bank accounts for Australian expats

Bank accounts for Australian expats: key issues

Friday, September 27, 2019 by Shane Macfarlane CA

Beginning your life as an Australian expat feels like you are setting up an entirely new life; from buying a home to furnishing your house, everything you had set up in Australia needs establishing in your new home overseas. Banking is one of those components of your life that you need to organise before you start working, so you can accurately get paid by your employer and access money to live.

Many expats experience hesitation over banking overseas, and in this article, we discuss the three most common questions about how to best handle your banking arrangements as an Australian expat regardless of where you are living and working from, anywhere in the world.

Should I keep my Australian bank account?

There is no legal reason to close down your Australian bank account. Non-residents can maintain bank accounts in Australia

Having said that however, maintaining Australian bank accounts shows a stronger durability of association with Australia and this creates a stronger argument for Australian tax residency as opposed to non-residency.

Accordingly, we generally recommend that our clients shut down and or consolidate all accounts but one in Australia (i.e. we often recommend that one account only be kept open in Australia). We suggest this as the shutting down of unnecessary bank accounts shows that the taxpayer has made attempts to cut ties with Australia to support the argument for non-residency status.

Although you may wish to close all of your Australian bank accounts, we encourage most of our expat clients to keep one Australian bank account open whilst they live and work overseas as non-residents.

Here’s a few reasons why:

  • Your Australian tax returns – as you will continue to have Australian tax return lodgement obligations each year, even whilst you are a non-resident expat, (refer Do I need to lodge a tax return while living overseas?), maintaining at least one Australian bank account is generally recommended as this will be required to receive any ATO refunds that may be due. It’s also needed so that you can pay any Australian taxes that may be owing on your return each year.
  • Time to return – most Australian expats return home to Australia at some point during their life, whether that be at the conclusion of their expat adventure, or between expat roles or even be it simply to visit friends and family during a short break home. Maintaining an Australian bank account means that you can utilise that account for your day to day expenses whilst you are in Australia without incurring high foreign currency transaction fees and foreign exchange fees like you would if you choose to use your foreign bank account instead. Additionally, it’s one less thing you will need to organise upon your return and allows you the freedom to begin life at home quicker.
  • Goodwill – your years of loyal banking means that you have built a history with your Australian bank resulting in some goodwill. Although not a major factor, maintaining such a history means that it is often easier to set-up and obtain new banking products such as other accounts, credit-cards or loans down the track.
  • Emergency – it’s generally good not to keep all of your eggs in one basket. So, in the case where perhaps your foreign account (your day too day expenses account) has been hacked or your card stolen, maintaining some funds in an Australian bank account that’s not used often, is a good backup that can be used in times of emergencies.

Should I open up an overseas bank account?

While some people assume opening a bank account in your new country isn’t necessary (because you can continue to live day-to-day out of your Australian bank account), working and living comfortably without one is difficult. Withdrawing money from your Australian bank account overseas incurs higher ATM fees, higher transaction fees and foreign currency exchange fees to boot. Even worse, all these fees are are charged by your Australian bank each time.

Worse again, by living day to day out of your Australian bank accounts, this shows a very strong durability of association with Australia thus increasing the risk that you have perhaps remained an Australian tax resident, subject to taxation at high Australian tax rates on your worldwide income, no matter where you earn it!

Depositing money is also problematic, as most international terminals don’t offer capabilities for overseas institutions.

Accordingly, we highly recommend that you open a foreign bank account as soon as possible after you move overseas and we recommend that you live day to day out of that account, leaving your Australian account to remain largely untouched.

Can I transfer between my bank accounts?

Most foreign banks allow you to electronically transfer money across borders back to your Australian bank accounts however you should always check that this is the case when you set-up your foreign account for the first time.

So although you can transfer money via the banking system, a better question is should you?

In our opinion, the answer is a resounding NO – you should not use the banking system to transfer money from your foreign bank account to your Australian bank accounts.

Why? Because banks are notorious for charging ridiculously high foreign currency transfer fees and worse they charge exorbitantly high foreign currency conversion fees in the form of a foreign currency exchange margin when they convert your foreign currency too Australian dollars. Here at expat tax services, we’ve incurred hidden foreign currency exchange fees of 7.5% of our transfers. In dollar terms this means that for a AUD$10,000 transfer to our foreign bank account, we were charged $750. In addition to that we were also charged a $12 transaction fee for a grand total of $762 of fees on only a $10,000 transfer! That’s a ridiculously high cost that truly shows the greed of all banks participating in our banking system

So what do you recommend for transferring money overseas?

Recognising the sheer greed of banks around the world, we’ve recently hammered out a deal with www.ofx.com, an ASX listed Australian company that specialises in much cheaper foreign exchange transfers for Australians living and working overseas.

In partnering with OFX, we have negotiated for our clients, friends and followers of our firm:

  • fee-free transfers, and
  • a discount off the standard exchange rate offered by OFX for all transfers

If you’re interested in dramatically reducing the costs of sending money overseas by taking advantage of this, you’ll need to sign up for an account as an Expat Tax Services client via the following link:

www.ofx.com/expattax/

Finally, if you have some questions about your finances or if you’ve got other questions about your circumstances and your taxes, contact us today.

We’ll be happy to discuss your options, review your circumstances, answer all of your questions and we’ll help guide you through what you need to know whilst you live and work overseas as an Australian expat so that you’re set up for success!

Shane Macfarlane CA
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Comments 10

  1. Hi everyone. Great site!
    My question/s is what if I have relocated abroad to Thailand. I have no property or ties back home to Australia.
    I do have an Australian mutual fund which pays me quarterly distributions which I live off and is paid into an Australian bank account.
    In which I then transfer over to a bank account in Thailand.
    Will having this set up hinder me if I want to be a non resident???
    I have no intention of coming back to Australia, no lease or property, no vehicle etc……
    Cheers
    Andrew

    1. Hi Andrew,

      Having a bank account and investment in Australia in isolation is unlikely to result in you being an Australian tax resident but Australian tax residency is complex so these facts would need to be weighed up with all of your other circumstances and all of the residency tests.

      Here is another blog post that sets out 15 ways to loose your Australian tax residency status which might help you.

      If you have any further questions please get in contact with us.

      Thanks

      Terryn

  2. Hello, I am Australian living and working remotely in Spain. Can I issue Contractor invoices from Spain, but be paid into an Australian bank account?

    1. Hi Laura,

      Yes that is fine for you to issue invoices from Spain and be paid to your Australian bank account.

      If you are a non-resident for tax purposes then the invoice should have your overseas address and you shouldn’t be using or required to have an ABN.

      Please get in contact with us if you have any other questions.

      Regards

      Terryn

  3. Hi, thanks for the great article. Quick question: I’ve been an overseas resident for tax purposes for 2 years and have a further 3 years on my contract. My bank account where I live overseas doesn’t accrue interest. When I leave to come home, I want to close my foreign account and transfer my savings (that I have paid foreign tax on) to my Australian account using OFX. Presumably I don’t need to declare this money? It includes some money I transferred from my Australian account when I first got here for living expenses etc. and after-tax savings. Thanks for clarifying.

    1. Hi May,

      Thanks for your question. That is correct, the transfer of your money from your overseas account will not be taxable in Australia based on the information you have provided. The key thing to be able to demonstrate if required would be that the income was earnt overseas whilst you were a non-resident or was part of your initial transfer from your Australian account.

      Before returning it is always a good idea to have a chat with a tax advisor that specialises in Expats who can explain any potential tax consequences of returning to Australia.

      Regards,

      Terryn

  4. I am an Australian citizen living in UK. Is it possible for me to move my Australian savings into a new Australian savings account with a better rate, considering I’m not in the country or have an Australian address anymore?

    1. Hi Rachel,

      Thanks for your question.

      There is no reason why you can’t setup a new bank account and change banks without an Australian address, the difficulty is each bank will have a different process for setting up an account and proof of identity. There will be banks that will do it but you’d need to do some research or contact some of the banks to enquire.

      There are some Australian banks with branches in the UK so they may be able to assist.

      Regards,

      Terryn

  5. Hey
    With the right paperwork and initial outlay, it is possible for a foreign citizen to open a bank account in Australia. This opportunity for international accounts and investments offers several advantages based on economic regulations and tax structures. Interest rates, tax laws, and fees vary depending on the specific country in which you are investing; careful research and strategic financial moves could result in significant portfolio growth.
    Thanks

    1. Post
      Author

      Hi Maxonium221,

      Thanks for your question. It is possible for a foreign citizen to open a bank account in Australia although you’d need to be physically present in Australia at the time as the bank in question will be required to obtain your ID, your signature and they will need to identify you as per their mandatory KYC procedures. But it is certainly possible.

      Thanks

      Shane

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