Plan for the financial future that you want

Learn to Avoid 7 Common Tax Mistakes Made by Doctors

1. Receiving interest income on a personal savings account or investment account.

When you receive interest income from a savings account, it is considered assessable income. Any interest earned will be taxed at your marginal tax rate (the highest tax rate you pay).

2. Receiving dividend Income in your personal name.

Many doctors will have shares that pay a dividend. In many cases, these dividends will have franking credits, called imputation credits. These franking credits are passed on to investors that are able to offset against their tax bill or to receive a tax refund.

3. Not salary packaging.

Salary packaging is an arrangement where you agree to forego part of your future salary or wages in return for your employer providing benefits of a similar value. You can sacrifice your salary or wages for a variety of benefits. These can range from car fringe benefits and loan repayments, through to school fees and child care costs.

4. Not taking advantage of negative gearing or depreciation.

Negative gearing occurs when the cost of owning an investment property outweighs the income it generates each year. This creates a taxable loss, which can normally be offset against other assessable income.  Additionally, depreciation can often be claimed against elements of an investment property.

5. Wrong debt structure.

We often come across doctors taking the wrong decision on how to structure the finance around tax-deductible debt vs non-tax-deductible debt. This could be costing you thousands every year.

6. Having the wrong structure to bill for medical services.

Medical services are treated as Personal Service Income (PSI). This means that medical services provided in the capacity of a principal should be taxed under the principal’s name. PSI should not be taxed under a different legal entity, such as a company or spouse’s name.

7. Not claiming all deductions on their tax return.

Many doctors fail to keep appropriate receipts to claim for expenses on their tax returns. This can leave thousands of dollars in unclaimed expenses and the paying of more tax than required.

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The 8 Common Tax Mistakes Made by Doctors

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Financial planning tax mistakes made by doctors