Retirement in Asia
In other areas of the business, we have had significant experience in providing advice to individuals working and retiring overseas. In that context, we would offer a few general comments about potential retirement into Asia. This is having regard to our general view that before deciding on a permanent retirement into Asia, or elsewhere, individuals and families should consider spending part of the year overseas as an interim step, or on a regular basis. If you haven't previously experienced living overseas on a long-term basis, you won't appreciate how much of a difference there is between being a tourist and a resident.
One of the attractions associated with retirement into Asia has been that offshore income - such as superannuation income streams or investment income generally - has often not being taxable in Asian countries. We expect this position to change over time, and anyone thinking of retiring into Asia should seek prior tax advice. As we mention elsewhere on the website, it can be more tax effective to remain an Australian tax resident, particularly if relying on superannuation income.
At this point in time, the purchasing of property in Asia remains largely a "cash" proposition, with little or no finance available locally from banks - although occasionally vendor financing is available. The latter tends to be short-term and it will often be reflected in the pricing of the property. The market is however becoming more sophisticated, and we are just beginning to see "quality" fractional ownership schemes focused on retirees.
Our 5 Top Asian Retirement Destinations
This is our subjective view of the top five retirement destinations in Asia. It doesn't present a scientific analysis, but there is a significant amount of both personal and professional experience underlying the assessments and commentary. Given that we are talking long-term retirement destinations, we have adopted a 10 to 20 year horizon.
Thailand |
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Sri Lanka - AVOID, just recovering from a financial crisis |
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Philippines |
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Vietnam |
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Malaysia - NOW AVOID |
Malaysia was one of the first Asian countries to introduce a well-developed and structured foreign retiree program - referred to as "Malaysia My Second Home" (MM2H). The program was frozen in July 2020 pending a review and then reactivated with effect from October 2021 with new, substantially higher eligibility criteria, apparently with the intention of attracting "wealthier foreigners". We summarise the new criteria in the table below, and it's difficult to understand whether Malaysia are simply trying to move abruptly "upmarket", or just have a total misunderstanding of the expatriate market and the need for stability and trust. Nevertheless, the Government initially sought to apply the new criteria to expatriates on existing visas, providing 12 months "grace". Following significant criticism the Government - as we anticipated - eventually "grandfathered" existing visa holders. However, the initial approach was simply unacceptable and unethical and flagged that Malaysia can no longer be recommended as a foreign retiree destination. Irreparable damage has been done to Malaysia's reputation as a retirement destination. Whilst Malaysia has the right to simply say we don't want international retirees, they must always deal with existing visa holders equitably and visa holders should be able to expect stability. Very unsurprisingly, we believe the impact of the new rules has been a 90%+ drop in applications and indeed more cancellations are being processed than applications. However, note that Sarawak maintains its own MM2H program (S-MM2H) which in many respects is (currently) more attractive than the "Peninsula" program. |
Malaysia - SEE COMMENTARY ABOVE |
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Indonesia (and Bali)
The most obvious location missing from the list above is Bali - however, Bali is a part of Indonesia and can not, or should not, be considered in isolation. Indonesia is the world's most populous Muslim nation and, while it has a long history of tolerance and moderation, some relatively recent events suggest that a less tolerant environment may be developing, including a greater prevalence of Sharia law.
Our basic concern with respect to Sharia law is that, apart from the medieval nature of the penalties, it is not compatible with a separation of powers - judicial, executive and legislative - and religious changes could significantly impact the future property, civil and other rights of non-Muslims. Our view was reinforced with the previous announcement of proposed changes to the criminal code in 2020 which did not proceed but should have had any proposed retirees reconsidering any investment in Indonesia and current retirees pondering a withdrawal.
Nevertheless, widespread changes to the criminal code enacted in December, 2022 included a ban on sex outside marriage (commencing in 3 years) and we may be witnessing a resumption in the trend towards increasing Muslim ascendancy in Indonesia. Even if this doesn't prove to be the case, why take the risk?
Consequently, while Bali and Indonesia generally are likely to remain wonderful tourist destinations, or indeed great locations to work remotely on new digital nomad visas, different considerations clearly come into play when choosing between tourist destinations for a few weeks or months and long-term retirement destinations for 10 to 20 years.
Note, for completeness, that Indonesia announced a "second home" visa at the end of 2022. The visa allows foreigners to stay in Indonesia for 5 to 10 years, subject to a number of requirements, such as the depositing of Rp2 billion (approx USD130,000) in an Indonesian government owned bank - more details are available at the Second-Home Visa webpage.
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