Accounting for Psychologists Newsletter #17
I hope you’ve had a productive month. Personally, I’ve had an excellent month with the excitement of the Archery Nationals in the first few days of October and then really getting into the swing of things with work.
As your accountant, I feel it’s my responsibility to help optimise your personal finances.
After talking to lots of psychologists about personal finance, I’ve found that Wills and Estate Planning are almost always put into the “too hard” basket. It’s not an easy subject to think about, but it’s something that can really make a difference for you and your family – your parents, siblings, partner, children and pets - if things were to go awry. It’s a big task which you can tackle step by step and it is absolutely worthwhile. My attitude is that having an estate plan assures me that my family will be financially secure if I’m unable to work or if I’m no longer around.
Like everything else recently the cost of Public Indemnity Insurance has gone up. In this newsletter I give a brief outline of PII.
In this newsletter
- Important Dates for Tax
- Enduring Power of Attorney
- Advance Care Directive
- Estate Planning Action Plan
- Public Indemnity Insurance
Important Dates for Tax
|21 November 2023
|Monthly BAS lodgement due date
|25 November 2023
|Quarterly BAS (July-Sept) due date if you lodge with a tax agent
|21 December 2023
|Monthly BAS lodgement due date
As I mentioned earlier, as your accountants, we feel it’s our responsibility to help you to optimise your finances. An absolutely integral part of that is having an Estate Plan for your personal finances and assets.
Is your Will up to date? What about your Power of Attorney and Advance Care Directive?
No one really wants to think about worst case scenarios, but by setting up a Will, Power of Attorney and an Advance Care Directive you’ll be helping your loved ones to make decisions in difficult situations and making sure that your assets are distributed as you think best. Do get a lawyer assist you in doing this, so that it’s all done properly leaving no room for ambiguity.
A Will is a legal document specifying how you want your assets, including your house, money and personal belongings to be distributed after you die. It also includes your wishes regarding care for your minor children, and you can include guidelines about your pets too.
Having a Will means you can ensure that your assets will go to the people you care about and that the people you choose will administer your estate. It will make it easier for your loved ones to deal with your affairs when you are gone.
When making a Will you need to consider:
- Executor – This is the person, or people, you choose to carry out the directives in your Will. They can be a friend, a member of your family or a professional like a lawyer, accountant or professional executor. It’s good to have two people as executors - one as the principal and the other as a back-up just in case the principal is unable to act. Being someone’s executor is an honour, but it is also a responsibility, so speak with the person or people you choose and check they are comfortable to do it. Generally, executors are not paid but they may be a beneficiary of the Will, or a special clause can be added to the Will specifying payment. Executors can engage professionals like lawyers or accountants to help them and these fees are taken care of by the estate.
- Beneficiaries – Make a clear list of the people or charities you would like to receive your money after you die. Be specific so there can be no mistakes in identity.
- Specific gifts – Would you like to leave a major asset (like your house) to a specific person? Are there any items of sentimental value or jewellery that you would like a specific person to have?
- Guardianship of your children - If you have children under 18, or dependents, you need to name a guardian for them in your Will.
- Care for your pets – If you have beloved pets, you can include guidelines about who will care for them in your Will.
Enduring Power of Attorney
This is a legal document allowing you to appoint a family member, a close friend or a professional, to look after your legal and financial affairs if you become incapacitated and unable to make decisions.
If you don’t have an Enduring Power of Attorney and you become incapacitated, your loved ones won’t be able to make decisions on your behalf. They’ll need to apply to the Guardianship and Administration Tribunal to be appointed as your guardian which can be a stressful and costly process.
Advance Care Directive
An Advance Care Directive is a legal document that allows you to write down your wishes, preferences and instructions for your future health care, living arrangements, personal matters and end of life in the event that you suffer serious illness or incapacity. In this document you nominate one or more people to make these types of decisions for you if you are not able to.
It’s not something to put off, so utilise the free government service in your state right now to register your preferences and nominate your substitute decision makers online. You can find links to your state or territory’s Advance Care Directive forms at Advance Care Planning Australia. You can review it with your lawyer later on.
Laws vary in different states and territories, so I recommend you find a local lawyer to help you with this. If you’re in Adelaide, we can put you in touch with a lawyer specialising in Estate Planning.
Estate planning action plan
To be honest, the first time I made my Will, I had no idea where to start or what to do, so, I’ve made this step by step plan:
Step 1 – Decisions
Get a large block of your favourite chocolate and/or a glass of wine and do some serious thinking:
- Decide who you would like to be your executor and your back-up executor.
- Decide who you would like to have guardianship of your children.
- Consider how you would like to distribute your assets. It could be percentage based, or you could give specific assets to your beneficiaries.
- Think about any special requests you may have such as organ donation or funeral arrangements.
- Decide who you would trust to make decisions on your behalf if you were to become incapacitated.
- Think about what sort of care you would like to have if you were to become incapacitated.
Well done, you’ve completed the most difficult part.
Step 2 - Action
- Now, make some phone calls and book some coffee catchups to speak with the relatives or friends you’ve considered for executors, guardians and decision makers. Check with them if they are willing to take on that responsibility.
- Get online and fill in the Advance Care planning form
- Ask a friend to recommend a lawyer specialising in estate planning. If you’re in Adelaide, I’d be happy to recommend someone.
- Make an appointment with the lawyer to complete your Will, Enduring Power of Attorney and Advance Care Directive.
Like everything else recently, insurance premiums have gone up. As a practicing psychologist you are obliged to have Professional Indemnity Insurance (PII) so make sure you are covered. Here’s a brief outline of what it is.
Professional Indemnity Insurance
Professional Indemnity Insurance (PII) protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.
Professional indemnity claims can arise from genuine mistakes such as giving an incorrect diagnosis, incorrect advice, or losing documentation. It also covers breaches of privacy.
PII insurance can cover your legal costs, compensation costs and time spent away from your business. It can also protect the reputation of your business because you’ll be able to afford to go to court to defend yourself and your decisions, rather than quietly offering a compensation payment to avoid the expense of legal action.
AHPRA has very strict rules about PII. It mandates that all psychologists must have PII in order to register and to practice psychology. AHPRA makes it very clear that the PII must cover all aspects and locations of your practice whether you are working in the government or the private sector, whether you are full-time, part-time, self-employed or a volunteer.
The amount of cover you should have depends on the nature of your practice. The aim is to have enough to meet the legal liability if a claim is made against you. Cover starts from $2,000,000 and goes up to $20,000,000.
Some policies have ‘automatic reinstatement’ which means that the amount that you’re insured for will be restored for a new claim, if a claim has already been paid out.
If you are employed, your employer will probably have PII in place, but it is worth checking what their arrangements are.
If you are self-employed, you will need to make your own PII arrangements and have a Certificate of Currency, or other documentation showing that you have current PII.
If you carry out a combination of employed and self-employed roles, you will need to have PII arrangements which provide appropriate cover for all aspects of your practice.
If you’re currently not practicing, but registered, you’re not required to have PII, but you must have what’s known as run-off cover, which protects you against claims arising from the time you were practicing. Run-off cover may be part of a PII policy or may be purchased separately. If you’re planning to take maternity leave or an extended break, it’s worth checking that you have this in place.
Hope you have a great month,
Fairuz & the Accounting for Psychologists Team