After many years of hard study, starting your medical career can be a rewarding time – from both a work and financial perspective.
The early months and years will be busy – getting to know different hospitals and the new rotations each term. Long term financial planning may not be your immediate priority, but there are still a few things you should spend some time on in this early part of your career.
Super is often overlooked when you’re starting in the workforce and usually we sign up to the one recommended by our employer. There may be nothing wrong with the fund offered by your employer, but you should get at least a basic understanding of how it works – after all, it’s your money!
Things to consider are the return the super fund is making, what fees they are charging and what, if any, insurances are housed within the fund – and whether you could be paying too much for these insurances – in some cases up to 40% too much. Your super investment strategy needs to fit your long term goals and also what is known as your risk profile. Knowing your risk profile helps guide you towards the investments that might best suit you.
Keeping yourself registered, insured and up to date isn’t cheap. There’s no getting out of paying these expenses but, on the plus side, most of those costs are tax deductible. Those annual registration fees to APRHA for example are deductible, as is rofessional indemnity insurance, subscriptions to medical journals, training courses and text books.
Make sure you keep receipts for all expenses that relate to your work and then you can discuss with a tax professional whether or not they can be claimed in your annual tax return. Remember, deductions don’t work on a straight dollar for dollar basis – but they should get you some extra money back to help ease the financial pain.
We often see professionals do some locum work on the side, for example after hours doctor services, on top of their main wages job. Two misconceptions relating to this work can be:
1) It’s all extra spending money.
Well this is partly true, but it’s important to factor in that tax is usually not withheld on these payments, it will be payable in your year end tax return.
2) It’s not worth it – you just end up working for the tax man.
The extra hours that you work will mean extra tax to pay. But after the tax man takes his cut, you will still be left better off than before. It’s up to you to decide if what you get in the hand from this extra work is worth the extra hours.
If you are looking at starting a second job, even if that job will be withholding tax from payments, it is always a good idea to have a look at how the second job will effect your overall tax position. At the end of the year your two incomes are added together with any other assessable income, deductions taken away and a final taxable income calculated.
The tax you owe is then calculated based on this taxable income and this figure can include any amounts you owe for HECS, Medicare Levies and Medicare Surcharge. This final tax figure you owe is then compared with the tax that has been withheld on your behalf during the year – and that is how your tax bill or tax refund is calculated.
After working for a while you may find surplus cash building up in your bank account. After all those years of being a student, most of you will want to set yourselves up with a car and probably shout themselves a decent holiday. But what about other financial priorities?
Should you pay off your HECS debt? Invest it in shares/property? Should I borrow some money to invest and where will I get the best deal? Put extra into super? It is important to get advice on the financial options that best suit you and everyone is different. There is no one solution that suits everyone.
You probably won’t have a 100% financial blueprint for the rest of your life at this point in your career. But you should use these early months and years to gather a good team of advisers around you – ones that can help you now with your immediate priorities and also be there for you in the future.
At Affinitas, we understand the medical industry and have the tax, insurance, investment and lending advisers that you can call on when you need them. Contact us for a chat on 07 3359 5244, or even send us a message on Messenger.