featured article — Guide to Tax Deductions for Doctors in Australia - Smith Coffey
Doctors Tax Deductions You Can Claim in Your Next Tax Return
One way for doctors to demystify the process of lodging their tax returns is to gain a better understanding of the deductions you can claim, as well as the ones you can’t. Strong record-keeping is really important at tax time for medical professionals. It is essential to maintain detailed records and keep all receipts related to claimed expenses, including digital copies and email receipts. It is not compulsory to keep physical receipts, as long as you have a legible digital copy. This article will provide a summary of things to claim at tax time, as well as considerations to bear in mind when submitting your next tax deductions including considerations for personal expenses, work related expenses and other deductible expenses you might not have considered.Introduction to Tax Deductions
As a medical professional, understanding tax deductions is essential for maximising your refund and keeping your personal finances in good shape. Medical professionals including doctors, nurses, and other healthcare workers are eligible to claim a variety of deductions, such as travel expenses for work-related trips, self education costs, home office expenses, and protective clothing required for your job. Knowing which expenses are deductible and how to claim them can make a significant difference at tax time. This guide will help you navigate the most common tax deductions available to medical professionals, so you can make the most of your next tax return.Self-Education
Due to Continuing Professional Development (CPD) requirements, medical professionals are often required to spend a large amount of their own money on self-education expenses every year. If this self-education relates directly to your work and how you produce your income, you can claim the cost as a deduction. Examples of these deductible expenses include relevant:- Course and exam fees
- Textbooks and subscriptions to professional library resources
- Seminar and conference fees
- Study expenses directly related to your current position or employment activities
Insurance
Any professional indemnity insurance expenses incurred in relation to your work activities are tax deductible. You may also be wondering ‘Can I claim income protection on my tax return?’. The answer is maybe - other insurance expenses related to your work, such as income protection insurance, may be tax deductible but it’s always best to talk to a qualified medical tax accountant.Uniforms and Protective Clothing
Expenses related to the purchase, hiring, cleaning or repair of uniforms, protective clothing, or specific garments that you’re required to wear for your job can be claimed as a deduction. Examples include specialised theatre footwear, medical scrubs and lab coats. You cannot claim a tax deduction for normal business clothing, such as collared shirts or blouses, even if they are outlined in your organisation’s dress code.Travel
Generally, you cannot deduct expenses for travel to and from work - this is considered a private expense. However, you may claim deductions for business-related travel expenses, such as:- Travelling between different workplaces (e.g. between two hospitals or medical practices)
- Travelling from home to a workplace other than your regular place of work (e.g. for irregular locum work at another clinic)
- Travelling from home to your normal workplace in a situation where you are being paid to be on call and need to attend to an emergency.
Equipment, Tools and Data
If you have purchased tools or equipment that you use for work-related purposes, you can claim the expense as a deduction. For doctors, this may include the purchase of medical equipment, office stationary and electronic devices. For example, you can claim a mobile phone purchase tax deduction if you use the device in the course of your work. Purchases of under $300 can be claimed immediately, but more expensive items will need to be depreciated over the course of their useful life. Doctors, dentists and medical professionals could also claim deductions for the purchase, maintenance, and repair of medical equipment and tools used exclusively for work. If you have expenses that relate to maintaining a home office, you also have the option to claim a fixed 67 cents per hour for each hour that you’ve worked from home. If you choose to claim on this basis, you cannot claim for the specific expenses as well.Carrying on a Business
Doctors carrying on a business, such as a private medical practice, can claim the full cost of any equipment purchased for that business in the year that it was purchased. If you’ve taken out any loans for business-related purposes, the interest expense incurred on the loan can also be claimed as a tax deduction.Other Deductions
There are a number of other tax deductions you can claim in your next tax return. Expenses related to the management of your tax affairs can be claimed as a deduction, as well as eligible donations of over $2. You can also claim a tax refund for union fees. Another consideration is the use of tax deductible debt to drive wealth creation. This can be a great way to reduce your tax liability while also growing your investment portfolio.Final Thoughts
This financial year, consider partnering with a qualified tax accountant who understands the medical field and can help you identify all relevant deductions. Book a consultation with Smith Coffey today and start getting more out of your tax return. Consulting with medical tax professionals can help medical professionals save time and ensure they receive all eligible deductions. by the FSD Teamread now
featured article — How to Structure Your Investment Portfolio
Generally speaking, medical and dental professionals are considered to have a high-risk occupation. Because of the kind of work you do, you’re subject to a wide range of regulations, and you have a high level of liability exposure. Changing economic conditions can also have a substantial impact on your operations, especially if a lot of your capital is tied up in your own practice or you specialise in providing elective treatments that depend on people having disposable income. A smart way to protect your assets from these risks is to build a robust investment portfolio, but sometimes it can be difficult to know what investment structure is best for you and where to start. At Smith Coffey, we specialise in providing expert financial planning and investment accounting services to Australian medical and dental professionals. In this article, we outline some of the more common investment structures and discuss their pros and cons.
Investing as an Individual
Creating a personal investment portfolio is the easiest way to start investing because you’re doing it in your own name and don’t need to set up a separate investment structure. The downside of this is that your assets will not protected if you’re personally sued.Pros
- It’s cost-effective and easy to set up.
- You can gain access to the 50% capital gains tax discount.
- Tax advantages can be achieved.
Cons
- You have fewer options for distributing income.
- Your negatively geared assets may turn positive and thereby increase your tax liability.
- Your risk of exposure to creditors is higher because the investment is in your own name.
Establishing a Trust
A trust (usually a family trust or unit trust) is more complex to establish than a personal investment portfolio and requires a trustee to oversee its ongoing management. That being said, trusts offer greater flexibility when it comes to distributing income and reducing taxes. They also make it easier to protect your assets.Pros
- You can distribute income and capital gains in a way that minimises your tax liability.
- Assets are not owned by an individual, so it is more difficult to be accessed by creditors or litigators.
- You can carry forward any loss incurred by the trust and offset it against future income.
Cons
- Trusts last 80 years, which can pose issues for estate planning.
- If your trust is negatively geared, you’ll need to have more than one income stream to make it effective in reducing your tax liability.
- They are more expensive to establish and maintain than simply investing as an individual.
Extra Superannuation Contributions
Additional super contributions are a great way to grow your investment incrementally over time. Some investors may be put off by the fact that you can’t access your super until later in life, but for others, this limitation is seen as a positive, setting you up for a comfortable retirement.Pros
- You can enjoy greater financial security by significantly increasing your retirement savings.
- Your super contributions are generally taxed at 15%, which is likely lower than your own tax rate.
- Your personal super contributions may be eligible for tax deductions.
Cons
- The 15% concessional tax rate only applies to the first $30,000 of contributions each year.
- Additional contributions above the cap can trigger additional taxes and penalties.
- Super has low liquidity as an investment because it can only be accessed later in life.
Company Investments
More complex again than establishing a trust, a company investment structure is owned by shareholders and run by directors appointed by the company. While it is a more involved investment structure, it also affords even greater asset protection.Pros
- A company’s assets have stronger safeguards.
- The company tax rate of 30% will likely be lower than an individual high-income earner’s.
- Companies do not end, so they’re an effective way to plan your estate.
Cons
- They’re more expensive to establish and run than investing as an individual or via a trust.
- They do not enjoy the 50% capital gains discount.
- You can only offset losses against future company income, not your own.
Final Thoughts
Choosing the right investment structure requires careful consideration of your financial circumstances and investment targets. At Smith Coffey, our team of financial planners specialise in helping medical and dental professionals achieve their financial goals. We’ll work with you to identify investment structures that align with your needs and long-term plans. Interested in a free coffee and chat to discuss your financial future with one of our expert team members? Or want to explore our accounting and tax services for medical and dental professionals? Contact us today. by the FSD Teamread now
featured article — How to protect and grow your wealth at every stage of your medical career
It’s never too late to start growing your wealth, but those who start earlier tend to enjoy better long-term financial outcomes. If you’re a doctor in training or still in the early stages of your medical career, now is the perfect time to take a few simple steps to protect your financial future. At Smith Coffey, we’re experts in helping doctors and medical professionals protect and grow their wealth. That’s why we’ve put together this list of tips that you can use to secure your long-term financial health at every stage of your career.
How to Protect and Grow Your Wealth…
While You’re at Medical School
- Grow your financial literacy by gaining a better understanding of the Australian financial system (e.g. superannuation and taxation requirements) and simple ways to invest.
- Create a budget to help you manage your living expenses. Ideally, you should identify your spending limit and plan to spend less than this so you have a buffer. You can either do this yourself or use an app to help you track your spending.
- Start saving money by routinely depositing small amounts into a savings account. Keep some of this on hand in case of emergency, but also consider investing a portion.
While You’re Working a Graduate Job
- Consider additional super payments to improve your financial security in retirement. Just remember that contributions over the yearly cap of $30,000 will be taxed at a higher rate.
- Purchase insurance policies for income protection, life insurance and professional indemnity so you’re financially protected.
As Your Career Progresses
- Keep growing your financial literacy by staying up to date on the latest investment strategies and consulting with financial advisors like Smith Coffey who know your industry.
- Invest part of your income in a diversified investment portfolio. There are a number of investment strategies you can use, but your choice will ultimately depend on your circumstances and goals.
- Plan your tax with an expert tax advisor who can help you maximise your deductions and create a long-term tax strategy that aligns with your financial goals.
- Plan your estate by creating wills (and trusts, if relevant) to ensure your assets are handled effectively, and your wishes are honoured if you’re not around to do so yourself.
As You Prepare to Retire
- Develop a retirement strategy and review it periodically to ensure that your savings and investment strategies still align with your current retirement goals. Use this as an opportunity to make any necessary adjustments.
- Plan for healthcare costs that may arise as you enter retirement, such as any at-home care needs.
- Develop a drawdown strategy for your super and any other investments that’ll help you sustain yourself financially through retirement in a tax-effective manner.
- Talk to a financial advisor about tax-effective ways to distribute your assets to your heirs or any charitable institutions you wish to donate to.
Final Thoughts
It’s never too early to start planning your financial future. At Smith Coffey, we don’t just grow your wealth - we help you protect it so that when the time comes, you can retire with peace of mind. Let’s have a coffee and a chat about your financial future today. Book your free initial consultation. by the FSD Teamread now
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Guide to Tax Deductions for Doctors in Australia - Smith Coffey
Doctors Tax Deductions You Can Claim in Your Next Tax Return One way for doctors to demystify the process of lodging their tax returns is to gain a better understanding of the deductions you can claim, as well as the ones you can’t. Strong record-keeping is really important at tax time for medical professionals. It […]
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Generally speaking, medical and dental professionals are considered to have a high-risk occupation. Because of the kind of work you do, you’re subject to a wide range of regulations, and you have a high level of liability exposure. Changing economic conditions can also have a substantial impact on your operations, especially if a lot of […]
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How to protect and grow your wealth at every stage of your medical career
It’s never too late to start growing your wealth, but those who start earlier tend to enjoy better long-term financial outcomes. If you’re a doctor in training or still in the early stages of your medical career, now is the perfect time to take a few simple steps to protect your financial future. At Smith […]
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