There are many hurdles that a doctor in training will navigate throughout their training program, one being whether you should or will apply for an overseas fellowship before taking on a consulting role. That comes with a number of financial considerations that a doctor should be aware of before commencing an overseas fellowship.
Income expectations before and during your fellowship
One of the first realisations to be faced is the significant drop in income that will be encountered in almost all instances. In fact, some doctors who take on overseas observerships will not earn an income at all. Although most fellowships only last 1 to 2 years, this can still cause a financial burden for the duration of the fellowship. Many doctors travelling overseas will travel with young families so their fellowship income will not just be supporting themselves but in fact their family. Building up a buffer over your final few years of training in anticipation for the loss in income will be crucial.
An important decision that will need to be made before going overseas is what to do with your home, will you rent it out or not? Many doctors travelling overseas for their fellowship will rent their home out and the extra cash flow generated from doing so will help pay for the properties holding costs. Whether you rent your property out or not, there will inevitably be tax consequences therefore it is always a good idea to speak to your accountant about future Capital Gains Tax to stay on top of it. If you rent your home out you will also need accounting advice around the rental income generated and rental expenses.
Due to the timing of when your training program ends and your fellowship commences, some doctors will be in a position to earn some extra income before going overseas. In many cases, this will be private patient fees or income generated through locuming. Earning this extra income is great for building up a pre-fellowship buffer but you will need to plan ahead for future tax payments if the income earned is generated through an Australian Business Number (ABN). Receiving an unexpected tax bill while away overseas and earning a moderate income is not what you need if you are already feeling financially stressed.
Your tax obligations during a fellowship
One of the more common questions you may have regarding your fellowship is whether fellowship expenses are tax deductible, in short the answer is typically no. This is the case particularly if you will be employed and earning an income while overseas. However, everyone’s circumstances are different so it is always best to get your own independent advice about whether or not your expenses can be deducted.
Whether the overseas fellowship income earned is taxable depends on whether you will be regarded as a resident or a non-resident of Australia for tax purposes while you are away. How long you intend on being away for, whether you travel alone or with your family, what your plans are after fellowship are all factors that need to be considered to determine your tax residency status. In the event that you are still considered to be a resident for tax purposes you need to be aware that your overseas fellowship income will be taxable in Australia. In most examples, this should not lead to double taxation as any income tax paid overseas will be used here in Australia to offset the tax you owe. However, due to the timing of various tax years and different income tax rates across the world, the ability to offset overseas income earned with foreign income tax credits can still lead to top up tax being paid in Australia.
Hence, it’s important to have a chat with your tax accountant before you plan to commence an international fellowship; or even better if you can plan ahead to create a fellowship fund with the help of your financial adviser to put your best foot forward.
If you would like any assistance with funding your overseas fellowship, our specialised medical financial services advisers & tax consultants can be contacted here. Happy fellowship planning!
Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.