The Financial Planning Guide for Digital Nomads and Remote Workers

Conventional employees can usually plan for their financial future knowing that certain fundamental parameters will not change: their regular income, their Australian tax residency, their banking arrangements, their superannuation contributions and their insurance needs.

But for digital nomads and remote workers, the picture is completely different, and their situation will have implications for how they pay tax, contribute to super, conduct their banking and investments and ensure they are covered for health problems and income protection.

Tax residency

Remote workers and digital nomads who move around within Australia don’t need to worry about this one, but for those working overseas, especially if changing countries frequently, it’s the single most important issue. The ATO uses several tests to work out whether you’re an Australian or foreign resident for tax purposes:

• Resides test. Depends on family, business and employment ties, location and maintenance of assets, your nationality (such as whether you have dual citizenship) and other factors. 

• Domicile test. Considers whether Australia is your domicile by origin or choice, and whether it’s your permanent place of abode.

• 183-day test. Have you been in Australia for more than half the income year?

• Superannuation test. Applies mainly to government employees.

You cannot, therefore, assume that leaving Australia to work overseas automatically makes you a non-resident for tax purposes. If you’re an Australian resident you’ll be taxed on your worldwide income. If you’re a non-resident you’ll still pay tax on income derived in Australia, possibly at a higher marginal rate and without the tax-free threshold.

Income structure

If you’re an employee working remotely within Australia, your PAYG tax and super contributions will continue, so your compliance will not be significantly different from that of someone reporting daily to a physical workplace.

Independent contractors and freelancers have the added burden of setting aside funds for income tax payments, paying their own super contributions, and possibly managing GST, all of which are difficult when income is uneven.

Digital nomads with higher earnings may choose a company or trust structure, especially if international contracts are involved. This makes income smoothing easier, but comes with greater compliance costs.

Superannuation

Even if you’re travelling or residing in different places for most of the year, you’ll still receive superannuation contributions from an Australian employer, or need to pay them yourself if you’re a self-employed Australian tax resident. Personal contributions made from overseas may still remain tax-deductible, depending on your residency and whether you have Australian income against which to claim.

For those with uneven incomes, it’s possible to make more substantial personal contributions in higher income years, and also to make strategic use of carry-forward concessional contributions.

Banking

Anyone working overseas for long periods will need to rethink their approach to banking. It’s a good idea to maintain at least one Australian transaction account, preferably with multi-currency access to minimise foreign exchange fees.

Cash flow management

For the self-employed, or for overseas workers with Australian taxable income not subject to PAYG, it’s important to keep money earmarked for tax payments separate from cash available for spending.

An irregular income will call for a larger emergency fund – ideally 6-12 months of expenses – which should be kept in a stable currency if you’re overseas.

Insurance

Digital nomads who plan to work overseas may require specialist international health insurance, rather than standard tourist travel insurance. They also need to check that any income protection insurance they may have does not exclude foreign residency.

Investing

Continue your investment strategy to align with your long-term goals, not with where you happen to be living. You may wish to consider whether to continue with your Australian investments while overseas, and whether you will have difficulty accessing Australian investment and trading platforms. There may be CGT implications if your residency changes.

In this situation, it would be a good idea to keep your investments simple, with minimal trading using fewer platforms, and investing in ETFs, which usually require less monitoring.

Tailored advice will help

Digital nomads and other remote workers can rely on a financial adviser for advice on financial planning issues such as tax residency, optimal income structure, banking and cash flow, insurance and investments. 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.