Australia
is sometimes colloquially labelled as the world’s biggest island. While some
might view this from a geographical stand point, it can often be meant more in
the intellectual sense. It’s no secret Australia is generally more interested
in what’s going on in Australia, than what’s happening in the rest of the
world.
The big
news out of Australia, if you haven’t already heard, is that voters went to the
polls last weekend. In true Trumpian and Brexit fashion, Australia was
delivered its own ‘surprise’ political upset. The right leaning conservative
government, led by Scott Morrison, was re-elected, much to the surprise of the
pollsters and betting agencies.
I wasn’t
terribly surprised, having had enough nous to place a bet on the coalition
government as returning to power. The odds of 5 to 1 coalition to labour seemed
out of whack with the actual closeness of the polling in marginal seats, and
the impact of potential preference votes. They weren’t out of whack with the
media commentary however, which from left to right leaning publications, was
more or less backing, or accepting a labour win. Seems like the media these
days, gets it wrong with alarming consistency.
You’re
probably wondering what any of this has to do with fintech.
Well,
governments can play a crucial role in driving the fintech ecosystem forward.
Labour had already made murmurs it would deprioritise open banking, which is
already overdue in Australia.
On the flipside,
the coalition government hardly painted an exciting picture for fintech, with
innovation absolutely not on the agenda. It’s anyone’s guess what will fill the
policy void now, but for those interested in where it may land, Business
Insider spoke to several leading voices on what they think will happen
next. A good read for those of you who have investments downunder, or who are
looking to invest.
As a Kiwi – who can’t vote in Australia, but who’s taxes are certainly welcomed by the powers that be – what I find is interesting, is how the voices of people like me, Australia’s immigrant community, can be impacted by government policy around money. While I am afforded many more protections and rights given the close nature of New Zealand and Australia countries, many others from the immigrant community are not. And this can result in a serious financial impact.
Working Holiday Super Tax
Australia
has long been a number 1 destination for working holiday makers. It’s estimated
that during their approximate 2 year stay, they contribute $1.3 billion to the
economy, with $770M being spent in rural communities alone.
While these
visa holders come from all over the world, one of the main working corridors is
the UK, which only looks set to grow post Brexit, should the trade
representatives get their way. Around 40K land each year as part of the working
holiday visa program, with many going on to sponsored employment.
Working
holiday makers are expected to abide by Australia’s laws, including
contributing 9.5% of their earnings into Australia’s compulsory pension system,
superannuation.
When they
leave Australia, while they can freely take their take-home pay earnings, they cannot transfer the thousands of dollars
of super they are likely to have accumulated to an equivalent pension plan in
their country.
Instead a shocking 65% of their wealth is taken off them, with the
remainder cashed out. Their Kiwi counterparts can take the full balance home,
thanks to a Trans-Tasman portability scheme.
This is a tax rort, front left and centre. It also disproportionately
affects young people, who need all the help they can get these days, building wealth.
But it is also an opportunity to reinvent what pensions mean, how we distribute
and manage them, and how a fintech that thinks globally but locally can make
all of this easier, simpler, and hassle free.
Look at Transferwise, which is now the most valuable European fintech. It
is part of a growing group of global first fintechs that are willing to tackle
cross border money frictions that have no reason to exist other than through
archaic government policy.
Fintech’s that tackle these problems have a unique opportunity to represent the new global citizen. Despite the noise around protectionism, I believe it is fairly inevitable that the movement of workers and migration will continue, if not escalate. Which is why we need more companies willing to tackle some of these policy inequities head on.
We are doing this at my pension startup fintech, Zuper. After all, why does
it matter where your pension is managed from, so long as you can easily
contribute into it? If you have multiple pots here and elsewhere, there is no
reason why this should be hard to manage.
We launched a petition today that calls
on the UK and Australian government to allow for cross-border, full super
payment transfers. There is no reason someone should lose 65% of their
wealth in one hit. If you ever worked here and had to hand you cash over, this
petition is for you.
Whether we get somewhere or we don’t, the challenge and opportunity is clear. Solve the problems that matter, and be a champion for your customers. Fintech, when done right, should address inequities, not further them. If you can prosecute that case well, then you’ve earned the right to build a billion dollar business.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.
I have a commercial relationship with the companies or people mentioned as CEO and co-founder of Zuper. I am not receiving compensation for this post.
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