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I've been working in the US for a number of years, and am shortly to return to Australia. My cash is in an online bank based in the US.

Would you recommend I move it to an Australian bank, or leave it with the US bank? What sorts of issues should I consider while making my decision?

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The big issue I can see is foreign exchange risk - if you've got the money in the US and you need it in Australia, you're vulnerable to fluctuations in the exchange rate between the two currencies.

I would think that if you're expecting to go back to the US, you might want to leave some money in the US (to guard against the AU$ falling against the US$); if you're not planning to go back you're probably better off moving the money with you unless you expect the USD to appreciate considerably against the AUD anytime soon.

The picture changes slightly if you still have expenses in the US, like paying for a mortgage, or repairs to a property there or something similar, as you're probably better off leaving part of the money in the US to get rid of both the exchange rate losses and currency risk.

3

Other than the exchange risk, one more thing to consider is interest rate risk and the returns you are generating from your money. If it is lying around in a current account with no interest then it is rational to keep it where you intend to stay(US or AUS).

Now if your money is working for you, earning interest or has been invested in the market then it seems reasonable that you should put it where it earns the maximum for you. But that comes with a rider, the exchange risk you may have to bear if you are converting between the currencies. Do the returns earned by your money cancel out the FX rates moving up and down and still leave you with a positive return, compared with what you would earn if your money was where you stayed. Consider the below scenarios

Stay in US -> Money in AUS -> Check what are your returns
Stay in US -> Money in US -> Check what are your returns
Stay in AUS -> Money in US -> Check what are your returns
Stay in AUS -> Money in AUS -> Check what are your returns

Do evaluate all your options before you transfer your money.

  • 1
    I think a more practical consideration than interest (unless you have a huge amount of cash) is the tax considerations: you will have to pay tax, and you'll have to file a tax return. If I earned say $100 extra interest by leaving it in the US, but I had to file a US tax return, I would not have come out ahead. (Of course the example is counterfactual because at this point US rates are far lower.) – poolie Dec 12 '10 at 23:25
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There are short-term and long term aspects.

In the long term, if you live and work in Australia and plan to continue doing both indefinitely, you might as well move all your cash investments there. There would be no point bearing the exchange rate risks. It may be worth keeping the account open with just enough credit to stop it being shut down. There is no point needing to (think about) filing foreign tax returns just because you have an account earning a small amount of interest.

In the short term, I think the more important question is practicality rather than exchange rate risk. You want to have enough cash in both countries that if you suddenly have to pay say an apartment deposit or a bill, you won't be caught short. So I would leave at least a few thousands dollars in a US bank account until at least a couple of months after the move, when I was sure everything was settled.

Good luck.

1

You have left out the most important piece of information: are you an American citizen? If you are, then PFIC rules mean you need to be very careful not to invest in any foreign index funds/ETFs. That means it will probably be easiest for you to just leave the money in the US and continue to invest it there.

If you do not have US citizenship, and have never had a green card, then you will qualify for non-resident alien status after you've been gone for 3 years. Once that happens, you won't owe US capital gains tax (though you will owe it in AUS). You will owe 30% tax on dividends, though. Much more at Investopedia.

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