Leave savings in UK or transfer to Australia?

robdav

I’m currently living and working in Australia but I haven’t decided if I’m going to stay here long term or only for a few years. Current plans are up to four years as that is what my visa allows but I may go home sooner.

I have some savings in the UK that are currently earning very little interest due to the low interest rates. The Australian dollar is also quite strong against the British pound (current exchange rate £1 = $1.61 AUS$ which is low but may still get lower and I wouldn’t necessarily achieve this at the time of exchange) However, I can get around %6 on savings over here.

My dilemma is (and I appreciate it's a nice dilemma to have), do I transfer the currency over to Australia at a relatively poor exchange rate (compared to the last few months/years, but receive a higher interest rate on the savings, or do I leave it in the UK, as I don’t need the capital at the moment?

Has anyone got a formula I can use to work out my position or any general advice?

Thanks.

apt

There's no formula because what will turn out best financially depends on the future exchange rate between the pound and the Australian dollar which is unpredictable. If you are likely to need your savigs while in Australia move at least some of them. If you are likely to be able to build up savings in Australia anyway then there is a good case for leaving your existing savings here.

nrsql

lol - I have a similar issue. I started moving money into AUD via a citibank linked account a couple of years ago when it looked like sterling would tank and also because I spend a lot of time in Oz. I've stopped now as the rate is so low but have no reason to believe it won't go lower - may well start again soon.

In your situation I would be tempted to leave some money in the UK - the question would be how much. 6% isn't a lot compared with exchange rate fluctuations nad if you are coming back then the worst case would be if the AU$ gets depressed.

Loughton_Monkey

robdav wrote: »

Has anyone got a formula I can use to work out my position or any general advice?

Yes, there is no magic formula at all. A calculation can prove (as I think is the case) that had you moved savings 6 months ago, then you could put them back to UK having made a huge profit.

But as you will appreciate, working this out in the future is a crystal ball job. You also need to factor in (a) physical cost of money transfer (the spread of buy/sell rates), and (b) your tax situation both sides of the world.

Remember that if, for example, you moved a large cash ISA from UK to Oz for a year or two, and then came back to UK, you might have made a short term profit, but you will have to use future allowances to drip feed it back into the tax free wrapper.

bendix

robdav wrote: »

I’m currently living and working in Australia but I haven’t decided if I’m going to stay here long term or only for a few years. Current plans are up to four years as that is what my visa allows but I may go home sooner.

I have some savings in the UK that are currently earning very little interest due to the low interest rates. The Australian dollar is also quite strong against the British pound (current exchange rate £1 = $1.61 AUS$ which is low but may still get lower and I wouldn’t necessarily achieve this at the time of exchange) However, I can get around %6 on savings over here.

My dilemma is (and I appreciate it's a nice dilemma to have), do I transfer the currency over to Australia at a relatively poor exchange rate (compared to the last few months/years, but receive a higher interest rate on the savings, or do I leave it in the UK, as I don’t need the capital at the moment?

Has anyone got a formula I can use to work out my position or any general advice?

Thanks.

If you don't need the money in Australia, you'd be utterly daft sending it over. The Aussie is close to an all-time high. It's almost at parity with the greenback. When things are at all time highs, they are more than likely to retreat rather than continue pushing on.

Plus you say you are getting a low interest rate compared to the 6% you could get in Oz. You will only get 6% in Oz if you're prepared to tie it up for a few years; why not do the same in the UK. You should be able to find 4% under those conditions.

wriggly

My suggestion: work out what proportion of money you have in UK and Australia, e.g. you might currently have 90%:10%. Decide how you would like it in 4 years time, given your uncertainty, say 50%:50%.

So, in 2 years time, you want it split 70:30, and splitting further, in one years time you want, 80:20 (and in 3 years 60:40). You can keep splitting (and if you're comfortable with spreadsheets, you can work it out to the day). Every 3/6 months, use a cheap online broker (e.g. OzForex) to transfer enough to get to your new proportion.

This method will see you transferring more when the pound is stronger, and less when it is weaker.

If you decide to stay in Oz, repeat for the next 4 years to get the proportion to 0%:100%.

KingKenny

Have a read at these, not sure how accurate, but got me thinking...................


http://www.gomatilda.com/news/article.cfm?articleid=327

http://britishexpats.com/wiki/Australian_Tax-Special_Issues

http://www.ato.gov.au/rba/content.asp?doc=/rba/content/65872.htm


IS THERE ANY TRUTH IN THIS

• The United Kingdom exempts foreign currency from the capital gains tax regime. In other words, as long as you are not a "trader", any gains you make on foreign currencies are exempt from capital gains tax. At the same time, you can't claim for any capital losses!

• Australia does treat gains and losses on foreign currency as part of your capital gains and losses (you can only offset capital losses against other capital gains, not regular income).

• There are a number of ways to manage this:

• • Transfer your funds into Australian dollars (whether you physically move the funds to Australia or not is irrelevant) before you become Australia tax resident;
  • If you wait 12 months after becoming tax resident before converting to Australian dollars, your capital gain is reduced by 50%.

• Many people want to leave funds in foreign currency "hoping for a better exchange rate". If you are moving to Australia, you may want to consider whether or not you really know more about prospective currency movements than the foreign exchange markets do. It is impossible to predict how future exchange rates will go and holding a substantial balance in cash is not a good way to get a long term return. (if you really want to do this, why not buy gold?)

.

robdav

Thanks everyone, I will digest all the replies and decide what to do.

neilsedaka

If you remain a UK citizen I think you may find that there would be a special Australian tax on UK money in an Australian bank which would make your plan uneconomic.

MiserlyMartin

There is no such special UK tax that I'm aware of. I spent a lot of time looking into moving to Oz.

neilsedaka

I was referring to an Australian tax called Non-Resident Witholding Tax, not a UK tax. "Interest withholding tax is imposed at the rate of 10% (regardless of in which foreign country the recipient is resident) when that interest is paid or credited."

http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm
http://docs.google.com/viewer?a=v&q=cache:HiJH4kJEQUYJ:www.grantthornton.com.au/files/sharp12050106.pdf+australia+non-resident+withholding+tax&hl=en&gl=uk&pid=bl&srcid=ADGEESjPY4EIBSTN3rr_hEZ3KBJHy-v-Fbj3Fejzuc12qrReh-Z5ZdS5cSufhyQ4Sm7MRVTyY03fANMoOKK6aJMFeQ2w_5eKJ0BxaloP3Oanfd4ClSPmjV89rAWsY1_bsYhY2dMFY5bs&sig=AHIEtbQj4l1ih8pKXfqDcFsfm46Z3pewWA
http://sraa.asn.au/non-resident-withholding-tax.html