How to Structure Your Finances As An Australian Expat In The UAE

How to Structure Your Finances As An Australian Expat In The UAE

How to Structure Your Finances As An Australian Expat In The UAE

 

As an Australian expat in the UAE, it’s crucial that you understand that the rules of the land are different in the UAE than they are back in Australia. Firstly, as an Islamic nation, the UAE is subject to Sharia law – a code of laws governing the behaviour of Muslims and Islamic nations.

If you pass away in the UAE there is no right of survivor-ship meaning UAE based assets are not passed to the surviving spouse. Instead the assets of a deceased person will go to probate, meaning the state court will decide how those assets are distributed as per sharia. In sharia law, the distribution of assets heavily favours male relatives, meaning that if you are an expat male and you pass away, most of your assets may not go to your surviving spouse or partner.

Furthermore, if you are called to a court order in the UAE, whether for something as low key as unpaid parking fines or a car accident that wasn’t your fault, your local bank account in the UAE can be frozen. Similarly if you lose or leave your job and your visa is cancelled your local account may be frozen. I know this first hand as it happened to me when changing jobs and meant I wasn’t able to use my local account until my new visa was processed 2 months later.

Here are my tips for structuring yourself financially as an Australian expat in the UAE using the simple 3 pot idea.

The Three Pots – Structuring Your Wealth in the UAE

Pot 1 – Your Expenses Pot

With the above reasons in mind you should only keep a minimum amount of funds in your UAE current account. We advise 1 – 1 1/2 months expenses. For instance if your monthly expenses are AED15,000 then keep a maximum of AED22,500 in this account. This ensures you have enough funds readily available to cover your expenses for that month before your next pay cheque arrives, and that the bulk of your funds are moved offshore. Keep separate accounts for both partners and spouses.

Pot 2 – Your Emergency Pot

In this pot we advise to keep either 3 month’s salary or 6 months expenses in an account held offshore, whether that be back in Australia or in an offshore bank account in one of the international banking hubs such as Isle of Man, the Channel Islands or Luxembourg. The idea of this pot is to have some money set aside for a rainy day in case something happens, whether you lose your job or have a family emergency. As this pot is for emergency purposes you don’t really want to have it invested due to the short term nature of the account. It is important to not leave too much money in this pot however as you may miss an opportunity to get your money working for you given this pot of money is earning little to no interest and thus is effectively decreasing in real value due to inflation.

Pot 3 – Your Investment Pot

Both the expenses pot and the emergency pot will be earning you little to no growth thus it’s crucial that you get your money working for you in order both ‘inflation proof’ these funds as well as to achieve your investment goals, whether that is saving up for a property deposit or for your retirement. Depending on a variety of factors, including your investment time frame, risk appetite and asset preferences, this pot of funds could be invested in a range of different growth orientated assets whether it’s shares, mutual funds, ETFs, property, bonds or annuities. Whichever asset you may choose, generally speaking they should be held once again outside the UAE to avoid sharia law and for other estate planning reasons.

And Don’t Forget – Draw Up A Will

By moving the majority of your assets offshore using the above, you will have reduced the issues associated with Sharia law for most of your wealth. However, there are a number of other UAE based assets to consider, which will need to be safeguarded by putting a UAE Will in place. These include your end of service gratuity benefit (EOSB), workmen compensation, death in service benefits if applicable (such as employer life insurance) and your personal effects such as your motor vehicles. Expat Wills can be produced for as little as AED3,000 so you it would be foolish not to get one in place – you will be saving your family a lot of additional hassle if tragedy were to strike.

 

General advice warning. The above information is general  in nature and does not take your specific needs or circumstances into consideration. You should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

 

Daniel is an financial planner who has a wealth of knowledge and experience when providing financial advice to Australian expats. Daniel was an accountant after graduating from university and was then accepted into the industry renowned Jardine Lloyd Thompson Graduate Program after competing against several hundred applicants. He then moved into the financial planning and wealth management sector and has been providing financial advice since 2013. Combining his accounting skills with financial advice, Daniel has been working with expats living in the Middle East after relocating to Abu Dhabi in 2016. He has experience in providing advice on offshore banking, investing, superannuation, UK Pension Transfers and Foreign Exchange. Daniel holds a Bachelor of Business with an accounting major, a Masters of Commerce, and a Diploma of Financial Planning.