International property – pros v cons of living in Spain
Considering an international property purchase? Perhaps pick up a bargain to live in permanently, or just add to your existing portfolio, you can join the growing number of Australians reaping the benefits of buying in Spain.
The News Daily has compiled the following investigation, written by Isabelle Lane into Australians based in Spain. Spain is just one of the countries on the target list of more than one million Australians living, working and retiring abroad.
Three years ago Queensland-born Brendan Bale was staring down the barrel of 30 and beset with doubts about his career and life direction.
Like many searching for meaning and purpose he looked to travel to find some clarity, and boarded a European cruise that took him to the Spanish cities of Vigo, Cadiz and Barcelona. It proved to be a life-changing journey.
“I instantly fell in love with Spain,” he says. “The locals were really friendly – except in the suburbs of Barcelona – the food was delicious and the sights were mind-blowing, not to mention I found myself endlessly enthralled by the turbulent history of the Iberian Peninsula.”
Fast-forward to 2018 and the 32-year-old has traded his life as a journalist and radio host in Melbourne to teach English to primary school children in Alcoy, Spain – a small town with a population of around 70,000 in the province of Alicante.
Join the club
Mr Bale is one of an estimated one million Australian expats living and working overseas, including around 200,000 in the UK and Europe. He applied to become an English language assistant through the Spanish consulate in Melbourne last year while looking for a “drastic change”.
“A few months later I was living in Cocentaina, Spain. It’s been the best decision of my life,” he says. The only downside has been leaving behind family and friends in Australia, but they “understand that I’m doing something positive for myself”, he says.
“I am heading in a completely new direction … I couldn’t be happier.”
Culture and lifestyle
“The best part about being an Australian in Spain is that people are excited to hear about your country, and ask why I have come to Spain to live,” Mr Bale says.
“They have a sense of pride when you tell them about your love of their country and the reasons for that love.”
Still, it hasn’t all been smooth sailing. Arriving with only minimal knowledge of Spanish and the multiple regional dialects spoken across the country was “definitely an obstacle”, but “something that can be rectified over time”, Mr Bale says.
“In the Valencian community, the two main languages are Valenciano and Castellano [Spanish], and English is a distant third in the hierarchy of spoken languages,” he says.
“This makes simple things like opening a bank account or ordering food at a restaurant a challenging experience to begin with.” Making an effort to learn the languages and integrate into Spanish life is “highly rewarding”.
“Locals really appreciate you try to speak one or more of their languages, to show that you care about their country’s history and their community’s way of life,” he says.
As with most overseas adventures, navigating paperwork, slow-moving administrative and bureaucratic tasks, and securing the necessary visa and residency permit can be a “long and frustrating” process.
“It really has been the worst part of an amazing personal and professional journey,” Mr Bale says.
“I try to think of it is a temporary annoyance that facilitates a huge reward at the end of the process, which is living in a beautiful country and being able to help Spanish children improve their English skills.”
Spain continues to battle high unemployment, particularly among young people, so finding a job as an expat can be difficult.
“The school in which I assist also helped send the Spanish authorities all of the relevant documents needed to get paid my monthly stipend, so I could afford to cover rent and other living expenses,” Mr Bale says.
James Ridley is a financial planner at Atlas Wealth Management, a company that specialises in providing financial advice to expat Australians.
Mr Ridley warns Australians looking to move overseas to do their research, and consult an adviser experienced in overseas finances and taxation.
The firm’s recent survey of more than 1700 Australian expats by the firm found more than a quarter of Australian expats said managing their finances has become more complex. Nearly half said they were able to save more money when they lived in Australia.
Australian expats grapple with a range of financial issues when moving overseas, including the “currency risk”.
“If you’re accumulating the majority of wealth in a foreign currency at the time of repatriation, depending on the exchange rate, you could be in for a nasty surprise,” Mr Ridley says.
Whether or not you’ll be considered a non-resident for tax purposes is “one of the most grey areas” when you become an expat, he says.
Managing an investment portfolio abroad can also prove challenging, with Mr Ridley describing the tax treatment of property for non-residents as “very difficult”.
Australians aged between 25 and 39 are most likely to make the move overseas according to Advance, a government-funded not-for-profit connecting Australian expatriates around the world. Many are still paying off student debt from undergraduate and postgraduate degrees.
Following changes to regulation that came into effect in 2017, anyone with HECS-HELP debts now has to declare their worldwide income to the ATO each financial year, with repayments required of anyone earning $45,000 or more.
“Previously we could go overseas and not have to worry about paying back [student debt],” Mr Ridley says.
“Often you find that expatriates go overseas and their incomes go up, but their lifestyle quickly adjusts. Now, the amount you have to repay will depend on how much you earn, which can come as a surprise to people who are living in otherwise tax-free zones.”
Despite budget cuts in recent years, Spain has a high standard of healthcare, which expats who are residents can access for free or at low costs. Private healthcare coverage is also available on affordable insurance plans, and is a popular option for many.
“I’m in a fortunate position because my healthcare is organised through the [Spanish] government, so there are no upfront fees for the policy,” Mr Bale says.
What to know before you go
- Tax: When leaving Australia for an extended period of time it’s crucial to understand whether or not you’ll be remaining an Australian resident for tax purposes. For instance, if you’re living overseas but are considered an Australian resident for tax purposes the ATO will tax you on your worldwide income, which you will need to declare at the end of each financial year. Check out the ATO’s online guides covering key topics for expats including working out your residency status for tax purposes, taxable Australian property, and changing residency.
- Super: Expats can make contributions to their superannuation fund while overseas, and apply for release of their savings once eligible. It’s crucial to note that released funds will be taxed twice for residents of countries such as Italy that have a Double Tax Agreement with Australia. Self-managed super funds (SMSFs) are more complicated, and are generally not considered a good option for expats.
- Age pension: Australians are generally eligible to continue receiving the pension when they move overseas, though the process can be complex. Centrelink provides a breakdown of pension rates for those living outside Australia
- Student debt: If you’re a student or former student with a HECS-HELP or TSL debt living overseas you’ll have to declare your worldwide income to the ATO or lodge a non-lodgement advice, even if you’re considered a non-resident for tax purposes each year.
- Visas: Beware of visa scams and unscrupulous operators. Use a registered migration agent where possible.
- Safety: Visit the Australian government’s SmartTraveller website for more information on how to protect yourself while living and working abroad.