If you're a doctor in Australia, there are five things you absolutely must know about your superannuation.
But first, some context.
Doctors generally spend many years training prior to commencing their professional careers. You're probably not thinking about the end of your working life right at the beginning, but superannuation is the first step in planning to retire and the sooner you're thinking about it, the better. Superannuation in Australia is a savings fund that accumulates throughout your years of employment. It's a powerful source of future financial security, and the Australian superannuation system has remained one of the world's most dynamic retirement and pension systems since its inception in 1992.
Most doctors don't think seriously about super until their mid-30s, and the complexities of superannuation have often provided an excuse for avoiding the topic. For most professionals, including doctors, delayed earnings and high initial costs can impact their ability to save early and benefit from compounding years, which are crucial for building substantial retirement savings. The small steps you take today to boost your super account can have a big impact on your financial future. Retirement planning for doctors means more than just superannuation; it involves tailored strategies, including tax-effective investments and financial structures that support your specific lifestyle and income goals.
Here are five important notes on superannuation that you, as doctors, will find helpful when organising your super plan:
1) Concessionally taxed environment
A major benefit of super is the low tax environment of 15%. Your concessional (or taxable) contributions are pre-tax contributions taxed at 15% inside the fund, and all earnings on the investments within superannuation are also taxed at 15%.
Non-concessional contributions are after-tax contributions that do not incur tax upon entry. If you invest in capital assets within superannuation and those assets are held for more than one year and then sold, the effective tax rate is 10%.
This is compared to an individual marginal rate of up to 47% for every dollar earnt over $180,000. For high-income earners like most doctors, the tax rate on super contributions and earnings is significantly lower than their marginal tax rate, making superannuation a tax-effective savings vehicle. The benefit of this tax rate is that the income after tax can be reinvested over many years until retirement, thereby realising the benefits of compounding. For doctors, employers are required to pay 12% of salaries into a superannuation fund as of 2025-26 under the Superannuation Guarantee. Once you do “retire,” your balance within superannuation (up to certain limits) is then tax free!
2) Annual contribution limits
It is important to note that there are annual contribution limits imposed on concessional (pre-tax) and non-concessional (after-tax) contributions. The current concessional contribution cap is $30,000 per financial year for individuals under 50 and high-income earners, which includes employer contributions and salary sacrifice amounts.
Salary sacrifice is a tax-effective arrangement where you agree to redirect part of your pre tax salary into your super account, reducing your income tax and boosting your retirement funds. Salary sacrifice contributions are classified as concessional contributions and count towards the annual cap. High-earning doctors can also split up to 85% of their concessional contributions with a lower-income spouse to balance superannuation amounts.
3) Unused concessional contributions
If you have unused concessional cap amounts carried forward from prior years and a total super balance below $500,000, you may also be able to make catch-up concessional contributions over a rolling five-year period. This is especially useful for doctors with low balances due to previous years' earnings or delayed career starts, allowing you to maximise your retirement savings and take advantage of additional tax deductions.
4) Diversification
Diversification means you invest your superannuation monies across a range of investments and asset classes to receive returns from different sources. Diversification may help lower your risk, achieve more stable returns, and protect against the impact of individual investments or asset classes dropping in value.
Your superannuation money may currently be invested in Australian shares, international shares, property, cash deposits and other assets depending on your default investment profile, or if you have made your own investment selections. Most retail and industry super funds will allow you to choose from a range or mix of investment options and asset classes. Self-Managed Superannuation Funds (SMSF) offer a wide selection of choices and require you as the SMSF trustee to prepare and implement your own investment strategy.
We recommend our clients always review the fees and costs associated with your super fund and investments, as high fees can erode your long-term savings and retirement balances. Direct property can be a strategic investment option for doctors, both inside and outside super, offering potential income streams and capital growth. Building multiple income streams beyond superannuation, such as property, diversified portfolios, and other investments that provide financial stability and flexibility in retirement. Fund consolidation can help doctors manage multiple super accounts resulting from changes in employers, hospital networks, or states during their residency, making it easier to track your retirement funds and savings.
Understanding your financial situation, career stage, and risk profile is essential when choosing an investment strategy for your super account. You may want to adjust your super investment strategy as you move through each stage of life, and as your circumstances change.
5) Borrowing within your super fund to purchase medical premises
For medical professionals, buying your medical practice premises in a SMSF structure is a strategy that is worth due consideration subject to your personal circumstances.
Through a limited recourse borrowing arrangement (LRBA), you can borrow money within your SMSF to fund the acquisition of the premises in the Fund, with the rental income derived from the property being used to service loan repayments and the property serving as security for the loan itself.
Limited recourse means that the lender’s rights are limited to the property, and they do not have recourse to other assets held in the SMSF in the event of a default. Any rental income earned, and any capital gains made on the sale of the property will only be taxed at a maximum rate of 15% within the SMSF which can provide significant tax benefits over the long-term.
Self-managed super funds (SMSFs) allow doctors to have control over their retirement savings and investment choices, but managing an SMSF involves significant legal responsibilities and compliance with regulations.
The costs associated with running an SMSF can outweigh the benefits for balances below $300,000, but for doctors with a super balance of $500,000 or more, an SMSF can be economically viable, especially for specific investments like direct property. Compliance with SIS regulations, annual audits, and other obligations is critical, and breaches can lead to adverse tax outcomes. Private practice ownership can influence income, investment opportunities, and long-term financial planning for doctors, making SMSFs a valuable tool for some. The transfer balance cap limits the amount that can be transferred into a tax-free retirement pension account, so it is important to manage your super balances and contributions effectively. Seeking expert guidance is highly recommended to ensure compliance and strategic decision-making.
When utilised fully and structured correctly, superannuation can help you reach your financial goals and approach retirement with confidence. If you would like specific advice tailored to your individual circumstances, please reach out to your advisor.
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