buy groceries and the cost of living for Australians is quite reasonable so they should be able to eat well. A family of four will, on average, spend around $200 on groceries every month. Most supermarkets in Australia don’t sell alcohol. It’s available from specialist shops instead.

Another expense for the expat in Australia is tipping. Like the UK and US, tipping is now common and people leave up to 10% as a tip. Taxi drivers are also tipped. Taxi fares in Australia are tightly regulated and quite reasonable.

The cost of schooling will vary depending on where the expat is living in the country. Expats looking to place their children in a private school will find the fees range from $3,000 a term up to $33,000 for the more reputable ones.

Also, childcare costs are between $70 and $185 per day for a place in a childcare centre and between $45 and $80 every day for a place in pre-school. Agencies and a nanny will cost up to $25 per hour.

Commuting costs can also be reasonable – expats living in Sydney, for instance, may pay up to $6 for a metro ticket. Trains can be quite expensive but they are great for long journeys to see Australia at its best. Overnight sleepers are popular, with a ticket from Sydney to Perth costing from $940.

The best way for an expat to manage their money in Australia is to budget carefully so they can live comfortably and enjoy the delights that the country has to offer. By figuring out what their everyday expenses are likely to be before they travel, life will be much easier.

More information
Australian visa requirements (Government website)

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