New Immigrant Guide to Finance in Australia

MOVING TO AUSTRALIA?

Five Key Financial Considerations 

You’ve made the decision to move to the land “down under”. Congratulations!

People from around the globe immigrate to Australia for lots of different reasons: the weather, job or education opportunities, travel options, a better way of life, or so that they can be with family or their soul mate.

Regardless of your motivation for coming here, one thing each of you will need to deal with is moving your finances here as well.

You’ll likely have many questions as you prepare for and then actually make the move. This guide will answer your queries about your Australian finances. It will provide options, information and resources to help get your financial life sorted so you can focus on the reasons that brought you here in the first place.

 

This guide will concentrate on five key areas for your consideration:

1. Moving your money to Australia – How much? Transfer options? Legalities?
2. The Australian banking system – Banking options? Players?
3. Australian superannuation – What is it? How much? Who’s entitled?
4. The Australian medical system and your money – Coverage options? What’s covered? What’s not?
5. Australian government benefits – What’s available? Criteria and qualifications?
6. Australian tax system
7. Transferring a pension from overseas

 

1. Moving Your Money to Australia

Whether you leave some or none of your money in your home country, chances are when you move here, you’ll be moving some, if not all your money as well.

But, how do you get it here? And how do you decide how much to bring?

There is no limit to the amount of currency you can bring into or take out of Australia. That is a personal decision and depends upon your unique circumstances. Only you can make that choice.

Whether you prefer to move your money in cash or electronically is also up to you.  Let’s look at both options:

Bringing Cash Into Australia, Physically

• If you bring less than $10,000 Australian Dollars (AUD) or equivalent in foreign currency with you, you do not need to declare this money at Customs (on arrival at the airport.
• You must declare amounts of $10,000 (AUD) or more in Australian currency or foreign equivalent in cash, when you come into Australia. You will need to declare this at Customs (on arrival at the airport).
• You will not be required to pay tax on these cash amounts that you bring with you into Australia.

Moving Money Electronically into Australia

You have various options for electronic movement of funds internationally. Although transferring from your current bank to an Australian bank is a simple option it comes at a cost with bank fees and exchange costs. A few of the popular (less costly) options include:

• Travel money cards
• Western Union transfer services
• A variety of electronic money transfer services
• International bank transfers
• Foreign exchange specialists (eg. OzForex)
• Paypal
• Bitcoin transfer
• Mobile cash apps

Each option comes with its own process, exchange rates, timing and associated fees. You will need to research the best option for you considering your specific needs. Stick to reputable service providers who clearly communicate their costs, rates, and services, and have been operating for many years.

When transferring money between currencies there is always the danger of the exchange rate moving against you. Some companies will allow you to lock in the current rate if you are worried about this but usually require you to pay a deposit on your transfer.

Finally, you may consider taking a quote that you receive regarding transferring money between your home currency, into Australian dollars, to your Australian bank. They may match the rate you’ve been quoted.

 

2. The Australian Banking System

Australian Savings & Transaction Accounts

You will need to establish a local bank account, to transfer your money from your home currency and for your salary once you have gained employment in Australia. To help you choose the accounts you will need when you move to Australia, think about how you access your money and manage your finances. Australia’s financial institutions have a wide range of options. Identifying your needs can help you identify the right choices and most affordable and suitable bank to service them, for the options are plentiful.

Some of the larger Australian banks will allow you to open an account before you arrive in Australia.

To open an Australian bank account, you need:

• Identification, for example: driver’s license or passport
• Proof of an address in Australia
• Sometimes, a reference from your old bank

Australian banks follow the 100 points system of identification. Points are allocated to the types of documentary proof of identity that a person can produce. Each form of identification holds a different point value and they must have at least 100 points to be able to open and operate a bank account. For example, a birth certificate equals 70 points and an Australian driver licence is 40 points (a foreign driver licence is 25 points). It is worth noting that if you apply for an Australian bank account within six weeks of your arrival, your passport can be valued at the full 100 points.

Banking in Australia has traditionally involved four major banks: 

1. Commonwealth Bank of Australia
2. Westpac Banking Corporation 
3. Australia and New Zealand Banking Group
4. National Australia Bank

These major banks are among the world’s largest banks by market capitalisation and all rank in the top 25 globally for safest banks. [Wikipedia]

However, with changes to banking and finance, brought about by digital change and deregulation of the banking sector, there are now many smaller banks throughout the country including (but not limited to):

5. Bank of Queensland
6. Macquarie Bank
7. Bendigo Bank
8. AMP Bank Ltd
9. Suncorp

Credit unions, building societies and mutual banks are among other financial institutions in Australia and provide limited banking-type services. They are described as authorised deposit-taking Institutions and operate as not for profit organisations, owned by their members.

The 10 largest customer-owned banks in Australia (by total assets) are:

1. CUA
2. Heritage Bank
3. Newcastle Permanent
4. People’s Choice Credit Union
5. IMB Bank
6. Greater Bank
7. Beyond Bank Australia
8. Teachers Mutual Bank
9. P&N Bank
10. Bank Australia

Many foreign banks do have a subsidiary in Australia, mainly in the merchant banking sector with a small number having a retail banking presence.

Australian Credit Cards

Your credit history is an important determinant of your ability to get a credit card in Australia.

Remember that when you apply for a credit card, this will be recorded on your credit history, so refrain from applying for multiple credit cards, especially if your first credit card application is rejected.

Ways to have access to credit in Australia, after you move:

• Until you have established a credit history in Australia, you can use the credit card from your country of origin (if it can handle international transactions);
• Or, your bank in the country that you are emigrating from, may have a network of branches in Australia, and be able to issue with an Australian credit card when you arrive here;
• Finally, some banks and credit providers offer a “moving abroad credit card”, where they transfer your credit card from your previous country, to Australia, which helps you apply for a credit card at another institution, due to having “established” your credit history.

However, if you are moving here for work, then your salary/income can often be used by a bank to give you a credit card, despite not having a credit history in Australia yet.

Australian Personal Loans

Remember that when you apply for a personal loan, this will be recorded on your credit history, so refrain from applying for multiple loans, especially if your first loan application is rejected.

You may choose to use a personal loan to purchase something like a car.

Having a high income will assist in being successful in getting a personal loan approved, because as an immigrant, your loan may have strict conditions and a high interest rate.

Temporary residents will be restricted by the term of the remaining time on their visas, whereby the personal loan term cannot be longer than the time remaining on your visa.

Australian Home Loans

Remember that when you apply for a home loan, this will be recorded on your credit history, so refrain from applying for multiple loans, especially if your first loan application is rejected.

If you intend to buy a home in Australia:

• Know that there are immigrant home loans offered by lenders in Australia that are specifically for new immigrants (allowing you to borrow up to 80% of the property’s value when you provide a 20% deposit immediately);
• You may be required to show evidence of overseas assets, liabilities and bank accounts (but they can’t see your credit history in your previous country);
• Australian banks are stricter, compared with US or UK home loans processes, so there will be more paperwork and a thorough check of your financial situation and history.

What Australian lenders look for, when you apply for a home loan:

• Your assets and liabilities
• The status of your visa (type and conditions)
• Your employment and work history (in Australia and overseas)
• Your credit history in Australia (see previous comments re credit history)
• Loan security (the value of the property you are buying and its potential sale price)
• Your ability to repay it (income, debts, living expenses, etc)

 

3. Australian Superannuation

Australia has a mandatory retirement saving system for its citizens, which requires employers to provide a minimum 9.5% (some employers are paying up to 13%, voluntarily) of employee salaries every year into a registered superannuation fund, for each employee. This money can be accessed upon retirement as a lump sum or paid as an income to fund retirement.  

Superannuation funds invest this money, with the idea that the superannuation money should grow beyond the contributions made.

It is important to carefully think through your options, when choosing a superannuation fund. Financial advisers can be of great assistance in making the choice between super funds, investment styles, consolidating your super into one fund and comparing fees. Always remember to ask your financial adviser why they are making a recommendation for you. For example, if they recommend a super fund of the company that they are working for work, make sure they can explain why this really is the best choice for you.

There has been recent debate as to whether performance of the fund or the fees that you pay, matters more in determining the end outcome for your superannuation balance.

 

4. The Australian Medical System and Your Money

Medicare is Australia’s government funded health insurance scheme. It is partially paid for by an income tax surcharge. Medicare provides residents of Australia with either free or subsidised benefits for most medical, diagnostic and allied health services, including doctors, specialists, optometrists and at times dentists. It gives residents access to lower cost prescriptions and free care as a public patient in a public hospital. More information on Medicare can be found here: https://www.humanservices.gov.au/individuals/medicare

The Department of Human Services will determine if you are eligible for Medicare benefits. You might be eligible if you are living in Australia and are:

• an Australian citizen
• a New Zealand citizen
• an Australian permanent resident
• applying for permanent residency - conditions apply, or
• covered by a Ministerial Order

If you are visiting from a Reciprocal Health Care country you may also get a Medicare card.

Private Health Insurance for Immigrants

Some visas require you to take out private health insurance. This is to cover hospital costs if something happens to you (for example, an injury), whilst you are living in Australia.

There are many private health insurers in Australia. They offer differing levels of cover, however often you cannot take full advantage of the private health insurance that you are paying for, until you are holding a permanent residency visa.

Private Health Insurance, for citizens and permanent residents, means that, depending on the level of cover you have, and who your insurer is, you can get rebates for certain health services. This means that you pay the amount listed on your bill with a health provider, such as a physiotherapist, and you are then refunded by your private health insurer, for a portion of the bill. Certain health care providers will scan your insurer’s card when you are paying your bill and may only require that you pay the difference between your insured amount and the cost of the bill (instead of paying the entire bill and then getting refunded in future for the difference).

Some private health insurers have special coverage options for people who have recently moved to Australia.

 

5. Australian Government Benefits (Australian Pensions)

There are several benefit systems in place to serve all Australians. As an immigrant to Australia, you are also entitled to these benefits. However, there is a waiting period before you can apply for some benefits.

New immigrants granted a permanent residence visa, a protected Special Category visa, or an Australian citizenship, are required to wait for 104 weeks (two years) to be eligible for most Australian government benefits. This waiting period doesn’t apply to family assistance payments.

If you arrive on a New Zealand passport and meet certain conditions, your waiting period and regulations applying to you, may be different, see here for more information: https://www.humanservices.gov.au/individuals/enablers/newly-arrived-residents-waiting-period

Legislation regarding the waiting period being extended (doubled in length) and the conditions altered, is likely to be passed in 2018. Please monitor this page for updates: https://www.dss.gov.au/living-in-australia-and-overseas/updates

Here are some of the Australian government benefits available:

Family Tax Benefit

• This benefit, based on your income, helps families with the cost of raising children.
• Single parents or sole income families can apply for additional support.

Read more about the Family Tax Benefit at the Australian Department of Human Services here: https://www.humanservices.gov.au/individuals/services/centrelink/family-tax-benefit

Parental Leave

• Parental Leave Pay can be paid to the primary carer of a newborn or newly-adopted child, to individuals who have earned less than $150,000 in the last financial year, who are not working whilst receiving the Parental Leave Pay, and who meet the work test.
• It is paid for a maximum period of 4.5 months (18 weeks) at the national minimum weekly wage, which is currently $719.35 per week before tax. This is approximately $12,948 over the 4.5 months.
• You may also receive 2 weeks of Dad and Partner Pay, at the same rate, bringing the total number of months you can receive Parental Leave Payments to 5 months, between you both: https://www.humanservices.gov.au/individuals/services/centrelink/dad-and-partner-pay

More on Parental Leave Pay here: https://www.humanservices.gov.au/individuals/services/centrelink/parental-leave-pay

• Newborn Upfront Payment is a lump sum payment of $550 per child and is not taxed.
• Newborn Supplement is an ongoing payment for up to 13 weeks and is not taxed. For your first child, the maximum amount you can receive is $1,649.83. For subsequent children the maximum amount is $550.55.
• Newborn Upfront Payment and Supplement are applicable only if you are NOT getting parental leave pay for the same child and qualify for the Family Tax Benefit Part A.

Read more about benefits when having a baby at the Australian Department of Human Services here: https://www.humanservices.gov.au/individuals/subjects/having-baby

Parenting Payment

• Is a support payment while you are a young child’s main carer and earn less than $2,124.60 gross income in a fortnight (as a single parent) or less than $1,927.50 gross income in a fortnight (as a combined income, and your partner does not get another Centrelink pension).

More on the parenting payment here: https://www.humanservices.gov.au/individuals/services/centrelink/parenting-payment

Child Care benefit

There are two forms of benefit:

Child Care Subsidy

If you care for a child who is 13 or younger, and use an approved child care service, you may be eligible for payment of this subsidy, after the care has been provided to your child.

Payment is made after the child care service sends the Dept of Human Services your child’s session report, fortnightly.

The amount you may receive is based on your family’s income, the hourly rate cap of the approved child care used, your child’s age, and the hours of work for you and your partner.

For more on the child care subsidy visit: https://www.humanservices.gov.au/individuals/services/centrelink/child-care-subsidy

Additional Child Care Subsidy

It may be possible to receive an Additional Child Care Subsidy under certain circumstances, eg. experiencing temporary financial hardship.

For more on the additional child care subsidy visit: https://www.humanservices.gov.au/individuals/services/centrelink/additional-child-care-subsidy

Government Pension

If you are of retirement age (65.5 years) and have been a resident for 10 years, the Australian Government pays a pension to cover standard costs of living.

The maximum basic rate per fortnight is currently $907.60 if you are single, and $684.10 each if you are living as a couple. The pension has income and asset limits; therefore, your payment rate could differ to these standard rates.

You need to be an Australian resident for 10 years in total with no break in residency for at least 5 of these years.

Centrelink is the department of Human Services that is responsible for payment of the above benefits. For more information: https://www.humanservices.gov.au/individuals/centrelink

 

5. Australian Tax System

Once you begin to earn money in Australia, you will need to apply for a Tax File Number from the Australian Taxation Office. This will make you a “tax resident”.

When you become a tax resident, you’ll need to pay tax to the Australian government on your income, and capital gains tax on any investments (here and in the country that you emigrated from).

Individual income tax rates are changed from time to time, so for the most up-to date table as to which income level equals which tax rate, see the Australian Taxation Office Income Tax Rates Table: https://www.ato.gov.au/Rates/Individual-income-tax-rates/

Make sure you enlist the services of an accountant, so that you can maximise the tax return you may receive from the government, at the end of the financial year (June 30^th of every year). This is the money that the Australian government refunds you, in taxes paid, if you qualify to be refunded that financial year.

For the exact definition of a tax resident in Australia, or if you are curious as to whether you are a tax resident or not (note: this is different to a resident as defined by other government departments): https://www.ato.gov.au/Individuals/international-tax-for-individuals/work-out-your-tax-residency/

 

6. Transferring a Pension from Overseas

If you plan on transferring a pension from another country, when you emigrate to Australia, it is essential that you seek the advice of a financial adviser who specializes in overseas pensions and Australian pensions and superannuation. There are many regulations related to these transfers, and you want to make sure that you minimize any tax that you may have to pay, by transferring your pension from overseas, to an approved super fund in Australia. A qualified financial adviser in this area will be able to help you with this.

 

Summary

Starting your life here with sound financial advice, will help you to establish a solid foundation from the very start, helping you to have the best experience possible. With your financial life sorted you can focus on the reasons that brought you here in the first place. Australia is a country that not only abounds in nature’s gifts, but also government services and benefits. It offers a stable and growth focused economy bursting with opportunities.

We think this combination all adds up to a great place to call home.

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