This article has been written by Brentnalls SA, Chartered Accountants and Advisors.
How Doctors can reduce their tax bill
One of the simplest and most effective ways a Doctor can minimise their tax bill is by being aware of the available tax deductions which can be claimed against assessable income.
What is income tax and how can I reduce it?
Simply, Income Tax is payable on a person’s Taxable Income, which is calculated as Assessable Income minus Allowable Deductions. By maximising Allowable Deductions, you reduce the Taxable Income, and the resulting Income Tax. Therefore, claiming everything for which you are entitled is a key strategy to help minimise tax.
The fundamental basis for an allowable tax deduction is that it must be “incurred in gaining or producing your assessable income; or it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income” Sec 8-1 ITAA 1997.
However, you cannot claim a deduction to the extent that the expense is personal in nature, or is capital expenditure (e.g. a motor vehicle, however you can claim depreciation on the vehicle).
It is also worth noting that for Doctors who are registered for GST, you cannot claim the GST portion of an expense as a tax deduction where you have received a refund of that amount through your Business Activity Statement.
Typical tax deductions that Doctors can claim
Service Fees payable to Practice (often withheld by the Practice from payments to Doctors – your Practice should provide you with a summary of fees withheld)
Work Related Car Expenses
When using your own car in the course of performing your job, such as:
- Attending conferences or meetings
- Delivering or Collecting items or supplies
- Travel between two separate places of employment
- Travel from your normal place of work to an alternative place of work
- Does not include travel between home and your usual place of work
- 2 available methods:
- Set rate of 66c per kilometre (up to maximum of 5,000km)
- Log book method – completed for 12 weeks, providing a business use % of your car. This business use % is then applied against your car’s running costs, depreciation, finance interest and other holding costs to determine the deductible amount
Includes travel, accommodation, meals and incidentals
Memberships, Registrations and Subscriptions
- Memberships e.g. RACP, RAGCP, RACS
- Registrations e.g. AHPRA
- Professional Journals
Equipment and Supplies
- Laptop or Tablet
- Bag / Briefcase
- Any other medical supplies or tools of trade
- Professional Indemnity
- Income Protection
Self-Education and Professional Development
Home Office Costs
- Portion of heating & lighting of home office
- Mobile Phone
- Accountants and Tax Agents
Personal Superannuation Contributions
- Currently subject to “10% test” – may only claim a tax deduction for personal contributions to Super where income from being an employee is less than 10% of your total income
- The Government announced in its May 2016 budget that it intends to scrap the “10% test”