A very different theme to this post from the last two relaxed gardening stories. It is aimed directly at Australians who are thinking of or planning to retire and move overseas to take up permanent residence and has less relevance to other nationalities (skip the first two topics and head to the second half).
I have to say that we Australians must rate as one of the most poorly treated citizens of any country in the western world when it comes to becoming a non-resident and I will set out to prove that statement as we go along. As you can tell from this opening sentence I have some strong feelings about this subject and that may shine through in the words I write! This post will therefore have two benefits; you may learn something and I will get it out of my system – a win/win for everyone 🙂
A couple of caveats:
- My experience is based on my over four years of living in Thailand but much of this applies wherever you move to.
- If you are fortunate enough to have a very comfortable retirement income then obviously this information has less relevance. I am aiming my words to people like me who have enough but a few thousand dollars plus or minus per annum makes a difference to the everyday budget.
- I am not an expert in anything except relaxing in the garden so I am not setting myself up to give you the final word on this subject or any other. I will provide some heads up and then you will need to do your own research/take advice and make decisions based on that.
It has been on my mind to write about this topic for a while because there are some aspects to an Australian moving to live overseas that hit the retirement budget some people may not be aware of. I find the “retiring overseas” articles you come across online and elsewhere are often useless in providing down to earth useful information about the practical downsides of changing your country of residence especially on the financial side. They are good at telling you that a decent lifestyle can be had for $2,000 a month in a country like Thailand but don’t warn you about the threats to maintaining your net income once you leave Australia. $2,000 net in Sydney doesn’t necessarily translate to a $2,000 income in Thailand! How does this happen?
Becoming an Overseas Resident for Tax Purposes
Firstly the huge discrimination against long term CITIZENS of Australia happens when the Australian Taxation Department (ATO) classifies you as a non-resident once they decide you have permanently left the country. You are then treated the same as any non-Australian citizen for the purposes of working out your taxation rates. The fact that someone like me, English by birth (dual nationality so the parliamentary career is looking shaky) but I have lived in Australian for 45 years before I left in 2013, and worked continuously since I left school in 1974. By the ATO rules that historical contribution means nothing and once I become a non-resident I am treated the same as some overseas investor.
The ATO definition of an non-resident is very clear and simple. See the last entry on the list:
The online tool for determining residency HERE is equally clear. The Yes/no questions are:
For those ex-government public servants like me the reference to the PSS (Public Sector Superannuation scheme) above only relates if you continue to be a contributing member (i.e. not retired). Once you collect a superannuation pension from the scheme as I do then you are classified as a pensioner not a member. If you think that receiving a government superannuation pension will get you any relief then this ruling HERE stops those thoughts dead. An extract says:
And the biggie:
And the result? You may as well not be a citizen and we will treat you like a foreigner for tax purposes.
There is no tax free threshold. You pay tax from dollar one! You not only pay from dollar one but you instead on the normal tiered rate starting at 19% you pay 32.5% up to $80,000. The normal rates are:
But for you we do a special deal like this:
So let’s say you are Joe or Sue average retiring on a modest superannuation or pension income of $40,000 pa. If you stay in Australia and use all the public facilities provided by the government; roads, infrastructure, medical, police, etc then you will pay $4,547 p.a tax excluding Medicare Levy. As a non-resident using none of the facilities you would if living in Australia you will pay $13,000. I find this discrimination one of the most upsetting things about leaving Australia. I can sort of understand the desire to treat non-citizens in a different fashion, those who maybe have only lived/worked in Australia for a short time and then extract an income once returning home. What I struggle with is the logic of determining that as a long term citizen the country you choose to live in determines the tax rate you pay. I know that expats from the UK and the USA don’t pay more and suspect that many other first world countries are the same. What has Australia got against its own citizens and especially retirees that treats them this way? Shouldn’t government be encouraging older people to become the medical/old age problem of another country!
My rant over and I feel better but no richer. Now you beating the tax system is a national pastime and I guess you can have a go at this if you want to. I know of Aussie expats who maintain a residence back home or set up an “address” and then take many long “holidays” in Thailand. If you have a residence I think you could have a good try at saying you haven’t left the country permanently and that would work. If like me you needed the capital from my home and I have no intention of returning home to live or for regular holidays then it all becomes a bit iffy. Beating the tax system is a good thing until the ATO find you out and then your retirement plans might go out the window with repayment schedules and fees. I don’t want to live worrying about a letter from the ATO so I declare and suck it up – but not gracefully.
If there are any Aussie out there that have come up with a workable solution you can write to me privately or discuss in the comments section.
So my obvious warning is that when planning your available retirement income once you leave Australia and move to Thailand or elsewhere is be very sure of your residency status and budget to the reality of becoming a non-resident if that’s the outcome. It will make a big difference if money is a little tight.
The Age Pension
Another area where Australia leads the world in discrimination against non-residents. Not only do we means test the age pension eligibility for both income and assets, something neither the retirees from the UK or the States have to worry about as far as a know (subject to eligibility of course), but then as a non-resident you have to return and become a permanent resident of Australia for two years after pension approval to “lock it in”. If you don’t then as soon as you leave the country the pension stops. Centrelink and Immigration are spot on with their ability to remove payments and slower to approve! If you are already a resident, claim the pension and then leave the country no problems apart from the non-resident tax rate.
I am on that awkward income level where I don’t have a huge income but just enough to stop me receiving an age pension once I reach that time and in true Aussie “Lucky Country” 2018 standards that time gets later and later:
Even if I was eligible I would have to return to Australia, claim the pension and then live there for the next two years. Once again why? If I am eligible for the pension because I am a citizen and lived and worked there for the nominated period then why does it matter where in the world Centrelink makes that payment? Another absurdity designed to cause the most hardship for the least possible result. Any logic? Maybe someone can explain.
Not a specific winge because exchange rates are a general fact of life and not Australian specific but I add it as a “beware”. When making your calculations for living in Thailand or wherever you plan to retire do make sure you are realistic about exchange rates. When I first came to Thailand I was getting 28/29 baht to the dollar. It has been on a steady decline since then and I budget for an average of 25 baht/dollar. It is no use being overly optimistic and expecting that the days of 30 plus baht exchange rate will return. I was here when that happened but there was this little military coup that caused that uncertainty so I am not hoping for a repeat.
As an illustration of what can happen I have an English mate who was financially comfortable in Thailand until Brexit happened which wiped 25% off his income. I know you can’t plan for a disaster like that but do be pessimistic and plan for the worst.
The Cost of Living
This is a topic I have covered in other posts but I will touch on it as part of this general financial reality check on retiring to Thailand.
The low cost of living is one of the big pluses highlighted in those retire to Asia type one pagers with pretty picture articles. In Thailand this is a yes and no response from me. You can live here incredibly cheaply if you drop your standard of living to say a rural or building worker or someone serving in a 7/11. They are getting 300 baht a day (A$12.00) and often by pooling with family, but not always, they can get by. You can rent a place for $120.00 a month but “basic” would be the word I’d use to describe its features (if in fact there were any!) Thai takeaway is great on a Friday night in Australia but as an everyday option for the rest of your life it might not be so attractive. If you move to live in the north east, which is where we are, a region called Isaan (Isan) then they eat Isaan food not Thai and there is a huge difference. Isaan is very rough “poor rural” type food, highly spicy and incorporating just about anything that has legs and a lot of things that don’t 🙂
If you, like me, wanted to replicate the standard of living you have enjoyed all your life then Thailand is CHEAPER but not necessarily cheap. What is cheap are things like:
Building – I have a beautiful highly specced home sitting on 2,000 sq mtrs of tropical landscaped gardens and it has cost me very little by Australian standards.
Labour – anything involving the cost of people. Getting a car serviced the new oil costs several times the labour charge.
Food – if you buy what the Thais eat it is mostly cheap.
Utilities – we have our own water (bore/well), sewerage (septic) and dispose of our own rubbish (burnt at farm) and pay no rates or utilities. Even where some council services are provide it is cheap (refer labour costs)
Power – probably a cheaper rather than cheap although I believe the cost of electricity in Australia has skyrocketed over the last few years. I am a heavier user because we have a seven water pumps of varying types and I use storage hot water rather than the instant. Watering our gardens in the long dry season is expensive. My monthly bill averages about $100.00 a month a bit more in the hot season when we use some air con and water more. The plus is that there is no “base” charge in Thailand. If you go away and use no power (in theory) then your bill will be zero.
Clothes – non-label everyday casual clothes. If you pay more than $8.00 for something you are being ripped off! Obviously you can spend whatever you want in the shopping plazas and specialised places in the bigger cities but it’s optional.
Domestic air travel – international too in some respects because you are partly on the way to Europe and central to many Asian countries. Domestic air travel is everything Australia isn’t. Plentiful choices, even out in the sticks as we are, lots of specials but even paying full price it is cheap. I just received an email for these Nok Air specials:
One way from Bangkok to Udon Thani, our nearest airport. which is an hour’s drive from home = $16.00 including 15 kg baggage. Why drive?
Holiday Accommodation – once again you can spend whatever you want such as the Siam on the river in Bangkok, which is where we always stay (in my dreams)
Back on topic – for everyday “just a bed” accommodation $20.00 a night will get you something basic that does the job. I guess what I am saying is that there is a broader range of price options available here than back in Australia.
Medical/dental – Medical is cheap if you use Thai public hospitals but you will be in a very busy and “Thai” system. High class it ain’t on the whole but like the cheap accommodation will do the job given patience. Local doctors shouldn’t cost you more than $4.00 a visit and a dental filling $20 – 25.00.
Speeding tickets – not that I have had one (yet) but $40.00 and no demerit points will get you back onto the track again. If you have the money speed away.
Updated 12 Feb 2018: I forgot the beer!!! A reader kindly pointed out my error. Alcohol falls into both cheap and expensive categories. Beer is cheap. U beer (a Singha product), if you can find it is $16.00 a case of 12 bottles. Chang, Leo and Singha are around $24.00. Heineken is $32,00. Gin is cheap at $16.00 a 750 ml bottle but run is nearly double that for some reason.
I am sure there are other cheapies but you get the point.
Medical – do your research. Once you hit private medical outside the Thai public system this is a cheaper but not cheap expense. Medical insurance is expensive, probably what you’d pay in Australia but it is age based so becomes very expensive once you get over 65. Lots of information online so do your research.
Western Food – if you want to include some or all the food you are used to in your diet here then this is a cheaper (maybe) but certainly not a cheap expense that you will need to allow for. For example a breast of chicken (A Thais also eat them item) will cost you $2.40 a kilo however a 2 litre milk (less Thai orientated) will set you back $3.70 the latter being cheaper but not cheap. I thought it was funny because we recently went to Makro, originally a Netherlands owned supermarket chain but in Thailand now owned by the largest private company in the country who also own the over 10,000 7/11’s here.
Gaun’s purchase for the visit was a 40 baht packet of cakes for Peng. My bill came to around 1,500 baht ($60.00) and it was a list of farang essentials reading such as:
- Bread – 34 baht
- Milk – 91 baht
- 500 g smoked ham – 155 baht
- 1 litre cream – 149 baht
- 1 kilo cheddar cheese – 375 baht
- Aussie mince 1 kilo – 295 baht
- 1 kilo spaghetti – 79 baht
- x 2 220 g butters – 160 baht
- 100 g Parmesan cheese – 129 baht
- Yogurt x 4 pack – 52 baht
All of which shows that you can take the Aussie out of Australia but you can’t take the Australia out of the Aussie! I know of many expats from different countries that mix Thai/Isaan eating with home-style as I do.
Electrical and things like cameras – around the same or more expensive than Australia.
Imported cars – maybe a little cheaper but certainly not cheap. Thai built cars and utes are probably cheaper but sometimes under specced (my Nissan NP300 only has 2 airbags while the Aussie one has seven).
Wine is very expensive by comparison to Australia. A bottle of Jacobs Creek Chardonnay (not a world leader but good everyday drinking) is $8.50 at home and $27.00 here. There must be a huge tax on all wines. You can find a few decent Aussie wines at the $14.00 mark but the majority are $30 -$40.00.
Once again I have run out of ideas on this topic but it was never meant to be an extensive list. I did write a Cost of Living post some time ago that maybe still somewhat helpful and you can find it HERE.
I hope you have found this post useful in touching on some of the realities on the financial side of retiring to Thailand. All in all the fact is that in my case, even despite the frustrations, I can afford to live a simple but very comfortable retired lifestyle here while back “home” I would be retired in a caravan or still working. I know what my preference is:
I hope this post generates some involvement from readers. I don’t want to stir the negative pot too much but would prefer if contributors would expand on the information I have provided as a helpful resource for those who follow. If you want to get in contact outside this forum then please leave a comment to that effect and I will pick up your email from that.
Thank you for reading.
NOTE: This post has generated a lot of interest and there are some excellent comments below that raise further issues you should consider. PLease take the time to read them if you are in the target readership of this topic. It is all a bit depressing but better to be fully informed before you make that final decision to move overseas.