Introduction

With the most recent treasury announcement regarding proposed limitations on self education expense claims per financial year ($2000/year) we believe it is important to highlight what is classified as self education expenses according to ATO guidelines.

Self Education Expenses

Self-education expenses are the costs you incur to undertake a course of study at a school, college, university or other recognised place of education. That is:

You are upgrading your qualifications for your current employment.

• You are improving specific skills or knowledge used in your current employment.
• You are employed as a trainee and you are undertaking a course that forms part of that traineeship.
• You can show that at the time you were working and studying, your course led, or was likely to lead, to an increase in employment income.

For a doctor, these are the courses undertaken in relation to obtaining your professional specialist qualification recognition e.g., costs incurred by doctors studying towards being an GP, Physician, Surgeon and other specialties that were initially pre-selected in their residency years.

Our View

In our opinion, this does not include seminar, conferences and other training courses that are aimed more towards doctors in general, does not serve towards obtaining credits for a specialist specific program and are more towards maintaining CPD hours for professional doctors.

Non self-education costs are claimed as work related deductions and thus not subject to the proposed $2,000 limit proposed.

Note however, that you can only claim self-education expenses when you already in a training path towards that specialty. If you are already in a specialty and is contemplating a change in career by changing to another specialty, such deductions are rarely, if ever, deductible.

We now look forward to seeing if this measure actually passes through parliament. If it does then there may be some opportunity to mitigate the lost deduction through other avenues, for example through salary packaging. Watch this space.

To arrange to meet for comprehensive tax and financial advice specific to your situation, please contact us on (07) 32528810 or here

It’s beginning to look a lot like…Tax Return time!

When the temperature starts to drop, and State of Origin kicks into full gear,  who wouldn’t want to celebrate the cool weather and shorter days inside, under piles of papers and receipts? Kidding!  Come July, tax season brings its frustrations and stress, but with some planning and the right partners to help out, it need not be.

Doctors Wealth Accounting has put together this list of common deductions for Doctors to help get you started. Of course, some of these will apply to you, some wont, and there will be some extras that apply to you that are not on here, but will instead be uncovered in your detailed tax return and planning meeting.

To see the Common Tax Deductions for Doctors, click here. To make an appointment with one of our chartered accountants who specialise in tax advice for doctors, please contact us on (07) 32528810, leave your details here, or email us at info@doctorswealth.com.au.

Why you should prepay your private health insurance premium before June 30, 2012

From 1 July 2012, the Government will introduce three new ‘Private Health Insurance Incentives Tiers’, meaning the private health rebate you receive will be means tested. This has now been passed by the parliament, so we wanted to discuss how to minimise this impact on clients.

What does this mean to you?

Well, for singles earning $84,000 or less and families earning $168,000 or less, you will continue to receive the existing 30% rebate.

However, when you earn over $84,000 as a single, or $168,000 for the family, your rebate will reduce according to the following scale.

For Singles earning

• Under $84,000 – 30%
• $84,001-$97,000 – 20%
• $97,001 – $130,000 – 10%
• Over 130,001 – Nil

For Families earning

• Under $168,000 – 30%
• $168,001-$194,000 – 20%
• $194,001 – $260,000 – 10%
• Over 260,001 – Nil

What should you do?

While everyone’s circumstances will be different, consider the following example case study.

Henry is a medical registrar in his advanced training, and will earn about $150,000 in total this year. After he learns of this issue from Doctors Wealth, he contacts his private health provider and chooses to pre-pay his yearly Private Health premium before the end of June, at a total cost of $1,800. He is eligible for the full 30% private health rebate, meaning he receives $540 back in the current year. However, if Henry was to wait until any time after July 1^st, 2012, this 30% rebate would not apply and he would not receive that $540 back (as his income is over $130,000).

By simply paying in June instead of July or after, he is $540 better off!

To discuss this with one of our specialist financial advisers, please ring (07) 32528810 or leave your details here.

The Six Enemies of Greatness (and Happiness)

These six factors can erode the grandest of plans and the noblest of intentions. They can turn visionaries into paper-pushers and wide-eyed dreamers into shivering, weeping balls of regret. Beware!

With ongoing uncertainty in Europe creating volatility in sharemarkets, here are answers to some questions you may have.

What’s happening in Greece?

In the May elections, anti-austerity parties did better than expected, but no
party could form a government. This has led to fears that Greece isn’t
committed to the debt-cutting measures it promised as a trade-off for bailout
funds from European policy makers. Fresh elections will be held in mid June,
and it’s unclear what the outcome will be. If an antiausterity government is
formed, and the European Union doesn’t provide further funds, the Greek government
will soon be unable to pay its debts (a large chunk of which are owed to banks
in Europe and the European Central Bank). If this happens, Greece may choose to
leave the eurozone or be forced out.

Why does it matter if Greece exits the Eurozone?

What’s worrying investors most is the possibility of a ripple effect from a Greek
default and exit. Other European countries – Spain, Italy, Portugal and Ireland – are also in a lot of debt. Spain and Italy are larger economies than Greece, and their debts, which
are much bigger, are held by banks and investors worldwide. The Italian government
bond market is one of the world’s largest. If these countries default on their debts,
the losses would be felt by banks internationally. They’d be less willing to
lend, further dampening global economic growth at a time when several European
countries are in recession and the US economy is still recovering.

What’s caused the market volatility?

With the uncertainty in Europe, investors have become very nervous. They’ve reacted
to each piece of news about new developments, causing swings in investment
markets.

How is China performing?

After a period of very strong growth, China’s economy is slowing. It’s unclear how
far and fast the slowdown will be. However, if growth starts to weaken
seriously, policy makers in China can act quickly to stimulate the economy.

How does all of this affect Australia?

We’re not immune to these global concerns. Our sharemarket has recently seen similar
levels of volatility to international markets. A slowdown in the rest of the world,
and particularly in China, could hurt our exports. If there’s an international
shortage of loan funds, our banks will face higher funding costs. But there are
good reasons to be optimistic about Australia’s position. There’s still a
strong pipeline of investment, especially in the resources sector. The government’s
finances are much healthier than in most countries, and our banking system is
strong. Policy makers have room to cut interest rates further to keep the economy
growing, if necessary.

So what’s the outlook?

The future remains uncertain, as there are several paths the situation in Europe
could take. The problems facing Europe have been bubbling away for almost three
years and it will be some time before they’re resolved. You can expect
sharemarkets to remain volatile until the outcome is clearer. However, the
long-term outlook for European countries certainly isn’t all bad. History shows
that the countries in similar situations eventually recover and grow again. Despite the current market volatility, we believe shares still offer reasonable potential returns over the medium term – better than bonds, cash or property.

Fixed vs Variable – the Great Debate

Fixed rate home loans

Generally people view fixed rate home loans as a safe but rigid option when looking for surety in terms of monthly commitment, but with flexible new products available, and interest rates at their lowest levels in 7 years, fixed rate loans are a popular discussion topic.

1. Fixed rate home loans now have the flexibility to allow extra repayments and include redraw facilities (some lenders).

2. A fixed rate home loan will give you surety about your monthly commitment in terms of the home loan repayment and are a great option for those who require a carefully managed budget – knowing exactly how much you need to repay means you can plan accordingly and gives you a degree of certainty and security.

3. Choosing the right fixed rate option and term which can be between one and ten years. The most popular fixed-rate loan term is three years.

Variable rate home loans

Variable rate home loans allow flexibility in terms of rates and repayment.

1. Variable rate loans cover the market in terms of features and benefits:

a. Offset products with savings account and credit cards

b. Line of credit products

c. Honeymoon offers

d. Greater overall discounts for higher loan amounts

2. The risk of variable rates is that in an increasing interest rate market the increase in rate will result in an
increase in the monthly repayment.

3. For budget conscious you a higher rate of interest needs to be factored in to ensure affordability.

Key statistics

RBA data illustrates some of the trends in terms of fixed and variable rates:

1. 83% of the time borrowers would have been better off in basic variable rate products than 3 year fixed rate products.

2. 96% of the time borrowers would have been better off with variable rate products when compared to traditional banks 3 year fixed rate products.

3. Borrowers have not been particularly good at picking the best time to fix their rates with peaks in fixed rate approvals often occurring at the worst possible times.

So…What should I do?

Simply put, there is no one right answer for everyone - Your particular circumstance will ultimately determine the options; and integrating this decision into your overall plan is vitally important.

We strongly recommend discussing this key decision with one of Doctors Wealth’s financial advisers, in combination with one of Doctors Wealth’s mortgage specialists to ensure all key aspects are covered. Please call 32528810 to book this complimentary initial meeting.

The idea of shifting from growth assets into an all-cash portfolio at this time may seem tempting to some investors.

Understandably, many investors are troubled by the deep European sovereign debt crisis, the lingering aftermath of the GFC and high sharemarket volatility.

The reality is that the annual returns from cash have been markedly higher than for Australian shares over the past 12-month and five-year periods.

The latest table of long-term asset class returns records that the total return from Australian shares (based on the S&P/ASX 200) was a negative 3.7 per cent for the 12 months to the end of October. And more significantly, local shares returned a negative 0.2 per cent a year over the five years.

These negative returns for shares compare with positive returns from cash for the same periods of 4.9 per cent and 5.4 per cent, respectively.

Yet looking more closely at the statistics reveals a different angle to the cash-versus-shares issue. Over longer periods, local shares produced annual returns that were markedly superior to cash:

• Over the 10 years to October, Australian shares returned 7.3 per cent a year against a 5.3 per cent cash return.
• Over 15 years, shares returned 8.4 per cent a year against a 5.3 per cent cash return.
• Over 20 years, shares returned 9.1 per cent a year against a 5.6 per cent cash return.

So when is cash not king? The answer is… Over a longer time period.

No asset class will outperform other asset classes every year. And sometimes the highest performer in any one year is the worst performer in the following year.

An investor who moves from shares to an all-cash portfolio during following a sharp sharemarket downturn often crystallises losses and could miss out on a possible rebound in share prices. And such investors lose the benefit of shares as a potential buffer against inflation.

To discuss where your assets should be and over what time period, please speak to one of our expert advisers using the contact page of our website, or give us a ring directly on (07) 32528810.

Doctors Wealth has put together this exclusive presentation for intern doctors, discussing the 5 key financial areas that medical professionals need to get right from the start of their career. In it, we discuss the fundamentals of cash flow management, income protection, salary packaging, superannuation and more.

Medical Financial Education Series Article

This article is designed to help clarify why it is often better for a busy doctor to put their focus into their career rather than driving endlessly around the suburbs to find their dream home.  Plus why having someone negotiate for you on the purchase will usually quickly pay for itself and save you hassle.

Firstly… What is a Buyer’s Agent?

Buyer’s Agents are licensed real estate professionals who represent busy home buyers and investors purchasing residential or commercial real estate.

They specialise in searching, evaluating and negotiating the best possible price on behalf of the buyer. They do not list or sell real estate.

The key difference between a Buyer’s Agent and a traditional Selling Agent is who they represent. A Buyer’s Agent works exclusively for the buyer, whereas the selling Agent works for the seller. By law, an Agent cannot act for (and accept) a commission from both parties in the transaction.

So… Why should you use a Buyer’s Agent?

1.Access More Property – Discover a hidden network of properties for sale. In addition to property for sale listed by selling agents, you can access ‘silent listings’ and developments before release or advertising to the general public.

2.More Free Time – Instead of searching the internet and newspapers get someone to do the hard work short listing suitable properties for you. Searching for the right property takes a considerable amount of time. While the average person may inspect 5 properties per week, we can look at over 30 (or as many as it takes to find the right property for you). We only present a short list of suitable properties for you to inspect.

3.Save Money - Use a professional negotiator to obtain the lowest possible price and get unbiased advice on what price to really pay. Don’t pay too much for your next property. Being in the market every day means we instantly recognise good value property. We cut through all the hype and give you the bottom line.

4.Reduce Stress – Using a Buyers’ Agent cuts out the frustration of being shown inappropriate or unsuitable properties by selling agents who may not listen to the buyer’s needs. We also guide you through the process, co-ordinating the support services you need including solicitors, mortgage brokers, building inspectors, accountants and property managers.

5.Representation – We do not receive commissions or ‘kickbacks’ from sellers. You have an unbiased Buyers’ Agent working on your side, with your best interests at heart.

6.Maximise your returns – Source the right type of property in locations with good prospects for capital growth to help build your property portfolio faster. We identify hotspots for our investors before they become widely known and provide comprehensive reports on the investment potential for each property. We provide general advice on investment that should deliver a superior level of capital growth but recommend professional confirmation from your accountant or financial planner.

7.Find it faster – Dealing with hundreds of transactions each year means we have systems to secure properties quickly and efficiently.

Great…How do you get started?

Contact us on (07) 32528810 or info@doctorswealth.com.au and we will arrange a great time to talk about  your property needs and wants.

Specialists in Medical Financial Services Including

Buyers Agents & Medical Mortgages