The title of ‘doctor’ brings both a lot of respect and a respectable income. Unfortunately, though, you’re also popular with the tax man. So you need to get savvy and learn some ways to pay less tax.
You’ve got bills and debts to pay, a practice to run and a life to live. How can you keep more of your hard-earned income in your wallet? Read on.
You can pay less tax as a doctor by considering one or more of the following possibilities.
Make Extra Super Contributions
The best and most reliable way to save your income from tax is to contribute more to your superannuation fund. Making before-tax contributions is a good idea. Get professional advice to better understand how much you can contribute to your super.
Gear Your Investments
Also called leveraging, gearing is a method where you borrow money to help you make an investment. This can be a good kind of risk and the government allows some tax breaks for it. Gearing is especially helpful for young professionals who don’t yet have much saved up to start investing with.
What does it mean to gear or leverage your investments? Here’s an example of a negatively-geared investment: costs for maintaining an investment property are greater than the income it generates. This situation can generate some tax savings. But don’t just take on more debt in hopes of getting a tax break! Proceed only after getting reliable advice from an unbiased financial adviser.
Another word of caution: watch out for offers of shady investment schemes. Too many doctors think that investing in something is better than investing in nothing simply because they hear about the tax benefits. Tax breaks are a perk of investing, but they should not be your main motivation for getting into an investment scheme given the risk involved.
Set Up a Trust
Trusts can protect your family’s finances or your business’ assets in the event of litigation. A trust can also be a good way to split income with a partner. There are some nice tax benefits attached to having a trust.
Be warned, however. You should not set up a trust without getting advice, for the sake of getting some tax breaks. A couple of mistakes, and you could land in hot water with the ATO under the suspicion of tax avoidance. So be sure to talk to an expert accountant before making any moves.
Pay Less Tax by Searching for Deductions
You can honestly and successfully save yourself a chunk of change at tax time by searching for the right deductions.
Stay on the lookout for some of the following deductions you may be able to claim:
– Continuing education costs
– Registration fees
– Membership and journal subscription fees
– Accounting expenses
– Travel costs
– Work-related purchases
Check out this post to learn more about tax deductions for medical professionals.
The smartest thing you can do is get advice from accounting experts who understand the tax requirements and opportunities for medical professionals.
Nitschke Nancarrow specialise in accounting and financial planning for doctors and medical specialists.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.