Thursday, December 8 2022 — Articles of Interest
Doctors and other medical professionals often qualify in the highest tax brackets, resulting in less income ending up in their pockets. A good tax saving strategy, such as salary packaging, is therefore integral to maximising returns at tax time.
At Smith Coffey, we provide long term holistic advice to Doctors and Medical Specialists and help our clients achieve financial independence throughout their working lives. We understand tax structures for doctors and are constantly looking to develop long-lasting and financially beneficial tax strategies for your income. We’ve put together this guide to salary packaging to understand how this strategy contributes to a reduced tax bill.
Looking for more tailored tax advice specific to doctors? Book a free initial consultation with us, and we’ll let you know how we can help you grow your wealth.
For Doctors and Medical Specialists either working full time, part time, or in some form of a permanent position for either WA Metro or WA Country Health Service, salary packaging should be available as part of your employment contract.
Salary Packaging is an effective way of paying less income tax due to public teaching hospitals being classified as Public Benevolent Institutions (PBI) status employers. PBI status employers enjoy a tax concession in relation to fringe benefits tax, with similar arrangements also being available for some employees of churches, charities and not for profit institutions. By choosing to salary package, you allocate a portion of your income tax free each fortnight to pay certain expenses before income tax is calculated on your remaining income.
For WA Metropolitan and WA Country Health Service, each employee is entitled to claim an amount of up to $9,010 tax free each FBT year, sometimes referred to as the FBT cap or Threshold. These funds can be used for a home loan, rent, school fees, general living expenses, and other expenses. The FBT year runs from 1 April to 31 March and is a different accounting period to the Financial Year. Typically, top marginal tax ratepayers stand to save around $4,054 on claiming the total amount of the threshold each FBT year.
Additional tax savings are available for packaging FBT exempt items over and above the $9,010 threshold. These items include meal entertainment, where an annual amount of $2,650 can be used for dining in meals at restaurants and cafes anywhere in Australia. You just need to ensure that you are not dining alone when the expense is incurred. Portable electronic devices are also claimable, including laptops, tablets, mobile phone handsets and smartwatches. There is a requirement that these devices be used at least 50% for work use for a claim to be allowable. Airline lounge membership is also packageable, and this expense can be claimed even if you only use the membership for private purposes.
Salary packaging the maximum allowable for meal entertainment will see top rate taxpayers save another $1,192 pa, with even further savings for claiming portable electronic devices. Other FBT exempt items that are concessionally taxed include Superannuation contributions and Novated Car Leases. These are some of the main items that Doctors and Medical Specialists salary package, but numerous other items fall outside this article’s scope. Typically, tax rate taxpayers save around $7,000 a year or more but take full advantage of the very tax-effective benefits available via salary packaging.
Are you looking for tax recommendations specific to the medical industry? At Smith Coffey, we execute specialised tax-saving strategies for doctors, medical professionals, and private practices to reduce your tax bill at the end of the year and maximise your earnings for your entire career.
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