How a Doctor Earning $100,000+ Yearly Can Still Be Financially Insecure
- June 13, 2018
- Posted by: Quarles Business and Financial Strategists
- Category: Tax and Accounting
If you’re a doctor in Perth with more than three years’ of practical experience, the latest statistics from the federal government show that you’re probably earning more than $100,000 a year.
You’re probably the envy of your friends
- If you’re working for someone else GP practice, you’ll pay about 30% of your income to the practice owner to cover their running costs.
- You might still have a massive HECS/HELP debt to pay off in addition to all your living expenses. If you do, you’re starting behind the eight-ball, and need to make sure you develop good financial habits with your restrictive This means outlining a budget.
1) Get rid of that HECS/HELP debt as quickly as possible before you get any further in debt.
2) Establish a solid financial foundation for your short, medium and long-term future.
It’s important to develop good financial habits early. Just because you’re earning an above average income, that doesn’t mean you’re good at managing your money. Keep in mind that Perth was recently rated the second most expensive city in Australia for the cost of living
There are plenty of high-income earners out there who don’t budget effectively or invest in the right assets to achieve financial security. Avoid the most common financial mistakes that young doctors make by making sure you get the right financial planning advice to make the most of your earnings.
Running Your Own Practice
If you’re a more experienced doctor running your own medical practice as a GP (or doing it in partnership with others), there is a possibility that your financial troubles are due to cash flow issues.
Or if you’re just starting your practice, you could be up for between $200,000 and $500,000 in fit-out costs, depending on where you choose to set up your practice. It can then take you a long time to establish a patient base and recoup these costs.
The Difference between Cash Flow and Income
The concepts of cash flow and income/profits are often confused by people who lack the requisite accounting knowledge. If you’re running a medical practice and have money in the bank, that doesn’t necessarily mean those can be counted as surplus funds. At least some of those funds will be required to cover all the expenses associated with running your practice.
The Importance of Tax and Accounting Packages for a Medical Practice
Running a medical practice can require a lot of administration work to keep on top of your cash flow. That can be tough if you’re not an accountant and you don’t have an efficient system in place.
To keep your revenue stream in check, you need to monitor client payments and Medicare claims for the services you provide. You also need to efficiently manage your expenses, including tracking the hours of any other doctors or staff who work for you and paying them accordingly, including the compulsory superannuation guarantee of 9.5%.
On top of that, you need to ensure that you fulfil your business tax reporting and payment obligations, such as:
- Pay as you go (PAYG) instalments;
- PAYG withholding tax;
- and potentially fringe benefits tax (FBT).
This all needs to be done via your monthly or quarterly business activity statements (BAS).
But you’re a doctor, not an accountant.
Thankfully, there are tax and accounting packages available to help you do all of this seamlessly.
Xero is the market-leading cloud-based accounting software in Australia, offering a package for medical practices with the following features and apps:
- Online access so you (and/or your staff) can use it anytime, anywhere.
- Online Medicare claiming for faster reimbursements to boost your cash flow.
- The ability to automatically load your invoices and bank statements so that you’ll always be up-to-date on your cash flow position.
- The ability to pay your bills and prepare information for your tax reporting and payment obligations.
- The ability to schedule your patient bookings to maximise your income-earning potential.
- Financial reporting functionality that provides you with the data you need to manage your medical practice effectively.
Xero accounting software is accurate, easy to use and can save your medical practice time and money.
How we can help
At Quarles Business & Financial Strategists, we employ only the most professional and experienced accountants Perth has to offer. We are Xero Gold Partners and Xero Certified Advisors who can help you to automate your tax and accounting tasks to create an efficient and profitable work environment in your medical practice.
Our accountants in Perth cater to the needs of the medical community as part of a specialised area of accounting focus. We can set you up with the most suitable Xero accounting software package and provide as much ongoing advice as you need.
No matter how large or small your medical practice, we have a team of specially trained certified practising accountants (CPAs) and Chartered accountants on staff. We are well qualified with over 40 years of experience, servicing the needs of our Perth clients across a variety of highly specialised fields.
- Business improvement programs to help you increase your business’s performance and scale effectively as you grow.
- Financial planning to help you implement strategies to achieve your financial goals, like minimising your tax, budgeting effectively, and choosing the right mix of investments to secure your financial future.
- Self-managed super fund advice and packages (if you want to take control of your retirement investments).
Contact our Perth accountants today to find out more about how we can help you!