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Personal Finance For Doctors: Making Money While You Sleep

Many doctor clients ask us how they can generate passive income. The idea is really simple: you invest your employment income so that it can start to generate investment income. Over time this passive income can start to replace all or part of your employment income.

But how exactly do you achieve this and what should you invest in? Let’s explore a few options and considerations.

Tax planning

Before we look at some investment options, it is important to consider various tax planning structures. As a doctor you have very little opportunities to reduce income tax on your employment income. You should thus aim to minimise the tax you incur on your passive income where possible.

You can achieve this by using tax-effective structures such as superannuation, family trusts and investment bonds. You can read more about this HERE.

Investment options

Let’s now look at some typical investment assets and explore how they can generate passive income.


Residential property has traditionally not been a great income-generating asset. The net income return of residential property is typically in the region of 1-2% (i.e. less than bank interest), due to the high ongoing costs, which makes it extremely difficult to retire on just a property portfolio. This is despite popular belief.

Commercial property typically has a higher rental return but also carries more risk in terms of vacancies, capital loss, etc.

Many doctors in private practice buy their own rooms through super, which can be a great strategy in the right circumstances. If you buy in a desirable location, you may be able to rent out your rooms in retirement and get a good income return.

Australian Shares

Australian shares have a high dividend yield, which may be in the order of 4-5% (read more HERE). This is a much higher return than residential property for example. If you are using a tax-effective structure such as superannuation, you may even get an enhanced income return by way of franking credits. Some investors and fund managers specifically target high-dividend paying shares, and make that the core of their investment strategy.

Investing only in Australian shares obviously carries a higher degree of risk compared to investing in a diversified portfolio, and dividends should only be one aspect of your investment decision.

You can learn more about investing in shares HERE.

Managed investments

Many of our clients invest in diversified investment portfolios, many of which pay a healthy amount of income, which is also partly franked. The benefit of a mixed portfolio is that you are typically exposed to a lower amount of investment risk compared to investing only Australian shares for example.

The income return will depend on the investment mix of the fund and the investment manager’s philosophy and mandate.

You can learn more about managed funds HERE.

If you would like to use your cash flow more effectively and implement a personalised, diversified investment strategy, so you can start to make money while you sleep, contact us on 08 6160 5918 or

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