Are you an Australian expat currently planning to return home from Hong Kong? Perhaps you are considering it, but are unsure where or how to start planning?

There is no doubt that the combination of factors such as an increasingly authoritarian rule, China’s harsh zero COVID policy, and tight border rules alongside general geo-political tensions is seeing an unprecedented exodus of Australian expats from Hong Kong.

However, regardless of how eager you may be to return home, it is imperative to plan ahead and seek astute advice to ensure your repatriation experience is as smooth as possible, both from a lifestyle and financial perspective.

In this article we have outlined 10 factors you need to take into consideration when preparing to return to Australia.

1. Prepare for reverse culture shock

Reverse culture shock is simply the emotional and psychological stage of re-adjusting upon returning home from living abroad. Whilst not anticipated, it is quite common to find returning home more difficult than expected. Many expats feel frustration, boredom, restlessness, or that they themselves have changed to a much larger degree than that of their initial home (which may not have changed at all). It’s important to acknowledge these feelings and accept that they are a normal (and temporary) part of the repatriation process.

2. It’s all in the timing for taxation

An essential component of planning your return to Australia is to understand tax strategies available to you before you fly home. The timing of your return in conjunction with proactive tax planning will determine when you will once again become subject to income tax (which can be up to 45% plus 2% Medicare Levy) as well as capital gains tax (CGT) on your worldwide income and assets.

Importantly, it’s critical to know that upon your resumption of tax residency status you are once again eligible for the CGT discount on assets held for more than one year. Many expats don’t realise that since 8 May 2012, you have to include 100% of a gain on taxable Australian property, and you only get to discount this gain to 50% for the period before 8 May 2012 and after your resumption of tax residency.

3. Repatriation requires reflection

Returning home requires asking yourself many of the same questions that you asked yourself before you moved overseas. It’s important for you and your family (if applicable) to reflect on what you foresee when you return home to Australia. Reflecting on questions such as: what do you want to accomplish in the first three months? what do you want to bring home with you? how will you reintegrate with friends and family? what aspects of your overseas life do you want to keep post your return home? will help you plan and navigate your journey home with increased clarity and a shared focus.

4. The ideal time to buy your home

The home buyer landscape has changed over recent years for non-residents. These days you need to take into account additional stamp duty and land tax (both of which are applicable in most states), and increasingly tight bank lending rules. Given the scope of changes, and the fact that the timing of when you buy property will determine how much tax you may pay in the future, it is vital to seek tax planning advice before your return home.

5. Your partner’s future career

If your partner has accompanied you overseas and not worked whilst based there, the prospect of seeking employment when they return home may feel daunting. However, it’s important that they remember living as an expat requires competencies such as a high degree of flexibility and patience, the ability to adapt to new situations, and a strong cultural understanding, all positive skills that add value to a resume and candidacy for a job.

6. Supercharge your tax savings and future before you return

Much like tax and home ownership, sorting out your superannuation before you fly home is critical for two primary reasons. Firstly, pre-retirees who are still expats have the potential to reduce their Australian income tax by making tax-deductible contributions to superannuation up to $27,500 p.a. (also add up to $110,000 p.a. as a capital contribution each year up to a balance limit of $1.7m per person which equals $3.4m for a couple). These tax advantages mean it is paramount to address your superannuation contribution strategy so that your capital has the potential to be sheltered in a tax-free fund when you retire after the age of 60.

Second, is the need to determine whether the retirement scheme or provident fund you have as part of your employment overseas is recognised by the ATO as a foreign superannuation fund. The answer to this question has significant tax consequences and affects the strategy options that can be used to bring this capital back to Australia. Much like tax planning and home ownership, timing is critical, therefore it is pivotal to seek the right advice before you make the move home.

7. Selecting the right educational institution for your children

Deciding where your children will attend school upon their return to Australia is undoubtedly one of the most vital decisions you will make when planning your repatriation. It’s important to research the various school options, as well as the various types of educational options (e.g. private, public, selective) available both in and around the suburb you are looking to resettle into.

In addition, there can be major differences from country to country with regard to secondary education curriculum and exams so sometimes the best solution is for the working partner to return home a little earlier, while the other partner stays in the posting country until the family’s teenagers have completed their secondary education.

8. Currency concerns

Currency management is vital for expats returning home. It is essential to plan ahead to reduce the risk of unfavourable currency movements. At the time of writing, for example, the AUD has depreciated significantly in 2022 against the USD and the risk is that this direction may reverse. Risk reduction may be achieved by building a portfolio of AUD assets (e.g. an Australian bank account, Australian property or shares, currency ETFs, Australian superannuation) over time to reduce currency risk.

Conversely, the other factor to consider is increases in the value of foreign currency: currency gains are taxable upon becoming an Australian tax resident with a limited exception. If you have a strong view on the direction of currency, there is more than just the one way of expressing that view by holding on to foreign currency and paying tax on gains. Currency views can also be proactively expressed through Australian structures where tax can be reduced. As with all finance-centric matters, forward planning before you fly home is key.

9. Foreign friendships moving forward

It’s important to stay in touch with the friends made during your expat experience, especially if you have children that have formed close friendships with local friends. Many expat families find it easier to maintain friendships made abroad than friendships from back home. This may be because the expectations are different: both sides know you won’t be in touch all the time or at a regular frequency, so it feels like a special occasion when you do reach out to them. Thanks to digital tools such as WhatsApp, Facebook, WeChat, and more, it’s easier than ever to stay in touch regardless of location.

10. Prepare today for a better tomorrow

After many years outside Australia, you may now have too little or too much life insurance and are perhaps paying unnecessary premiums embedded in old superannuation accounts. Reviewing your insurance options and estate planning prior to your return home will ensure you have access to the most current and suitable products for your circumstances and that you can enjoy your today, knowing you’ve taken care of your tomorrow.

If you have any questions, or would like to find out more about how to best structure your finances ahead of your return to Australia, please get in touch.

We aim to educate Aussie expats about the key issues in calling Australia home again: residency, taxation, investment (including superannuation), and retirement strategy. With us, you can be confident that you will receive the forward planning and advice you need to ensure that your finances are ready for your return home.

This piece was a collaborative piece by MGD Wealth and C3 Consulting.

The time to start planning for successful repatriation is now!

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Any advice included in this communication is general and has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Any tax information refers to current laws, is not based on your unique circumstances and should not be relied on as tax advice. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement.