Financial planning for employed doctors and medical specialists in Australia involves considerations specific to the Australian healthcare system, tax regulations, the stage of life and the family dynamics alongside retirement plans and having a clear understanding of Financial Goals, Purpose, and Legacy needs. The public hospital system plays a crucial role in the training of medical specialists, many of whom remain in an employed role post specialisation in some capacity.
Some of the specific areas that employed doctors and medical specialists ask us for guidance on include:
Salary Packaging
The government health system has some excellent opportunities for salary packaging, such as packaging for superannuation contributions, motor vehicle expenses, and additional benefits like professional development courses and memberships. In addition, depending on the hospital, other options may include living expense items such as mortgages, school fees and meal entertainment. Salary packaging can provide tax benefits and increase your take-home pay, public and non-profit hospitals are typically Fringe Benefits Tax (FBT) exempt employers.
Superannuation Contributions
We help our clients to better understand the tax and retirement planning advantages of superannuation. Opportunities include making additional concessional contributions, making sure all catch up contributions are used, and potential non-concessional contributions that can all help in boosting retirement savings. Outside of the family home, superannuation is one of the largest assets people hold so making the most of it can create a great wealth pillar.
Tax Efficiency
Managing the tax implications of any financial strategy is key and we work collaboratively with your chosen accountant to optimise your tax strategy, maximise deductions, and minimise tax liabilities. Opportunities for efficiencies include investing in a lower income spouse’s name, better use of superannuation and consideration of other entities such as family trusts and companies. You should also make yourself aware of tax concessions available for medical and healthcare professionals, such as deductions for work-related expenses and education costs.
Investment Diversification
One of the key pillars of any good investment philosophy to manage risk is to diversify any investment portfolio across asset classes such as Australian and international shares, property, fixed income, and cash. Investments could be made through a number of different vehicles including managed funds, exchange-traded funds (ETFs), or direct shares.
Many Doctors and Medical specialists understand the need to diversify their investments and superannuation but don’t have the time, expertise, or interest to implement their investment approach. We work with our medical clients to align their investments to their chosen risk tolerance once we are clear on the optimal strategy and tax structures to achieve their Financial Goals, Purpose, and Legacy needs.
Property Investment
Property Investments are an important part of a wealth-building strategy, and we find this can account from 40-70% of Medical Specialists’ overall Wealth. You should evaluate the potential benefits of property investment, including rental income, capital growth, and tax deductions such as negative gearing and depreciation. As with any long-term investment you should conduct thorough research and consider factors such as location, property type, and financing options before investing in real estate.
Insurance Coverage
Personal insurances are key to make sure that you don’t go backwards financially in the event of an unexpected sickness, accident or injury. You should be reviewing your insurance policies at least annually to ensure adequate coverage for income protection, total and permanent disability (TPD), life insurance, and critical illness. Many doctors and medical specialists have some form of cover via superannuation but often the level of cover is insufficient for their needs and/or the quality of cover and policy definitions is lacking and does not offer value for money.
We work with our medical clients to review their optimal levels of cover to protect financial goals, and recommend policies tailored to medical professionals that offer specific benefits and features to address their unique needs and circumstances.
Continuing Professional Development
Doctors and medical specialists are in the industry for a long time and are passionate about helping others. By investing in ongoing education and training, doctors will continue to enhance their medical skills and qualifications, particularly as technology and medical practices change over time. If not doing so already, you should be looking to allocate a portion of your budget for professional development activities such as conferences, workshops, and courses that will contribute to your career advancement and earning potential within the hospital system.
Budgeting and Saving
A common starting point for any personal financial planning is to understand your cashflow which means developing a budget that accounts for fixed expenses, variable expenses, and savings goals. Then to monitor those spending habits and identify areas where you can reduce discretionary expenses to increase savings and achieve financial milestones without compromise on your current lifestyle (too much).
While setting and tracking a budget is not a particularly exciting project for many, we see opportunities to streamline and digitise the cashflow management process including using budgeting software to extract recent expenditure data to analyse and track expenditure patterns and factor actual expenditure into future planning and modelling purposes.
We work with our medical clients to understand their cashflow and how their financial decisions now impact longer term goals and planning via our Five Pillars Client journey.
Estate Planning
While most planning is about looking forward and growing wealth, we also need to plan for your future legacy and developing an estate plan that includes a will, enduring power of attorney, and advanced care directive. We work collaboratively with our clients and legal specialists to get past the inertia of planning for legacy and pull everything together.
As life changes and evolves, you should then be reviewing and updating your estate plan regularly to reflect changes in your personal and financial circumstances, such as marriage, divorce, or the birth of children.
As in all financial matters that have some complexity, it’s essential to seek advice from professionals with expertise and understand the unique challenges and opportunities faced by medical specialists.
At Boutique Advisers Private Wealth, we understand the medical sector, and through our Five Pillars of Advice journey, help our clients make Confident Life Decisions about their Wealth. Contact the team today to find out how we can assist you with your journey.