When the default is damaging | Is your life insurance policy set in stone?

Posted by Sean O'Kane on 18 June 2019
When the default is damaging | Is your life insurance policy set in stone?

Trivial pursuit question what does guaranteed renewable insurance mean?

Guaranteed renewable means that once you've taken up a life insurance policy and have been officially accepted and received your policy document, the life insurance company can't cancel your coverage for any reason. Providing you've been honest in your dealings with the life insurer, you've disclosed everything required by law, and you pay all future premiums when they fall due, guaranteed renewable means your policy is locked in.

Why is this important? Aren't all personal insurances like this I hear you ask?

Well no, actually, as all those people who have default QSuper income protection cover in place will have found out recently. For full details on all the changes click here, but two of the major changes are:

  • change in waiting period from accrued sick leave plus 14 days to 90 days or accrued sick leave, whichever is greater; and
  • reduction in benefit period from three years to two years.

On the plus side, this means the cost of the cover has reduced, but it's not hard to see from these two changes that for younger doctors with minimal sick leave the change puts them in a significantly worse position.

We wrote a blog in March about the problems of default cover in super, so this major change by QSuper is quite timely. What I think will surprise people is that QSuper can just automatically do this.

I've been advising clients on personal insurance since 1995 and have only ever recommended and put in place guaranteed renewable policies. The result being that the conditions of these policies can only ever be improved, benefits can never be taken away, and they can't be cancelled by the insurer, unless the premiums aren't paid.

If you haven't looked at your insurance for a while, or only have default cover in place, talk to an experienced financial adviser who can recommend and implement comprehensive guaranteed renewable insurance, to ensure you're always protected.

Posted in: Financial planning Insurance   0 Comments

Taxing times - why playing the long game is the key to surviving political uncertainty

Posted by Matt Connor on 22 May 2019
Taxing times - why playing the long game is the key to surviving political uncertainty

It's always an interesting time during election campaigns, when the country waits with bated breath to see what changes are going to be made (or not made) by the successful candidates, and how this will affect their day to day lives. Right now its nice to have a reprieve from the relentless advertising.

In the lead up to our most recent polls, there were many people (including lots of accountants) sweating on changes to tax law that didn't eventuate. It's a good reminder that when it comes to your finances, the best protection you can give yourself is to invest in some solid professional planning, so that you're prepared for circumstances where you don't know the outcome, and over which you have little control.

Similar to investment decision making, effective tax planning means playing the long game - putting in place long-term strategies that are based on more than knee-jerk reactions to political movements or personal whims. Making sudden changes to your affairs will have immediate effects - some you expect and some longer-term effects you don't.

It's important to remember that while media hype around party policy and commentary on the possible impacts of these changes is unavoidable, it's important to absorb all the information with a healthy layer of reason.

Political ideologies aside, contentious topics such as changes to negative gearing and capital gains discounts, for example, are inevitable the rules in Australia are quite different to other countries - so it's important to ensure your tax strategies have you covered for fluctuations in these areas.

Similarly, self-managed super funds have always been a moving target, and will continue to be so. The popular strategy for doctors to buy their medical premises within an SMSF will continue, and the lack of appetite for the banks to lend is driven more by the general property cycle than by tax law considerations.

So to ensure you're on the front foot when it comes to your tax planning, make sure you're getting advice from a tax professional you trust and dealing with knowledgeable lenders who understand the medical industry and are equipped to assist doctors with their business planning.

Posted in: Tax Financial planning   0 Comments

ATO Data Matching Changes - What You Need To Know

Posted by Mary Young on 17 April 2019
ATO Data Matching Changes - What You Need To Know

For a long time, the ATO has been using data-matching practices to ensure individuals and businesses correctly declare their income and claim offsets and other benefits in line with the law.

Recently, the ATO have expanded their reach into your information, so it's important to be across what is now being assessed, to ensure that you're compliant.

Previously, data matching was largely focused on data from Centrelink, as well as interest and dividends, but these parameters are now being expanded to include other areas, such as property sales data, collected from land title offices.

For medical professionals, the ATO now receive summary reports from various providers, which include data related to research grants, WorkCover payments etc. This also includes rural and educational grants, and other untaxed payments received by doctors, that occasionally get forgotten about at tax time.

These changes mean that it's more important than ever before to ensure that your record keeping is up to date and that you're declaring all income earned. We recommend having a designated bank account that all practice income, including grants, is banked in, so that there's no confusion about what you need to report. Also be aware that you may need to request additional information on some payments, to ensure accuracy.

If you're unsure about what needs to be included, or you suspect you've missed something, you should check with your accountant. It's much better to be proactive and make sure that everything's as it should be, than have the question asked by the ATO. Your accountant can check what income information the ATO have collected on you in previous years, as well as advise on your current income streams to ensure you're covered across the board.


Posted in: Tax   0 Comments

In or out? Insurance within super isn't all it's cracked up to be.

Posted by Sean O'Kane & Neal Durling on 27 March 2019
In or out? Insurance within super isn't all it's cracked up to be.

The fields of insurance and superannuation are complex and filled with both options, and opinions. One of the latest (and loudest) opinions involves the recommendation from industry "experts" to take up personal insurance within your super fund.

The case for this stems largely from the default levels of cover that are provided through this process, with no underwriting required, making it simple for the member and cheap to administer for the super fund. Sometimes volume discounts mean premiums are also cheaper, but this isn't always the case. The more likely appeal is the fact that the premiums are debited from your super account so there's no out-of-pocket expense.

While this might sound good in theory, as is so often the case with financial planning, there is no one-size-fits all solution -  the best option for you depends entirely on your personal situation as well as consideration of the facts at hand. It's dangerous for members not to seek advice outside of their product provider (super fund) it means they aren't getting the full picture, including  the positives and negatives associated with their different options.

So what are the obvious problems in relying on the default insurance provided by your super fund?

Well, insurance is a basic concept dating back centuries, involving a group of people having each other's backs. Everyone pays in, hoping that they won't need to claim, but, if an unforeseen event happens, they receive a benefit to help support their family. It's a simple business that collects premiums, pays claims, makes a small surplus for reserves to cover future claims, and ideally makes a small profit for those making the market or taking the risk. Setting the premium is absolutely key for sustainability and needs to reflect the likelihood of claim each individual brings to the pool.

With guaranteed acceptance, which typically  occurs when you purchase insurance through your super fund, this process doesn't occur. As a result, this risk is typically managed in the following ways:

  • generally low levels of default insurance cover, which are likely insufficient on their own;
  • policy terms and conditions that are often more restrictive and difficult to claim on "any" rather than "own" occupation TPD, for example;
  • exclusions or restrictions on some benefits that cause high claims eg mental health;
  • exclusion of pre-existing conditions, meaning you're underwritten at claim time, leading to uncertainty at the worst time;
  • temporary income replacement benefits that are short term and cease if your condition becomes defined as permanent;
  • benefits cancelable by the insurer rather than non-cancelable provided you pay premiums; and
  • premium structures that don't offer the long-term premium savings offered by a level premium structure. 

Insurance through super has its place, just like Centrelink as a safety net has its place. And there are situations where an adviser might recommend this is retained or even extended, but to think it's a simple like-for-like comparison is naive at best. Additionally, if using your super to pay your premium is important for you (and of course there are a whole range of long-term implications of doing this as well) there are ways in which you can pay premiums for external insurance via rollover from your fund. So, contrary to popular belief, you aren't restricted to accepting your particular super fund's insurance product even if cashflow is tight.

If ever there was an area that requires the personal advice of a skilled practitioner who can really compare the pair, this is surely it. Just ask anyone who has had the need to claim.

Posted in: Insurance superannuation   0 Comments

When self-help is not a one-person job

Posted by Sean O'Kane & Neal Durling on 22 February 2019
When self-help is not a one-person job

There are times in life when you're better off not putting your head above the parapet, for fear of losing it. And so, with this in mind, it's perhaps no surprise that financial advisers have been largely silent in the wake of the Royal Commission.

While we feel some of the proposals in the final report may have unintended consequences if fully implemented, we feel that in other areas they may not have gone far enough. It's against this backdrop that Scott Pape's book, The Barefoot Investor, has stayed on the best sellers' list - not surprising given the absence of the FP industry having a voice. This has got us to thinking:

  • What is advice and why should clients not just read the book and do it all themselves?

We should show our hands here and disclose that not only have we read the book, but much of what he says closely aligns with our practice's advice philosophy. But we do think it's worth posing another question:

  • How many self-help / all-you'll-ever-need books do you have on your bookshelf?

We have everything from how to lower my blood pressure and chi running, to building your own home and we probably don't need to tell you it remains a work in progress.

  • So what's our point?

If, like us, you're a seeker of knowledge, believe you're a successful self-starter and reasonably disciplined, you buy these books with the intention of reading and understanding, but don't get around to the implementation. Usually, it also becomes apparent that it's more complicated than you first thought, that there are many options, or that it will take significant time, so the book becomes an interesting, but ineffective read.

  • So, is planning and coordinating your entire financial future as simple as it seems?
  • Is a one-size-fits-all approach right for everyone?
  • Is the increased risk of doing it yourself worth the money you're saving?
For some it might be, but through the next few articles we'll explore some of the key benefits that the right personal advice relationship can bring.

In the meantime, below is our advice philosophy, which outlines what we think a good advice relationship looks like.

Our Advice Philosophy

The main reason to seek financial advice or invest in a financial plan is not about having more money, but rather about enabling your finances to help you facilitate the life you want, now and into the future.

A good financial plan, therefore, always comes back to how it achieves this ultimate goal, without any surprises along the way.

This is why we spend a lot of time understanding our clients' goals, and how these evolve over time, to ensure our advice is directly in line with what you want out of your life, now and into the future.

Put yourself in the driver's seat

When it comes to your money, it's crucial that you're in control. It sounds straightforward, but for a lot of doctors this is not the case.

It doesn't need to be complicated, but you need to be on top of the basics knowing what you have coming in, what's going out, and then what you're left with.

Without this knowledge, it's very hard to make any sort of financial plans with confidence, and it's impossible to create financial independence if you consistently spend everything you earn.

Protect what you create

Insurance underwrites the risk of something going wrong while you're building your assets.

You are, and will continue to be, your most valuable financial asset, so we ensure all of our clients have comprehensive cover in place before embarking on creating wealth.

Investing in a comprehensive protection strategy is a positive step, as it ensures there are no surprises, and as your wealth builds and you become more financially secure, you can reduce your cover.

Own your lifestyle, don't borrow it

When money starts coming in, it's easy to get carried away living a lifestyle that's financially unsustainable, supported by borrowing.

It's never been easier for doctors to over-spend, as a result of a combination of low interest rates and over-generous lending by banks.

Just because you can borrow money, doesn't mean you should - having lots of debt will cause stress, restrict your choices, and limit your ability to invest and build funds for financial independence.

Having some debt is a part of life, but it's important to understand the opportunity cost of this and make decisions in the context of your overall situation and objectives.

Make informed financial decisions so that you can enjoy your money

Our strategy is to financially model your position, including all the lifestyle assumptions you wish to make, which means we can therefore predict, with reasonable accuracy, how your financial future will look.

Our advice, combined with all big financial decisions, are entered into the model so the implications of changes and decisions are known before you make them.

This process will allow you to have confidence in your finances so that you can enjoy the money you've worked so hard for.

Get the structure right

Restructuring assets can be a costly exercise, so it's important that we focus on buying assets in the correct entity, from the outset, whether that be in your own name rather than a trust, or super, or vice versa.

We help our clients understand the implications of different structures before any asset or investment purchases are made.

Make time your friend

The impact of compounding returns on investment is exponential growth, so we're big advocates of getting clients to start investing early.

$50,000 invested with an 8% return after 10 years is worth $108,000, after 20 years $233,000 and 30 years $503,000.

See where the money is made?

A long-term relationship

Your finances are a part of life that should always be a focus, no matter what stage of your life or career you're in.

This is why we aim to build long-term partnerships with our clients and use a structured ongoing review process to ensure you have the highest probability of achieving your financial goals.

We use our relationships with our clients to offer ongoing advice and financial coaching to enable you to be accountable for the plans we've made together.

Posted in: Financial planning   0 Comments

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The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

The financial planning services are provided by Medical Financial Pty Ltd trading as Medical Financial Planning (AFSL 506557)