It’s that time of year again – the end of financial year. For most of us this is a time of stock-take sales and that sinking feeling of realising that you have to scramble around to complete your tax returns. You may also be scratching your head trying to remember what is actually tax deductible, and come to think of it – where did you put that receipt for your stethoscope again…?
I’m definitely no expert, but in my experience most doctors are a bit clueless when it comes to money. We know that our pay (usually) arrives in our accounts each fortnight, but other than a cursory check to make sure it kind of looks right most of us don’t give it another thought.
Each year, I facilitate a financial wellbeing workshop in my department. It’s largely aimed at the registrars but we often have our training senior house officers (PGY3) attend as well. We don’t talk high-end finances, discuss stock prices or return on investment. We simply cover the basics. Each time, I’m amazed at how many of my trainees are missing out on allowances and other financial bonuses they’re entitled to. I’m also a little horrified at how few have what I consider to be essential items: income protection insurance, private indemnity insurance, and total and permanent disability insurance.
Haven’t come across these terms before? Here’s an overview of some of the key policies and allowances that may help improve your financial wellbeing as a junior medical officer and throughout your career:
- Training allowances/professional development allowance. These are offered by many employers (state health departments and other not-for-profit hospitals) and can be worth several thousand dollars. They may be specifically available to off-set the cost of a course, or may form part of your pay once you apply and show proof (for example, college fees receipt) of enrolment in training program. Some state health departments will back pay up to seven years’ worth of allowance so it’s worth exploring if you’re eligible and applying. The contract you sign each year should refer to the award or certified agreement under which you are paid, as well as any other entitlements for which you may be eligible. If you’re still not sure, contact the medical recruitment office (or payroll department) in your hospital and they should be able put you on the right track. Your state Australian Medical Association (AMA) branch will also be able to assist, particularly if you have had problems regarding claiming your allowance.
- Salary packaging/sacrificing. This sounds more complicated than it really is. Basically, it is a tax department approved program to allow you to pay your expenses before your tax comes out of your pay. This means your taxable income is lower which translates into paying less tax (and still covering your expenses). Like the training allowances, the rules for salary packaging are different in every state and even depending on your employer (for example, public hospital versus not-for-profit). Some states are incredibly generous with what you can pay with pre-tax dollars. Others are less so, but there is still an advantage of thousands of dollars. Setting this up will require you to interact with the provider who administers the salary packaging, but usually it’s reasonably quick and easy, particularly if you have a regular payment (for example, rent/mortgage etc.) which you want to package. This is definitely worth the investment of your time, and can be set up any time of the year!
- Income protection insurance. This is the insurance policy that protects you if you are unable to work for a significant period (several months or more). Most of us have oodles of sick leave accumulated after a few years, but at the start of your career you probably won’t have much. Even if you do have leave accumulated, it can get chewed up pretty quickly if you have an accident or significant health issue requiring you to take weeks off work. A few things to note – these policies are cheaper when you are young and healthier and there will be exclusions for pre-existing conditions (including mental illness), so there is an advantage in getting in early before you develop any conditions (which you invariably will!). You can reduce the cost of the policy by increasing the waiting period – for example, if you know that you have a lot of leave you can access you can select a three month or six month waiting period. The longer you work, the more likely you are to have accumulated enough leave to take advantage of this option. The policy will usually pay you 75% of your pay – some policies base this on your actual pay (that is, you provide several pay slips to give an idea of your actual take home pay including shift-loading/overtime), whereas others will only look at your base pay. For most of us that is actually a big difference (especially when you are working a lot of overtime), so it’s worth finding out what your policy pays. A lot of junior doctors think this policy is unnecessary but having worked with several junior doctors who have had car or bike accidents or diagnoses of cancer, having this financial support makes a huge difference. If you have dependents or are paying off a house, this insurance is ESSENTIAL.
- Indemnity insurance. This is not the same as income protection insurance (a common misconception) but just as important. This is what protects you if there is a complaint, adverse patient outcome or even a death at work. Yes, in theory your employer may cover you, but let’s be honest – would you rely on your hospital to represent your interests over theirs? There are several medical indemnity providers (also known as Medical Defence Organisations) in Australia. All will offer very cheap (and worthwhile) policies while you are a junior doctor. Once you finish your training the rates go up significantly, but again this is essential. Both indemnity (and income protection) insurances are tax-deductible.
- Total and permanent disability (TPD) insurance. “More insurance?” I hear you lament. Yes, and again this one is very important (and tax deductible). In the very unfortunate event you are permanently unable to return to work due to illness or injury, you want to have some financial security. What’s important here, is that you have a policy that covers you for your OWN occupation, that is, being a doctor. If you worked stacking shelves through university, but now can’t return to work as a doctor, some policies won’t pay if you can still work in a role you have been “trained for” – this may mean stacking shelves for the rest of your working life! Most superannuation accounts will include TPD insurance, but again read the fine print and make sure you know the waiting period (sometimes two or more years), and what you are covered for (for example, 75% of base or actual pay). As an emergency physician, I can’t imagine anyone not having this. We care for so many patients who are completely well one day and incapacitated the next.
You may find this all tedious gobbledygook, but hopefully you recognise that this is important. If you really can’t face wading through insurance policies and dealing with salary packaging providers, then you may find a financial planner is an option for you. Yes – it’s important to be aware of the commission they are paid for insurance policies and superannuation products, but they know this stuff inside out and hopefully can make it as pain-free as possible. Kind of how we like to think we are with our patients… Be an informed participant and ask questions. Consider finding a planner who has accounting services too so you can outsource your tax returns (these become much more complicated once you start working as contractor or in private practice).
If you’re interested in reading and hearing more about financial wellbeing, check out the resources and blog posted as part of Emergency Medicine Wellness Week 2018 – Financial spoke.
Follow Alex on Twitter @almarkwell