Investing outside Australia
It's now easier than ever for Australians to access
international investments. Investing overseas can provide
investment opportunities not available in Australia and help
diversify your portfolio; however, there are additional risks you
Here we explain some of the ways you can invest overseas, the
risks and benefits involved, and how to decide if international
investments are right for you.
Why investors look overseas
Some of the benefits of investing outside Australia include:
- Added diversification - Spreading your
investments over different countries and markets can mean that a
slowdown in one country will have a smaller impact on your overall
- Higher growth - International investing lets
you take advantage of potential growth in foreign countries,
especially in emerging markets. But, remember that while some
countries may have higher growth and potential returns, they can
have a higher level of risk.
- More options - You can invest in companies,
industries and assets that are not available or are difficult to
invest in domestically.
Before you invest overseas it's important to consider how the
investment fits with your investment goals, risk tolerance,
investment timeframe and overall portfolio.
How to invest overseas
If you are looking to invest overseas, the first step is to
think about which assets or asset classes best
suit your investment goals, timeframe and risk tolerance.
Then, consider which country or region you would like exposure
to. Researching the country or region, its trends and political and
economic environment is essential before you invest your money. See
how to research international investments
for more information.
Finally, think about whether a direct or indirect investment is
best for your investment goals.
Direct investing is where you purchase the asset yourself and
hold it in your name, for example buying international shares through your
broker or buying an overseas investment property.
If you are choosing between a direct or indirect overseas
investment, think about the time required to manage the investment,
the cost, level of expertise needed and level of risk.
If you are considering a direct investment, it's important to
- all the costs and fees involved
- how it will be taxed
- the foreign investment laws of the country you are looking
- how quickly you will be able sell if you need the money.
This is where your money is given to another party who buys and
sells investments on your behalf. Some of the main ways Australians
can gain exposure to international investments indirectly
include: managed funds, exchange traded funds
(ETFs) and Australian companies with international
Risks of overseas
Investing internationally carries all the general risks of the
underlying investments, as well as some unique risks,
- Currency risk - Foreign investments are
usually held in the currency of the country of origin. Income and
capital gains or losses must be converted into Australian dollars
(AUD) which will expose you to the risk of exchange rate
- Political, economic and regulatory risk -
International investments are subject to country-specific risks
such as political, economic and regulatory changes, which can be
hard to keep track of from Australia. You will also need to
understand the laws and regulations relating to foreign investments
in the country you invest in.
- Selling time - If you hold investments in
other countries or in managed funds that invest internationally, it
may take significantly longer to sell these assets. Some countries
may also restrict the amount or type of securities that foreign
investors may purchase.
- Additional costs - International investing can
be more expensive than investing in Australia. In some countries
there may be unexpected taxes, such as withholding taxes on
dividends or rental income and transaction costs such as broker's
- Lack of information - It can be difficult to
find up-to-date information on foreign companies and assets. Some
foreign companies may not provide investors with the same type of
information as Australian companies do or they may have different
legal and accounting standards.
- Foreign legal remedies - If there are problems
with your overseas investments, you may have to rely on the legal
remedies that are available in the country where you invest.
If you are concerned about any of these risks you should seek
professional financial advice before you invest
How to research
Before you invest it's important to research the country and
market you are investing in, the political and regulatory
environment and the foreign investment laws.
Some good sources of information that can help with this
- Financial adviser and broker reports - Some
advisers and brokers provide research reports on particular foreign
companies, individual countries or geographic regions. This can
help keep you up to date with rapidly changing market
- Foreign company reports - If you are investing
in a listed foreign company, they are generally required to provide
financial reports, such as half-yearly and annual reports. Check
the company's website or ask your broker for a copy of the
- Foreign regulators - The securities regulator
in the country you are investing in may be able to tell you
information about a particular foreign public company or market,
foreign investment laws and warnings about scams to look out for.
You can find a list of the international securities regulators on
International Organization of Securities Commissions'
- International bodies - International bodies,
including the International Monetary
Fund, the World Bank and the Bank for International
Settlements, have a large amount of data and research about
different countries. These can help give you insights about how
those markets are performing and global trends that could affect
your international investments.
Tax on foreign income
If you are an Australian resident for tax purposes, you must
declare income from all overseas investments in your tax return.
This includes income from offshore bank accounts, international
shares, rental income from overseas properties and capital gains on
overseas assets. If you have already paid foreign tax on your
international investments, you may be entitled to an Australian
foreign income tax offset.
See the ATO's webpage on foreign income for more
information on the tax treatment of international investments.
International investments can be an effective
way to diversify your portfolio. However, overseas investments can
also involve greater risks than in Australia. If you are unsure
whether investing overseas is right for you, seek professional financial
Last updated: 10 Dec 2018