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featured article — How to Structure Your Investment Portfolio

Generally speaking, medical and dental professionals are considered to have a high-risk occupation. Because of the kind of work you do, you’re subject to a wide range of regulations, and you have a high level of liability exposure. Changing economic conditions can also have a substantial impact on your operations, especially if a lot of your capital is tied up in your own practice or you specialise in providing elective treatments that depend on people having disposable income. A smart way to protect your assets from these risks is to build a robust investment portfolio, but sometimes it can be difficult to know what investment structure is best for you and where to start. At Smith Coffey, we specialise in providing expert financial planning and investment accounting services to Australian medical and dental professionals. In this article, we outline some of the more common investment structures and discuss their pros and cons.

Investing as an Individual

Pros

• It’s cost-effective and easy to set up.
• You can gain access to the 50% capital gains tax discount.
• Tax advantages can be achieved.

Cons

• You have fewer options for distributing income.
• Your negatively geared assets may turn positive and thereby increase your tax liability.
• Your risk of exposure to creditors is higher because the investment is in your own name.

Establishing a Trust

Pros

• You can distribute income and capital gains in a way that minimises your tax liability.
• Assets are not owned by an individual, so it is more difficult to be accessed by creditors or litigators.
• You can carry forward any loss incurred by the trust and offset it against future income.

Cons

• Trusts last 80 years, which can pose issues for estate planning.
• If your trust is negatively geared, you’ll need to have more than one income stream to make it effective in reducing your tax liability.
• They are more expensive to establish and maintain than simply investing as an individual.

Extra Superannuation Contributions

Pros

• You can enjoy greater financial security by significantly increasing your retirement savings.
• Your super contributions are generally taxed at 15%, which is likely lower than your own tax rate.
• Your personal super contributions may be eligible for tax deductions.

Cons

• The 15% concessional tax rate only applies to the first $30,000 of contributions each year.
• Additional contributions above the cap can trigger additional taxes and penalties.
• Super has low liquidity as an investment because it can only be accessed later in life.

Company Investments

Pros

• A company’s assets have stronger safeguards.
• The company tax rate of 30% will likely be lower than an individual high-income earner’s.
• Companies do not end, so they’re an effective way to plan your estate.

Cons

• They’re more expensive to establish and run than investing as an individual or via a trust.
• They do not enjoy the 50% capital gains discount.
• You can only offset losses against future company income, not your own.

Final Thoughts

featured article — How to protect and grow your wealth at every stage of your medical career

It’s never too late to start growing your wealth, but those who start earlier tend to enjoy better long-term financial outcomes. If you’re a doctor in training or still in the early stages of your medical career, now is the perfect time to take a few simple steps to protect your financial future. At Smith Coffey, we’re experts in helping doctors and medical professionals protect and grow their wealth. That’s why we’ve put together this list of tips that you can use to secure your long-term financial health at every stage of your career.

How to Protect and Grow Your Wealth…

While You’re at Medical School

• Grow your financial literacy by gaining a better understanding of the Australian financial system (e.g. superannuation and taxation requirements) and simple ways to invest.
• Create a budget to help you manage your living expenses. Ideally, you should identify your spending limit and plan to spend less than this so you have a buffer. You can either do this yourself or use an app to help you track your spending.
• Start saving money by routinely depositing small amounts into a savings account. Keep some of this on hand in case of emergency, but also consider investing a portion.

While You’re Working a Graduate Job

• Consider additional super payments to improve your financial security in retirement. Just remember that contributions over the yearly cap of $30,000 will be taxed at a higher rate.
• Purchase insurance policies for income protection, life insurance and professional indemnity so you’re financially protected.

As Your Career Progresses

• Keep growing your financial literacy by staying up to date on the latest investment strategies and consulting with financial advisors like Smith Coffey who know your industry.
• Invest part of your income in a diversified investment portfolio. There are a number of investment strategies you can use, but your choice will ultimately depend on your circumstances and goals.
• Plan your tax with an expert tax advisor who can help you maximise your deductions and create a long-term tax strategy that aligns with your financial goals.
• Plan your estate by creating wills (and trusts, if relevant) to ensure your assets are handled effectively, and your wishes are honoured if you’re not around to do so yourself.

As You Prepare to Retire

• Develop a retirement strategy and review it periodically to ensure that your savings and investment strategies still align with your current retirement goals. Use this as an opportunity to make any necessary adjustments.
• Plan for healthcare costs that may arise as you enter retirement, such as any at-home care needs.
• Develop a drawdown strategy for your super and any other investments that’ll help you sustain yourself financially through retirement in a tax-effective manner.
• Talk to a financial advisor about tax-effective ways to distribute your assets to your heirs or any charitable institutions you wish to donate to.

Final Thoughts

featured article — Life and income protection insurance for doctors and dentists

As a medical professional, you spend your days looking after others' health and wellbeing. But what about your own? Doctors, dentists, nurses and other health professionals can be more prone to work-related injury or illness than other occupations. With these risks, life and income protection insurance is crucial. Most people have no hesitation in insuring their house, car and other valuable tangible assets, but in reality, your income is worth significantly more. Insuring your most valuable asset, you and your ability to generate personal exertion income, is one of the most important types of insurance you will ever arrange. Let’s look at some life and income insurance options for medical professionals who want to protect their income should they become unable to work.

Income protection insurance

Why is income protection insurance important for doctors and other medical professionals?

How much can you claim from income protection?

What does income protection insurance cover?

How much does income protection insurance cost?

How do I choose the right income protection insurance for my needs?

Life insurance for doctors and dentists

• Blood-borne disease cover, also known as a ‘needlestick benefit’, provides a payout if you acquire blood-borne diseases like HIV, Hepatitis B or Hepatitis C during the course of your work.
• Own occupation TPD cover that provides a payout if you become totally and permanently disabled due to illness or injury and are unable to do your job. You can still get a payout if you can’t do the specialty you used to be able to do, but you can still work in your profession as a general medical professional.
• Business expense insurance is similar to an income protection policy for your practice.
• Future increase benefit that allows you to make large cover increases without needing to undertake medical tests as your income increases throughout your career.

Get specialised income protection insurance advice for doctors, dentists and medical professionals