Report shows high net worth families are rethinking investments and place of residence following the pandemic

25 February 2021

New research from business advisory firm BDO has revealed some key insights into how high net worth individuals and families are planning to rethink their investment strategies following the COVID pandemic.

The research gathered the views of more than 350 private wealth advisors and high net worth individuals from 16 countries within the BDO global network. More than one third of the respondents were from Australia.

  • 69% said the need to diversify their investments is a driving force for wealthy families and high net worth individuals
  • 57% of respondents expect to make significant or judicious alterations to their wealth strategy following the COVID pandemic
  • 71% of respondents said wealthy individuals are still moderately or very concerned with privacy and safety risks posed by tax transparency

Mark Pollock, Tax & Advisory Partner at BDO Perth, said many high net worth families are now looking to move away from the volatile stock markets and increase their exposure to private equity-type investments.

“Following the COVID pandemic, we are seeing high net worth families and individuals taking a very cautious approach and not making rash decisions,” Mark said.

“Another interesting development we are seeing is an increase in high net worth families - COVID refugees as they’re being referred - returning to the safety of Australia’s largely COVID free environment and world-class medical facilities,” he said.

“Many high net wealth families have been living and working abroad for years, but they’re now back in the Australian tax system and possibly being taxed on their global earnings at very high rates compared to the countries from which they came.”

Mark added that the returning families are also fuelling the property market as they have cash available to purchase a home without needing to go to the banks.

The report also showed that about two-thirds of respondents are concerned with the privacy and safety risks posed by tax transparency. Under the Common Reporting Standard (CRS), the tax authorities in 113 countries have agreed to swap banking information of high net worth families.

“These countries include a number of suspected tax havens, as well as a number of Australia’s trading partners including Singapore, Malaysia, and Indonesia. The Common Reporting Standard is only the tip of the iceberg for reporting undisclosed foreign bank accounts, which may then lead tax authorities to dig deeper to uncover undisclosed foreign assets like properties and privately owned investment companies,” Mark said.

“The impacts of Covid won’t stop the tax authorities improving tax transparency - there has been a push for this since the global financial crisis. Our new report revealed this is a concern for many high net worth families wanting to return to Australia but not wanting to face a tax audit due to assets that may be hidden,” he said.

“It will be a balance that many will be considering – living in a country that is relatively COVID free with world class medical facilities but facing tighter tax scrunity and the potential of a much higher tax bill.”