A medical practitioner's career is commonly associated with high earnings and an enviable lifestyle. However, scratch the surface and in our experience, you will uncover complex layers of commercial obligations, personal commitments and business intricacies that are highly vulnerable - all operating in a delicate balance that hinges entirely on one individual.
Medical specialists face the same personal and financial stresses as any other profession. however in our experience there are a number of characteristics unique to the profession.
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The bulk of a medics wealth is tied up in the net present value (NPV) of their future earnings stream.
Medical Professionals are going to become (or are already) a significant payer of income tax.
Australia is a highly litigious culture and once in private practice, medical professionals will need to ensure their assets and business ore protected from the voracious appetites of litigators and patients expecting a perfect service.
Unlike many small business owners in Australia, medical professionals often build up little, if any, goodwill in their practice that can be realised on retirement.
Medical professionals tend to work long hours. In our experience they have almost no time to breathe, let alone shop around for the best financial adviser, accountant. solicitor, mortgage broker, business coach etc.
Medical Professionals are likely to continue working longer (well into their late 60s) than almost any other profession.
Once into their career a medic's job stability tends to be greater and their earnings potential is higher than their peers. This provides them with some unique wealth creation opportunities.
Wealth is created by the development of a passive income stream that grows with time to ultimately replace your earned income. From this point onwards, retirement is possible. Leverage (purchasing assets with debt as well as cash) is a common way for individuals to turbo charge the wealth creation process. The Australian Tax Office (ATO) also kindly permits individuals to claim a tax deduction for interest associated with debt taken on for the purpose of generating income. This includes investment pro per ty loans and debt assumed to purchase shares. However, leverage is not without risk and is not suitable for everyone. It is perfectly suited, though, for those in more secure, well remunerated jobs. Whilst job security is not guaranteed for those in the medical profession, it is at least more certain than most other professions.
Once into your mid - 30s, you may be finally starting to earn some real money. As you look ahead, you can (hopefully) see a stable and rising earnings trajectory. Any event that would prevent you from working would be disastrous. As a medical professional there are unique threats - from the critical use of your hands to the threat of needle prick injury - that other professionals simply do not face.
As a result, it is absolutely critical that you insure this earnings stream. But, income protection insurance policies are not like bottles of milk or litres of fuel - i.e. they are not indistinguishable commodities. It is vital that the insurance policy is appropriate for your situation, that it covers you for all the risks to which you are uniquely exposed and that it is fully up to date. There are many variables to consider, and it is essential to seek professional ad vice for all your personal and business insurance.
There is an old saying that the key to asset protection is to own nothing and control everything. This is why Trusts - and especially Discretionary Trusts - are so popular for high income, high risk occupations such as running a medical consulting practice. The most appropriate business and asset structuring is vital to help assist against loss resulting from any future legal action.
Professional advice must be sought. as this topic is not straightforward and the implications of getting it wrong are immense.
For example Self-Managed Super Funds (SMSFs) have become wildly popular within the medical profession for three excellent reason s. Firstly, the income and capital gains tax rules are extremely generous. You are liable for just 15% income tax in the accumulation phase, reducing to -zero once a pension is commenced, and just 10% capital gains tax in the accumulation phase (provided the asset is held for more than one year). Second, the range of assets that can now be purchased in a SMSF is extensive. Finally, the protection offered by a SMSF from creditors can even be superior to that of a discretionary trust. Due to their growing popularity, the cost of establishment and annual maintenance of a SMSF has fallen significantly over recent times.
Each year Wealth for Health can co-ordinate the activities and reports of your key professional advisers (Tax and Accounting, Insurance, Lending, Banking, and Financial Planning) around the boardroom table. Like your medical team, your personal AGM needs to be cohesive and competent with leadership and direction.