The four risks in any cross-border allocation that people forget
The investment case for holding assets in more than one country is usually easy to make. The four risks people forget are harder, because they only show up when something changes.
1. Currency
The Australian dollar has moved through a very wide range against major currencies over the last 20 years. An investment that "worked" in the foreign currency can look very different once converted back. Clients who plan on a fixed exchange rate are planning on a number that will not hold.
2. Residency
Tax residency rules are not the same as immigration rules. The day you become (or cease to be) an Australian tax resident changes the treatment of everything you hold. People who move back to Australia after years overseas are often surprised by what happens to their old offshore accounts.
3. Timing
When you move money across borders, the timing of the transfer —tax year end, financial year end, treaty tie-breaker rules —can change the tax outcome. This is not a reason to panic, but it is a reason to time transfers with your accountant, not your broker.
4. Reporting
Australian tax law requires reporting of foreign income, foreign accounts, and in some structures foreign holdings. The paperwork burden is real, and the penalties for getting it wrong are material. We see this as the most under-priced risk in cross-border planning.
None of this means cross-border allocations are a bad idea. It means the sensible version is planned in advance with a registered tax agent, not executed on a tip.