The 'Real Cost' of Gaining Citizenship. Is it worth it in our situation?

[Progressive]

Further to my other recent post, I am looking to move back to UK (or elsewhere in Europe depending on job opportunities) in March 2015, after almost three years in Australia on a 457 visa. This is relatively flexible and we are in no immediate rush to leave.

 

We have had a fantastic time in Australia but came for a temporary work assignment for two years and it is almost time to move on. There are a few reasons for this but the main reason is there a number of other places we would like to live and work, and we don’t have a burning desire to stay in Australia at present. My job market is quietening down and wages elsewhere are increasing so that makes the decision slightly easier too. We would also like to start a family soon and our preference would be to do so around other family members, and from some quick research the cost of childcare, schooling and healthcare in Australia seems against us. Although I do appreciate that many people get on just fine.

 

My employer has offered on multiple occasions to sponsor our PR application, up until now we have not been particularly interested. As we approach the three year mark, part of me says stick around for another year (which wouldn’t be difficult as we thoroughly enjoy life here) and get PR and ultimately citizenship upon being here four years.

 

All sounds good right? Something that is putting me off is the following:

 

 

 

• I would likely leave Australia (temporarily or permanently) upon being granted citizenship and would be liable (and happy) to pay my employer the application cost and migration agent costs. Colleagues have been through the process and it comes out at around $10,000 for a couple.
  

 

 

 

 

• My super would then be ‘locked in’ until retirement. Upon withdrawing as temporary residents, once we have been here three years (or more), even with the taxation (35%) we would have a nice chunk of freed up money to either put towards a house deposit in UK or invest into an equivalent pension scheme. Once PR is granted, this is ‘locked in’ and I doubt by the time we reach retirement (assuming I don’t pay any more in to the fund) it won’t be worth much. A rough calculation suggests that after withdrawing at three years payments and paying the above tax, this would be worth around $20,000.
  

 

 

So whilst keeping our options open would be great, being granted citizenship would effectively ‘cost us’ around $30,000 if my logic is correct. Considering that we do not have a burning desire to return to Australia, although I could think of much worse places to live, this seems financially not very sensible.

 

Is my logic sound or am I missing something fundamental? Any personal experiences or points that helped your decision making either way would be appreciated.

[Aunt Agatha]

I think your logic is perfectly sound and in your situation I would leave without getting citizenship and take all that lovely Super money with you! I wish we could take our Super with us to use as a house deposit in the UK.

 

We originally intended to be in Australia for four years as temporary residents and then return to the UK. We were having lots of fun in Australia (still are) and when my DH's employer offered to sponsor him (and by way of defacto, me) for PR we jumped at the chance. Had we realised the financial implications of that and of our extended stay here (11 years) we would have stayed temporary residents and returned after the four years as planned. Don't get me wrong, many wonderful things have happened as a result of us staying including two incredible Aussie children, amazing friendships and great adventures but financially we would have been better off returning as temporary residents and taking our super with us.

[fourcorners]

We are in the same position on 457s, and made the decision not to get PR a while ago. You just have to bear in mind what the Super is there for - it is to help support you in retirement. If you can use it as a worthwhile investment when you return then you're effectively doing the same thing with it. Long term investment in property is still the most lucrative and reliable investment there is. It may seem like retirement is a long way off but make sure you have a plan in place to save for the future.

[Que Sera Sera]

Also it takes at least 3 months to get citizenship then you have to apply and wait for your passports.

[Gbye grey sky]

I think your logic is sound too. If you do not see yourselves returning to live in Australia in the future (and, specifically, one day retiring there) then why stay on and apply for PR/citizenship. It sounds as though you have got what you intended and wanted from the last 3 years. The sums of money you would be committing to gain citizenship are substantial (but probably typical of many immigrants) and you should really see your future to be there before committing so much.

 

I am a major fan of 'Super' but it is only really worthwhile if you are going to be retired in Australia I feel.

[darkstone1975]

Also it takes at least 3 months to get citizenship then you have to apply and wait for your passports.

 

careful with 3 month statement, more like when they feel like it.. i'm already 3 months, latest reply could be upto another 6 months for Ceremony, even though I'm approved.

Statement I got was close enough to "when they feel like holding a ceremony"

[sharron pickett]

I could be wrong, of course, but I was under the impression you had to have 4- years as PR before you can apply for citizenship. I'm not sure 457 time counts. But check it out first though.

[Bolt4]

I could be wrong, of course, but I was under the impression you had to have 4- years as PR before you can apply for citizenship. I'm not sure 457 time counts. But check it out first though.

Four years spent in Aus on any valid visa, with the last year at least on a pr visa is enough to meet the criteria for citizenship.

[mygirlies]

I have my Permanent residency... but I will never go for citizenship. I am not being locked into anything. Not thank you Mr Abbott.

[NickyNook]

I have my Permanent residency... but I will never go for citizenship. I am not being locked into anything. Not thank you Mr Abbott.

But as you have PR, you're already locked in super-wise. And you're also locked into getting eternal RRVs if you want to travel...

[mygirlies]

I don't deal with super. I was referring to voting... and the like. I don't see the travelling issue as locked in...

[fifi69]

Very good logic from the OP....I've had the same thoughts before.

 

Our first thoughts were come for two years, have an adventure, nothing too serious.

 

but we loved it from the off, and having two older teens, it made sense to get PR after a year, around the two year mark we also bought our own home, only because the mortgage payments were the same as renting, and they give a grant meaning no silly deposits needed.

 

as much as I love the place, I wouldn't mind at least one more adventure, and hopefully if it goes to plan we will do...but we won't do it before we have citizenship .

 

i think if you are 100% sure you won't come back to Oz, then take the money and run, for us too, there is a big world out there to see, but age isn't on our side, and you never know when/if Oz will move the goal posts.

 

Personally being so close to applying for citizenship, I would say get that first.

[Marisawright]

We have had a fantastic time in Australia but came for a temporary work assignment for two years and it is almost time to move on.

 

My employer has offered on multiple occasions to sponsor our PR application, up until now we have not been particularly interested. As we approach the three year mark, part of me says stick around for another year (which wouldn’t be difficult as we thoroughly enjoy life here) and get PR and ultimately citizenship upon being here four years.

 

All sounds good right? Something that is putting me off is the following:

 

 

 

• I would likely leave Australia (temporarily or permanently) upon being granted citizenship and would be liable (and happy) to pay my employer the application cost and migration agent costs. Colleagues have been through the process and it comes out at around $10,000 for a couple.

 

 

 

 

• My super would then be ‘locked in’ until retirement. Upon withdrawing as temporary residents, once we have been here three years (or more), even with the taxation (35%) we would have a nice chunk of freed up money to either put towards a house deposit in UK or invest into an equivalent pension scheme. Once PR is granted, this is ‘locked in’ and I doubt by the time we reach retirement (assuming I don’t pay any more in to the fund) it won’t be worth much. .

 

 

The point you're missing here is that your "locked in" super won't lose value. Yes it's locked in, but if it's in a decent fund with low fees and the right investment strategy, it will continue to grow and grow over the years - so by the time you're legally able to collect it, it will be a nice lump sum for your retirement.

 

http://www.superguide.com.au/how-super-works/top-10-performing-super-funds-20132014-year-past-10-years

 

The other bonus is that you won't have to pay any tax on it.

 

If you're planning to do a bit of globe-trotting then you may not be setting aside much for your old age, and that's always dangerous - especially as governments seem to be cutting back on state pensions all the time. So regarding your Aussie super as your "nest egg" could be a good strategy.

[Progressive]

Many thanks everyone for your detailed responses. They are all very helpful.

 

Admittedly, I think our minds are made up but I just wanted to run the plans by some like-minded people who may have been in the same situation. We have certainly got what we were looking for (and much more) from our time here in Australia. The financial commitment would absolutely be worth it if we saw a long-term (or even medium-term) future here, but at the moment we do not.

 

We will leave at peace with the country and its people, and I would thoroughly recommend people doing what we have done, providing the circumstances are right. Perhaps once we go, we will open up a couple of spaces for other fortunate migrants!

 

Thanks again all.

[robfromdublin]

Yes I think fundamentally if you have no intention of returning then there is absolutely no point in getting citizenship and incurring all that expense. If there is a chance that you will return then I would play devil's advocate and say you should get it.

 

The super issue is a good point but if you intend to return at any point then I would just leave that in an indexed share fund and let it accumulate, rather than take it out and incur taxes.

[Guest]

 

 

 

The point you're missing here is that your "locked in" super won't lose value. Yes it's locked in, but if it's in a decent fund with low fees and the right investment strategy, it will continue to grow and grow over the years - so by the time you're legally able to collect it, it will be a nice lump sum for your retirement.

 

http://www.superguide.com.au/how-super-works/top-10-performing-super-funds-20132014-year-past-10-years

 

 

 

The other bonus is that you won't have to pay any tax on it.

 

If you're planning to do a bit of globe-trotting then you may not be setting aside much for your old age, and that's always dangerous - especially as governments seem to be cutting back on state pensions all the time. So regarding your Aussie super as your "nest egg" could be a good strategy.

 

 

But remember you will be taxed at a much higher rate on any proceeds, either lump sum or monthly payments if you are not living in Australia when claiming it.

There was a thread on here recently where someone took their lump sum from the UK and I think lost nearly 1/2 in tax

[Progressive]

In answer to the super question, I had previously been advised (mainly from internet research and forums admittedly) that paying into a super fund for three years (lets say accumulating $25,000) abnd then leaving it until retirement with no further payments will make it worthless come withdrawl.

 

For reference, I am under 30 so the fees on the fund for the next 30 years will eat up most if not all of that.

 

My original intention was to leave my super alone upon leaving, regardless of getting PR or otherwise, as I thought it a good investment for retirement. I quickly realised that this isn't the case. unless somebody can correct me.

[sharron pickett]

Four years spent in Aus on any valid visa, with the last year at least on a pr visa is enough to meet the criteria for citizenship.

Thanks bolt4 ?

[Marisawright]

In answer to the super question, I had previously been advised (mainly from internet research and forums admittedly) that paying into a super fund for three years (lets say accumulating $25,000) abnd then leaving it until retirement with no further payments will make it worthless come withdrawl.

 

 

 

That sounds completely wrong. Say your fund earns 9% a year (which is the average over the last 10 years) and fees are 2% a year - your balance will still be earning 7% a year tax-free and at 60, you'll have $190,000.

 

I'd be looking for a fund that charges low fees, so that even in a bad year, the effect of fees will be minimal.

 

The tax payable on redemption is another question. If you convert the money to a pension, you'll have to declare it on your British tax return as income - but by that time you'll be retired and may not be liable for much tax anyway. If you take it as a lump sum, things get a bit murky and I'm still trying to get a clear answer on what happens then.

Edited November 26, 2014 by Marisawright

[Gbye grey sky]

In answer to the super question, I had previously been advised (mainly from internet research and forums admittedly) that paying into a super fund for three years (lets say accumulating $25,000) abnd then leaving it until retirement with no further payments will make it worthless come withdrawl.

 

For reference, I am under 30 so the fees on the fund for the next 30 years will eat up most if not all of that.

 

My original intention was to leave my super alone upon leaving, regardless of getting PR or otherwise, as I thought it a good investment for retirement. I quickly realised that this isn't the case. unless somebody can correct me.

 

My OH has a Super fund from when she lived and worked in Oz in the 90s. She split up from a LTR then and moved back to the UK. A few years later met me and we married 11 years ago. Unexpectedly she is now planning to move back to Oz with new family almost certainly with view to retiring there. The Super fund was small but has grown steadily so not eaten up by charges at all (I wonder if this is a myth as I hear it said but nobody ever relates it to personal experience).

 

Anyway, long story, but you never know what the future holds.

 

Still think if you are not expecting to retire in Oz you might as well take it but Marissa makes a good point about pension provision and one thing that can be forgotten when you are moving around in your 20s and 30s but can come back to bite.

[robfromdublin]

In answer to the super question, I had previously been advised (mainly from internet research and forums admittedly) that paying into a super fund for three years (lets say accumulating $25,000) abnd then leaving it until retirement with no further payments will make it worthless come withdrawl.

 

For reference, I am under 30 so the fees on the fund for the next 30 years will eat up most if not all of that.

 

My original intention was to leave my super alone upon leaving, regardless of getting PR or otherwise, as I thought it a good investment for retirement. I quickly realised that this isn't the case. unless somebody can correct me.

 

Only if you had very high fees and were in a poor investment choice. I've had a mere 8k in my UK pension and that has been increasing quite nicely even with fees. The key is what you are actually invested in. If you are invested in cash then yes, it is a rubbish investment for someone with a long timeframe to retirement like you. However, given what you've said, I'd imagine you are invested in the default fund for your super provider, is that right? This is probably the 'MySuper' offering which is a mix of growth (shares, property) and defensive (bonds, cash) assets. If I was you I'd put it all in growth, check the fees are low (~1%) and leave it there.

 

HOWEVER, this changes if you have no intention of coming back to Australia. If, as MrsDawnRazor says, you lose the tax benefits of Super if you are not an Australian resident (I didn't realise this) then there may be no benefit to having your money in Super. You may do just as well taking it out and putting it into the exact same investments outside of Super. I would investigate the tax implications of keeping money in Australian Super but not being a resident. And I wouldnt' be relying on internet forums for tax advice!

 

All the best with whatever you decide anyway.

[Keith and Linda]

That sounds completely wrong. Say your fund earns 9% a year (which is the average over the last 10 years) and fees are 2% a year - your balance will still be earning 7% a year tax-free and at 60, you'll have $190,000.

 

I'd be looking for a fund that charges low fees, so that even in a bad year, the effect of fees will be minimal.

 

The tax payable on redemption is another question. If you convert the money to a pension, you'll have to declare it on your British tax return as income - but by that time you'll be retired and may not be liable for much tax anyway. If you take it as a lump sum, things get a bit murky and I'm still trying to get a clear answer on what happens then.

 

OK, yesterday I went to see my Super fund about this as I need to convert over to Transition to retirement during next year. and this is how it works, assuming you will be working then form age 55 - 64, you can open a pension account (fund) by transferring all but say $10,000 from your super fund, you can then draw a pension from this account of between 4% ( the minimum you must take) and 10% ( the maximum allowed), both funds still earn (or lose too). NO lump sums can be taken out of either funds (there are some exceptions for emergency reasons). No further funds are allowed to go into the pension account, all employment super and sacrifice etc. goes into the original super fund.

Once you reach 65 then lump sums can be removed from the pension pot, your super fund is then transferred into a second pension account, effectively giving you two pensions. If you are eligible to retire after age 55 and actually do retire between age 55-64 then your super funds act the same as though you retired at 65. No extra money can be deposited into the pension accounts you would need to keep a super fund active for this and ultimately this would become another pension account.

Hope this helps any of you out there.

[Marisawright]

If, as MrsDawnRazor says, you lose the tax benefits of Super if you are not an Australian resident (I didn't realise this) then there may be no benefit to having your money in Super. You may do just as well taking it out and putting it into the exact same investments outside of Super. I would investigate the tax implications of keeping money in Australian Super but not being a resident. And I wouldnt' be relying on internet forums for tax advice!

.

 

You don't lose the tax benefits of Super while the money is sitting in the fund (provided you don't have a Self Managed Super Fund - that's a whole other issue).

 

If the OP ultimately takes a pension from the fund, that pension would be completely tax-free if he was resident in Oz, but will be taxed like any other income if he's in the UK - but it's just ordinary tax, not a punitive rate. The grey area seems to be if he wants to take a lump sum on retirement.

Edited November 27, 2014 by Marisawright

[Scrutineer]

We would also like to start a family soon and our preference would be to do so around other family members, and from some quick research the cost of childcare, schooling and healthcare in Australia seems against us.

 

On this particular point I can say from experience that childcare support in Britain is a total joke compared with Australia and significantly more expensive. You do mention other potential European destinations and I know places like Sweden have better childcare than Australia, so my comment is limited to the UK. As for citizenship, I think if it comes down to working it out in terms of dollars and cents gained then it's not something you should be pursuing. Citizenship is a privilege that can be costly and you have to accept that on its own terms. From my point of view I am a proud citizen of both the UK and Australia but it brings as many complications as it does freedoms.

[Marisawright]

OK, yesterday I went to see my Super fund about this as I need to convert over to Transition to retirement during next year.

 

Are you sure it's going to be worth all the hassle? It's not compulsory.

 

The theory is that by putting most or all of your salary into super and drawing a Transition pension to live on, you reduce your tax. When I first looked into it, I already didn't pay much tax because I had an investment property so it wasn't worth my while. This year, having sold my investment property, I'll still pay no tax because I'm putting a lump sum into superannuation, so again not worth it.

 

Of course the super fund pays some tax but when you add it all up, for many people the Transition to Retirement pension will save them a few thousand dollars if that. It's different after 60 because the income is then tax-free, but even then you have to be careful to do your sums.

 

The other problem with it, is that you are obliged to take the Transition pension, but you're not forced to pay more money into super - so it's tempting to spend instead of save, and your nest egg starts reducing!

Edited November 27, 2014 by Marisawright