Which Name Should Doctors Invest In?
With so many doctors now looking to invest, one of the first questions to ask yourself is, in which entity or person’s name should we invest?
The main issues to consider in that respect are:
Tax implications: income and capital gains tax, possible deductions
Asset protection: ideally you would not be exposing your investments to risk
So let’s look at some of the more common options.
Personal name
This might be the most obvious option available to you if you are single for example, and if you have only limited funds to invest. Obviously, there is no asset protection here, and the tax outcomes will also not be that great if you are on a high tax rate.
Spouse’s name
This could be a better alternative, due to accessing a lower tax rate, and also to increase asset protection, assuming your spouse does not have an at-risk occupation.
However, this obviously might give you little or no control over the actual investment itself.
Investment Bond
If you are both on a high tax rate as a couple, or both in risky professions, then this might be an option. Investment and education bonds have a maximum tax rate of 30% and offer asset protection. However, they are less flexible in terms of what you can invest in (pre-selected managed funds), and there are also limitations in terms of annual contributions. There is also an administration cost for the investment bond structure.
This might be good if you want a simple, set and forget strategy by way of direct debit.
Trust
A trust provides tax planning options as well as asset protection benefits. It also allows you to control the assets, without really owning them. You can invest pretty much in whatever you like.
The main disadvantage is the set-up and ongoing costs in terms of annual tax returns, etc.
Also, the main tax benefit will only really apply if you have tax-effective beneficiaries such as adult children who are still dependant.
If you have a sizeable amount to invest and plan to add to this over time, the initial and ongoing costs might become marginal.
Superannuation
This is probably the least popular option, even though it has one of the lowest tax rates, and offers excellent asset protection.
The main disincentives are the frequent legislative changes and the restricted access to super, which is less of an issue if you are close to retirement.
There truly is no one-size-fits-all and it is difficult the find the ‘perfect’ solution. Often you may need to use a number of different holding structures to get the best outcomes.
It is therefore important you always seek individual tax and financial advice.
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