The Economist Intelligence Unit compares the cost of living in some of the largest metropoles worldwide. They have been compiling this annual global ranking for 30 years. In the ranking they compare a basket of 160 items against a base of prices in New York City. According to the ranking Singapore has been the most expensive city in the World five years in a row now. What’s worse, not a single Australian city has made it into the Top-10 this year.

Sydney came in 16th, Melbourne 22nd, Brisbane 41st, Adelaide 51st, and Perth 54th. I cannot believe these results having lived in almost a dozen countries including Australia and Singapore. We need to set the record straight and debunk this ranking. Today I’m writing to you from cheap-o and wonderful Buenos Aires which ranks 125th.

 

Ranking of the most expensive cities in the World – Economist Intelligence Unit

 

(Source: EIU, 2019)

In a nutshell, I lived and worked in Australia for close to a decade. Later, I moved to Singapore for five years. As a result my quality of life increased while my savings quadrupled. Impossible? Let’s check the facts/ math. Don’t get me wrong, I truly love Australia, but from a financial perspective, it just doesn’t stack up. If you want to achieve financial independence you are better off making a living in a country like Singapore.

This blog post is particularly relevant to highly skilled professionals who consider moving to Singapore or Australia. I have based my analysis on an single expat without kids earning a salary of $180,000 annually. Do not worry, I modelled a $90,000 scenario as well which turns out even more surprising, believe it or not. If you would like to understand the financial pros and cons between working in Australia versus Singapore, this post is for you.

Let’s compare the actual costs of living in Singapore versus Australia. We are about to break down the real numbers based on my experience. Geo optimising your income and expenses can greatly accelerate saving up for your first million.

 

Income Taxes Australia

Most people don’t think of it but the number one cost item in Australia is mandatory income tax and superannuation. In addition most people need to pay the so-called medicare levy of 2% (basic public health insurance). There is no way around these. As a high income earner you will be required to pay an additional 1.5% medicare levy surcharge but this can be offset by buying private health insurance (at additional expense of course). I included it as either way you need to pay up. In summary as a high income earner in Australia, say you gross $180,000, you would be required to pay $56,415 in income tax, medicare levy and surcharge, and superannuation contributions tax.

The $56,415 break up superannuation tax of $2,342, medicare charges of $5,753.52, and personal income tax of $48,319. The $15,616 in superannuation contributions you can only choose to invest in a government approved superannuation fund. You are basically forced to buy paper assets by law. You can not touch this fund to invest in your Principal Place of Residence. This is unless you create a self managed super fund which comes with huge additional costs and doesn’t make financial sense for most people.

So before you spend a single dollar on housing, your taxes add up to a staggering $56,515 annually. The effective tax rate comes to 31.3%. You pay this tax with each of your paychecks. They call it Pay As You Go (PAYG). You basically work from January till almost the end of April just to pay your tax bill in Australia.

Further, one can deduct a few thousand dollars a year as a professional in some instances. You can also deduct interest for investment properties. The government incentivises you to take on debt and negatively gear – a terrible idea in my view. As I have written before, you should avoid the debt trap at all cost. For the purpose of the comparison I have excluded deductions as they vary based on individual circumstances and don’t impact the overall result much.

Let’s compare Australian income taxes to Singapore. Doing so we will disregard exchange rates for ease of comparison. The Singapore dollar has been more or less on par with the Australian Dollar for a few years now.

 

Income Taxes Singapore

In Singapore a $180,000 gross income would attract a total tax of $17,350. The effective tax rate comes to a mere 9.6%. That’s it. As a foreigner you don’t contribute to the Central Provident Fund (CPF). This is the equivalent to the Australian superannuation, or similar to an American 401k. You don’t even need to lodge a tax claim, because there is no meaningful deductions. It’s all automated for most of the companies and it couldn’t be more straight forward.

You pay after the tax year has ended and can choose to pay in arrears over 12 months (interest free!). Investing your postponed savings can additionally reduce your effective tax rate. Effectively you work just over a month for the Singaporean tax man.

By the way, If you earn significantly more than $180,000 and travel a lot for business you can reduce your effective tax rate to 10% or even 0% provided you work more than 95 or 183 days outside of Singapore. You would need to apply for Non-Ordinary Resident Tax (NOR) status which is valid up to five consecutive years. I used this to reduced my already low tax bills in Singapore even more.

 

Housing Costs Australia versus Singapore

Looking at Sydney prices you need to spend around $33,000 ($2,875 monthly) for a well-located one bedroom apartment. When I lived in Singapore I paid the same amount for a brand new apartment. In addition my two storey apartment came with a guest bedroom, a second bathroom, a terrace and a balcony. Did I mention my private Jacuzzi and a swimming pool? Having said that you get some world class beaches in Sydney.

I have written another blog post on Renting versus Owning in Australia which you might find interesting. I only look at renting because it made sense to do so in the past 20 years for most young(er) professionals.

What most people however don’t know is that as a foreigner you can rent so-called HDB apartments. Those are apartments that were built for Singaporeans by the government. Some of these are for rent. They don’t come with balconies and amenities (like swimming pools, tennis courts, etc.). They are also half of the cost to rent as compared to private apartments.

You have a huge choice in Singapore on what to rent, at which quality, and what price point. From an Financial Independence view this second highest cost bucket can make a huge difference to your saving rate.

 

Transportation Costs Australia versus Singapore

Transportation is a bloody huge expense in Australia. You need a car to get around. Infrastructure and public transportation is relatively miserably developed across Australia. I get that there is no fast trains connecting major cities given population and land size of Australia. However there is no excuse to have such a terrible public infrastructure across the bigger state capitol cities like Melbourne and Sydney.

Most professionals would need a car and partially use the public transportation system. It’s a double whammy. Public Transportation will set you back some about $2,064 p.a. (172$ on average a month). BudgetDirect estimated running the average costs for a car in Sydney at $22,292 per annum in 2017. You read that right. This sum includes all running costs, incl. tolls, gas, parking, maintenance, financing, etc. We can argue surely optimise here, but I have assumed a high income professional to use a combination of car and public transport (as I have lived myself in Australia).

In contrast, you truly do not need a car in Singapore. Buses, light rails, and subways connect the entire city state. It’s a fast growing state of the art public transportation system, which is subsidised by the government. They don’t want you to use cars and clogged the street. Consequently, there are limited effects during peak hour compared to other cities of this size. Personally, I used a mix of taxis, walking, busing, and subway transportation. It costs me less than $12,000 a year. If you would want to save and only use the public transportation, you probably can get easily away with less than $1,200 a year at today’s prices. But let’s say you use taxis a fair bit for comfort of getting from A to B.

 

Food Singapore versus Australia

This one is really difficult to compare as taste and preference in food and nutrition in general various greatly.

I can tell you this: In Singapore I never ever cooked once. Not in the entire five years that I lived there. I would simply go to various hawker centres (they are like non air-conditioned food courts) across the entire island and get my meals there. A meal would come as cheap as $2.50 (1 meat, 1 veg, rice) and a more elaborate meal would set me back $10 or so. I don’t think you can go to McDonald’s in Australia and get a meal for $10 these days.

Of course, in Singapore, you have another 7,000 restaurants to choose from and food would be more expensive there, but in Australia the same quality would cost even more in my experience.

For various basic food items and today’s prices I looked at Numbeo, which compares and updates average prices regularly. I don’t believe all numbers are accurate. Having said this you will get the trend that Sydney is a lot more expensive than Singapore when looking at the detail here. If you were to cook basic meat and vegetables at home it would cost you about $200 a month or $2,400 per year. In Sydney this would be around $437 a month or $5,245 per year.

 

Goods and Services Tax Australia versus Singapore

Whilst this doesn’t seem to be a big one, it actually is. Australian GST is 10%. Any good or service you purchase attracts a 10% GST. All your remaining disposable income is basically taxed one more time by the government. This is common today but there are differences.

In Singapore the GST is 7%, one of the lowest in the developed World. This equates to an instant 30 percent saving comparing to Australia. Think of the thousands of dollars saved here again. Of course the actual saving amount is difficult to estimate. Given most people live paycheck to paycheck we can estimate a 3% saving on the average saving potential. This equals $1,236 a year more disposable income in your pocket in Singapore than in Australia (based on the Australian Disposable Income).

 

Summary of Basic Living Costs in Singapore and Australia on a $180,000 gross income

Comparison of Cost of Living in Australia versus Singapore on 180k

I have compared the biggest living expenses in Singapore and Australia above. These include taxes, housing, transportation, food, GST and utilities costs in Sydney and Singapore.

In our illustrative case we took a young individual grossing $180,000 in income a year. The saving potential is almost triple in Singapore compared to Australia. But wait, there is much more. Think about holidaying, investing savings, the opportunity cost of your time, and fun things like drinking beer.

 

Vacations Singapore versus Australia

You can buy a return flight in Singapore for $150 to visit Thailand, Malaysia, Indonesia, Vietnam, Taiwan, Hong Kong, etc. There are even cheaper promotions available if you look for them. That $150 wouldn’t even pay the international airport tax in Sydney or Melbourne, let alone the actual flight. Vacationing in Australia is extremely expensive, whereas all around Singapore is extremely affordable. Your disposable income takes you so much further. Having said this I will never trade my experience wandering out into the hugely diverse Australian wild. Camping in and exploring magnificent Australian National Parks and Outback is truly amazing.

 

Investing Australia versus Singapore

So what are you doing with all the savings in Singapore? You invest them at zero % capital gains tax. Yes you have to pay income tax on your dividends (if applicable), but gains from sales of shares is 100 % tax exempt. In Australia you would have to taxes, again… sniff.

 

Drinking Beer Australia versus Singapore

Drinking beers like the locals do in Singapore is about half the price of drinking beers in Australia. A 650ml bottle of beer in the local hawker centre sets you back $6.50 in Singapore. In Australia the same amount in the cheapest locale would be at least double that price. You can buy a bottle of whiskey in a bar in Singapore from $80 including mixers. In Australia “responsible serving of alcohol” prohibits you to buy in bulk. The average spirit has 24 shots and costs $6 per shot. We are looking at $144 and queuing up 12 times to drink a few rounds with a buddy. All the meanwhile we are being assessed if we can take more?

 

Well, What If I you $90,000?

I looked at how a ‘low to medium income salary’ would compare in Singapore and Australia. You’d think $90,000 is not considered low to medium income, right? However, according to the Australian Tax Office this group of people can save on medicare levy surcharge of 1.5% and are eligible for an additional tax offset of $1,080. In Sydney your saving potential would actually drop further to a mere $20,050 per annum.

Assuming you keep the nice one bedroom apartment, still cook mostly at home, you would no longer be able to afford the average car and rely on public transport. Quality of life just reduced significantly. I assumed a similar scenario for Singapore, with the exception that we would cut most spend on taxi fares. In Singapore you could still afford a very nice life plus save almost two plus times the amount you would in Sydney. Below are the numbers.

Comparison of Cost of Living in Australia versus Singapore on 90k

 

Opportunity Cost Singapore and Australia

There are many costs we can measure but some are just priceless. We are pursuing Financial Independence to gain time after all. This is our ultimate goal. And time is the biggest saving in Singapore. Think about it for a minute.

You don’t need to shop groceries, get stuck in traffic jams, look for a car park, maintain your car. I saved tremendous amounts of time as everything is around the corner in Singapore. Whether it’s commuting, going to the gym, doctor, airport.

If you think of the endless opportunities to generate additional income, or simply live healthier due to lower stress, this is what I valued about Singapore the most. Of course if you prefer to pay thousands of dollars a month more for Sydney Beach access, that is ok to, but don’t count on becoming financially independent as fast as you could in Singapore.

 

My Experience in Singapore versus Australia

In my personal case I saved thousands of hours and unnecessary stress, besides hundreds of thousands of dollars in just five years. I vacationed much more frequently for far less money, in many exotic places. It was amazing to pay a fraction of the taxes while enjoying a far superior infrastructure and much more convenient lifestyle. It’s safer, easier and at least as much fun to live in Singapore.

I hope I showed you today that it’s far cheaper than working and living in Australia. Like everything in life it is all about the choices we make. If you are after Financial Independence, living in a country like Singapore can greatly accelerate your Financial Independence Day.

For Freedom and Living Your Dreams,
Your Financial Gladiator

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