Are you a doctor or medical professional working in Australia? You’re probably no stranger to the fact that the more you earn, the harder you’re taxed.
As it turns out, you could actually save yourself a lot of money the next time you submit your income tax return. At Nobel Thomas, our Melbourne accountants proactively help medical professionals take a scalpel to their tax bill with these tips:
Continuing Education Costs
Medical experts are required to invest in continuing education throughout their careers and it usually amounts to a significant annual tax deduction. Many medical professionals dread the cost of educational courses and materials but they understand such are necessary to maintain their level of skill and service.
Fortunately, you can also score a tax deduction by reporting expenses associated with:
Claim Deductions for All Your Cars
Many practitioners do not claim enough deductions for car costs. One strategy is to have the more valuable car in the practitioner’s own name and run a logbook showing a high business percentage. A high business percentage is simply the result of maximising business travel and minimising private travel.
The other car(s) should be provided as a fringe benefit. Under the statutory method, the amount of FBT is a function of the cost of the car (direct relationship) and kilometres travelled (inverse relationship). The actual business and private percentage are ignored.
The benefit to you will depend on the cost of the car, the normal private use and the total kilometres travelled. Our Melbourne accountants can quickly assess your situation to determine whether there is any benefit in salary packaging a car.
Use a Self Managed Superannuation Fund (SMSF)
SMSFs are essentially a Do It Yourself (DIY) approach to superannuation. They are an effective tax planning tool for a number of reasons.
Firstly, it can allow the practitioner the flexibility of making last-minute contributions prior to 30 June using EFT. In addition, it is not necessary at that time for the practitioner to know exactly what amount they intend to claim as a deduction. Our Melbourne accountants can determine the same at the time we prepare your income tax returns, ensuring we keep your tax to an absolute minimum for the group.
Importantly, it provides the practitioner with the freedom to invest in assets that they feel comfortable with. SMSFs have access to the same investment opportunities as a normal fund (shares, property trusts so-on), but also open other opportunities such as investing in commercial premises for the medical practice.
In addition, you may also explore Transition to Retirement pensions if you are working part-time and aged over 55. A transition to retirement strategy is where you sacrifice your wage to superannuation, paying 15% and then draw a pension from the SMSF at a more favourable tax position than the original wage.
SMSFs are not cheap to operate, in what many consider to be the most complex area of tax law. Accordingly, you should seek professional advice on whether this option is suitable for you.
Doctors and medical experts are often members of multiple associations and subscribe to journals and other publications associated with their field. Tax deductions can include:
All doctors need to purchase professional indemnity insurance. Thankfully, this cost is one that you can report as a tax deduction.
Other work-related insurance expenses you may claim include:
Tax audit cover
Complete Tax Planning Prior to 30 June
The simplest way to save tax is to see Nobel Thomas prior to 30 June. After 30 June, your accountant is simply recording history and has very limited opportunities to save you tax.
Tax planning is an essential part of increasing your overall wealth, as it provides you with the opportunity to actively seek ways to reduce your tax liability and/or increase your wealth through:
Donations over $2 made to Australian charities on the Deductible Gift Recipient list are also deductible.
Tax deductions need to be claimed in the financial year in which the expense is incurred. In some cases, you might consider bringing forward or postponing the payment of an expense to a year when your income is higher to maximise the cash benefit. For example, you could pre-pay interest/insurance in one financial year for the next financial year.
You should always seek advice before claiming any deduction of which you are unsure. To make sure you get the most out of your deductions, speak to a tax expert at Nobel Thomas before lodging your next return and we can prepare and lodge your income tax return for you.