Financial advice for medical specialists

Why do medical specialists need different financial advice?

Three characteristics recur: earnings start late and then climb steeply once becoming a Consultant, income often arrives through a mix of employment, private billings and potentially a practice entity, and time is the binding constraint. The result is high income, unusually complex administration, and almost no capacity to manage it.

The income shape matters more than the income level. Someone who finishes Fellowship at 34 has lost a decade of compounding that a comparable earner in another field has already banked, and frequently carries study debt into the first high-earning year. What follows is a compressed accumulation period in which nearly every financial decision is made under time pressure.

That produces a consistent pattern: the money is fine and the structure is accidental. A practice entity set up on a template, insurance bought once and never reviewed, superannuation on default settings, and an investment property bought because a colleague mentioned one.

Should I operate through a company or a trust?

For a specialist whose income comes from personal skill and effort, the answer is constrained by the personal services income rules. Those rules generally attribute income earned from personal exertion to the individual who earned it, even where a company or trust is interposed. An entity may still be appropriate for other reasons — but generally not as a means of splitting professional income.

This is the most common piece of poor advice given to doctors, and it is usually given confidently.

The personal services income rules exist precisely to prevent the arrangement people hope for. Where income is mainly a reward for an individual's personal efforts or skills, it is generally attributed to that individual regardless of which entity receives it, unless the arrangement qualifies as a personal services business under the relevant tests — which include the results test and tests concerning how many clients the income comes from, whether separate business premises exist, and whether others are employed to do the work. A consulting practice built around one specialist's own clinical work frequently does not satisfy them.

What a practice entity is legitimately useful for is different, and still worthwhile: employing staff, holding equipment and premises, contracting with a hospital or group, limiting liability, and housing genuine business income that is not personal services income. Arrangements involving service entities can also be appropriate where they reflect real services actually provided at commercial rates — an area on which the ATO has published specific guidance and which receives close attention.

The practical upshot is that the structuring question for a specialist is usually not "company or trust". It is which part of this income is genuinely business income, and which part is the individual. If that is answered wrongly, everything built on top of it is built on sand.

I started earning late — am I behind?

On paper, usually yes — and it generally matters less than expected, because a specialist's earning capacity is high and sustained. What determines the outcome is how deliberately the first ten high-earning years are used, not how the training years looked.

One mechanism is particularly relevant to this career shape. Unused concessional contribution cap from the previous five years can be carried forward where total superannuation balance was under $500,000 at the prior 30 June, with unused amounts expiring after five years. Training and early-career years often generate substantial unused room — and the years immediately after fellowship are frequently the last in which the balance test is still satisfied.

That creates a narrow window, and it closes without notice.

For higher incomes, additional tax may apply to concessional contributions under Division 293. Many specialists reach the relevant income level. The common reaction is to conclude that superannuation has stopped being worthwhile and reduce contributions; the arithmetic generally does not support that conclusion, because the total tax on a concessional contribution typically remains below the top marginal rate even where the additional tax applies. It is a reason to calculate, not a reason to stop.

What insurance do specialists actually need to consider?

Professional indemnity covers claims arising from practice. It does not replace income where someone cannot work, and it pays nothing to a family on death. Those are separate covers. Definitions matter more than premiums — particularly whether a total and permanent disability policy uses an "own occupation" or "any occupation" test.

For a surgeon, an anaesthetist, an interventional specialist — anyone whose income depends on fine motor function, vision or specific physical capability — the own-occupation distinction is the difference between a policy that responds to the realistic scenario and one that does not. A policy that pays only where the insured cannot work in any occupation will not respond to a hand injury that ends a surgical career but leaves other work possible.

When we review existing cover, these are the points that recur:

• Cover held inside a default superannuation account is often based on a generic occupational classification that may not match a specialist's actual circumstances.
• Income protection based on a base salary may not reflect income that includes private billings or practice distributions.
• Group cover through a hospital employer generally does not survive leaving that employer, and replacing it later can be difficult if health has changed in the meantime.
• Cover taken out during training is frequently never revisited against an income several times larger.

We do not underwrite or classify any of this. What we do is make sure the definitions are examined before a claim rather than during one.

Can my super fund own my consulting rooms?

Potentially, yes. Business real property is one of the few assets a self-managed super fund can acquire from, and lease to, a related party, provided the relevant conditions are met. It is a genuine strategy for practice premises and it carries real obligations.

Because the rules are detailed and the consequences of getting them wrong are severe, the full treatment sits with our SMSF advice rather than here.

What happens if I reduce my sessions or step back?

Reducing clinical load changes income, contributions, insurance adequacy and often the viability of a practice entity at the same time. It is a structural change dressed as a lifestyle one, and it tends to work considerably better where it has been planned a year or two ahead rather than in the month it happens.

This comes up more than the profession's public conversation suggests. The specialists who manage it well are generally those who built something outside the practice while the income was at its peak, so that the decision to reduce sessions is a preference rather than a calculation. The ones for whom it is difficult are usually those whose entire financial position depends on maintaining the current clinical load indefinitely.

What do specialists most often get wrong?

Four patterns recur: a practice structure adopted from a template rather than designed; insurance never reviewed against the actual specialty or the current income; property bought as the default investment without regard to the rest of the structure; and three or four professionals each optimising their own part with nobody holding the whole picture.

The fourth is the expensive one, and it is the one this practice exists to address. Accountants, solicitors, brokers and practice managers are each doing their job properly. Nobody is responsible for the interactions between them, and that is where the value quietly leaks.

How do you work with medical clients?

We coordinate with your accountant and solicitor rather than replacing them, we work around clinical schedules including early mornings and video, and fees are agreed with you before any work starts, with any life insurance commission disclosed in our Financial Services Guide. The first conversation is about how you want to practise, not about products.