The first and critical step to financial planning is to minimize your tax bill. Being a doctor in Australia, you may not understand that you have to face a drop to 50% of your income to pay taxes to different Federal and State governments. At the end of your career, this is a loss of hundreds or thousands of dollars for a no-good reason. So, it is wise to get advice from professionals who can reduce your tax payables and increase your cash flow.
According to the ATO, the most paying profession in Australia is a doctor. Specialists, anesthetists, and surgeons fall in the top three categories for all of the high-income jobs. According to an estimation, they earn more than $250,000 per year, and as such, the tax rate is also high.
Want to pay less tax as a doctor?
In this, you invest in trusts, and you do not have to purchase assets in your name. A practice is family trusts for doctors, and trust is an individual entity established by a trustor to distribute the funds from the trust. Anyone who gets funds from the trust is known as a beneficiary.
Why would you want to do this?
The primary purpose in using a trust is to distribute your money as it seems fit to the receivers who have lower tax margins. You can broadcast your money to your spouse, your kids, to any donations you may have, and you have to pay the tax only after you have distributed the money, and less amount will be deducting. You need to know that tax savings are essential. As you make more money, the more you will stand to save on the taxes by utilizing a trust to assist you in paying tax after all it has been given to your beneficiaries. The other main advantage of using a trust is that it does not keep the assets. It is an incorporated protective cover on the purchases you want to control.
Companies can also play the role of beneficiaries for you, which operates to deposit the income earned by you. But this income is exclusive of your personal services income earned by you. Having a company as a beneficiary is a feasible choice for you, and you will be taxed at 30% compared to the 46.5% that you would individually suffer.
In Australia, once allowable deductions are applied to the left income, it is known as 'taxable income.' It shows, if you have maximum permissible deductions, you can save the entire tax. If you paid the cost during your practice, then you can claim a tax deduction. You need to keep an organized keeping system to record, which will indicate your yearly expenses. This record system will help you review your costs quickly and lesser unclear connections between what is not and what is tax-deductible. So, the best accounting advice for you is to have book keepings to record your annual expenditures. For instance, your expenditures that are never clear is the home office, and you may have an office or desk at home where you may work daily, which incurred your expenses.
Transition to the retirement fund
If you are a doctor and are more than 60 years old, you can also transition to retirement funds in the pension form, which utilizes the money from your extra funds. The transition to retirement permits you to deposit about 10% from your super account every year till you are working.
In other words, TTR pensions are to sacrifice your salary, which means:
Your super balance will keep increasing
You will pay less tax as salary sacrifice payments are taxed at a low rate when they go into super funds.
If you are 60 years or more, you need not pay any taxes on your super funds.
Transition to retirement pensions is only accessible only if your super fund has the option of assistance. If this option is not available in your fund, a possible solution is to create a new super fund that provides pension service.
These practices are entirely legal in Australia because they are developed accordingly.
Are your funds being aligned with the ATO’s legitimacies? You will not leave your business vulnerable to ensure that you follow the best structure to reduce tax legally, expand your wealth, and get authorized and financial advice before you put them in place.
About half of income is being used to pay taxes, and you wish to save as much money as is possible for you? Luckily, you have several choices you could choose to ensure that your revenue is secured, as all of them are legal and simple to achieve. All you have to do is resolve which is suitable for your needs, business, lifestyle, and employment to reduce your tax.
What’s Your Next Step?
You can reach out to us and can talk about your situation as you are a doctor and value the idea of taking advice from a highly expert. We are the experts to help you reduce your taxes, and we can assist you out with your accounting advice.