What your accountant won’t tell you (but should!)

15 May 2019

Whether you are starting your dental career, acquiring or operating your own practice or wanting to wind down for retirement, your advisor should be able to provide proactive guidance throughout your career.

GRADUATES TO SENIOR DENTISTS

Typically, as you begin your working career after years of challenging study – managing your tax and financial affairs could be something that you just don’t have the skillset to do. However, the early years of your career are critical in establishing a long-term plan to achieve your goals – whether it is to acquire a practice, buy into an existing practice or establishing an investment portfolio to build wealth. Furthermore, addressing whether you should work as an employee, associate practitioner, locum or part of a larger practice for tax purposes and the benefit of each, can lead to some ultimately confusing decisions. This is when you need professional independent financial advice and tailored taxation advice to optimise your short, medium and longer-term outcomes.

YOUR OWN PRIVATE PRACTICE

For many dentists, starting a practice is a dream and a step towards financial independence. With making the leap into starting your own practice, the decisions made within the business’s inception can have drastic implications down the track including asset protection, capital gains tax (CGT), income tax, estate and succession planning.

The best way to minimise the risks associated with a practice acquisition is to be in a position to make a well-informed decision regarding the merits and risks associated with your investment. A thorough due-diligence process (normally provided by your accountant) provides you with a detailed insight into your investment. The process involves conducting an investigation into the commercial, financial and tax affairs of your acquisition – which typically involves:

- review and verification of historical financial information;
- identification and analysis of trends;
- review of forecast financial information;
- review of commercial factors (such as the quality of customers, products and assets); and
- review of internal processes.

The information provided will allow you to make an informed decision with confidence.

Following on, you will need to address what tax structure is appropriate for your acquisition – to not only assist with tax minimisation but to also address asset protection and future financial planning goals. As an example, you may look at purchasing the practice premises within your self-managed super fund to reduce the amount of capital you may personally need to invest whilst also reducing the risk of lease variances at the end of the lease period.

This may also help you to wind down your working hours in the future whilst still retaining ownership. Therefore,
you could set up a structure which will provide you with enough flexibility to allow you to sell a small percentage to junior staff, keeping them incentivised and motivated.

By partnering with the right and proactive (tax) advisors to help you understand your numbers through regular reporting and analysis, you have a better chance to grow and achieve your desired results with clarity.

The success of any business comes down to setting goals, having a plan and taking action. As a practice owner, you should not be spending your valuable time on day-to-day transactions, paying staff and suppliers, and juggling to balance the books. A proactive accountant should assist you in setting up the right technology,
systems and processes in place to assist in your practice growth and, most importantly, provide proactive advice and insights.

LONG IN THE TOOTH – ADVICE FOR DENTISTS
APPROACHING RETIREMENT

With any new chapter in your life, when it comes to retirement, preparation is critical in ensuring you’re not only emotionally ready but financially prepared for the road ahead. Seeking the right advice is critical to assist you in determining the consequences of the sale of your practice, minimising tax, ensuring your investment asset mix
is appropriate and implement a robust estate plan – whilst allowing a number of years to organise this before you enter into retirement.

When it comes to the sale of your practice, you may either wish to wind down the hours you work and retain part ownership or sell the practice as a whole (either to a corporate or practitioner). With either option, you will require a valuation from an industry specialist to determine what your practice is actually worth. You must also prepare the practice for sale in order to maximise is value and attractiveness. Last thing you want is to short change yourself after all those years of blood, sweat and tears.

Timing the sale is also crucial. The Australian Tax Office provides certain tax exemptions to assist in retirement – allowing you to maximise the after-tax proceeds of your sale and boost your super. Be sure to get the right tailored advice before you make any decision to sell.

DO DENTISTS REALLY NEED SPECIALIST ADVICE?

Dental practitioners require different and tailored advice throughout the various stages of their career and life. Whether you are commencing your career, establishing your own practice or preparing for retirement, you require a team of specialist advisors with tax, business advisory and financial advisory skills and experience.

As your circumstances continually change, your advice will need to be tailored to your evolving needs. Dealing with a specialist accountant means the advice you receive is tailored and proactive so that you can focus on doing the things you enjoy.