An Introduction to Retiring Overseas
More and more individuals and couples are considering spending all, or some, of their retirement outside of Australia - reflecting enormous changes in international mobility over the last 50 years. The corona virus pandemic will invariably impact this movement in the short and medium term, but at least it will focus much needed attention on the issue of access to medical treatment - something that we have stressed for a number of years but has not always been heeded by overseas retirees.
We think that living abroad can be very fulfilling from a personal perspective, but it is a significant decision that deserves very careful consideration. We have considerable personal and professional experience in this area, and intend to provide a significant level of detail in this area, but as a preface these are our major issues that we will shortly address in more detail:
- Unless you have direct experience of living overseas - not just travelling - in the country in which you wish to retire, whether permanently or for a significant amount of time, we believe you should spend at least six months in the country before making any substantial commitment. Travelling in, and living in a country, can represent two very distinct experiences.
- If your only substantial source of income is the Australian age pension, and you do not have access to substantial other liquid assets, then we don't believe retirement overseas is appropriate unless you otherwise have access to good quality, public health care in the country of retirement. This is simply because access to healthcare is an absolute requirement in retirement, and choosing to live without comprehensive cover should not be considered an option - the individual risks are simply too high.
- You need to fully appreciate the tax consequences associated with any move overseas, both in Australia and in the country in which you intend to retire, prior to making any move. Unless you make appropriate investigations you may suddenly find that your superannuation income which is tax-free in Australia, is taxable in the country in which you retire, and that you're also potentially liable for wealth or inheritance taxes and the payment of social security levies. Those with self managed superannuation funds need to be particularly careful from an Australian perspective if they become non-resident - as a lengthy or permanent move overseas will require professional advice with respect to whether your fund should be wound up, rolled over to another superannuation fund or changes made to the trustee roles.
- Bear in mind that you cannot apply for the age pension while living overseas unless you are resident in a country with which Australia has a International Social Security Agreement and this does not include the UK.
- Depending upon your personal circumstances, you need to thoroughly discuss your move with family members. Moving overseas if you have aged parents, or young grandchildren, can prove very difficult.
- Taking early retirement overseas to start or purchase a business overseas, such as hotel, B&B or restaurant needs to be particularly carefully considered if you do not have specific, relevant experience in the country of residence. Unless relatively little capital is at stake, these represent high risk activities.
For individuals and couples looking to spend time overseas and retirement, we think the better solution in many situations will be to plan around spending substantial parts of the year overseas, perhaps up to six months, but retain an Australian base and tax residency. We explain why we think this approach is attractive on our "6 + 6" page.