Is making (additional) Super contributions a good strategy for doctors?

— 8 min read

As a medical professional earning ABN (private) income, you will find that you are not receiving Super contributions on top of your earnings as you do from the hospital or other employer.

This means you need to make a decision around (additional) Super contributions.

A financial adviser cannot tell you exactly what you could or should do with your Super without ticking the necessary compliance boxes. You will need to engage with a licenced Wealth adviser for specific advice, but generally speaking there are some facts and tax implications that you need to consider when thinking about making additional Super contributions.

Beware of the limits

Importantly, there are limits to how much can go into Super and for which you can claim a tax deduction. The $25k concessional cap includes whatever your employer(s) have contributed for the year to date, best checked by logging in to your super fund member account and viewing transactions for the financial year.

Advantages

Every dollar you put into Super will save you tax (unless you earn less than the tax-free threshold). For example, let’s assume your annual income after other deductions is above $90k, you will save 39% tax (including Medicare Levy, not including any reduction in a HELP repayment) but the super fund will pay 15% tax on the contributions, a net benefit of 24c for every dollar. If you are a high income earner (more than $250k), the tax benefit will be 47% less 30% tax on contributions, a net benefit of 17c on the dollar.

Downsides

Any funds contributed to Super are preserved until you retire or reach preservation age (60 for those born after 1964) at the earliest. The only other way you can access this Super money back (other than through financial hardship) is via the First Home Super Saver Scheme.

It’s got to fit in your long term strategy

Given the above, you should consider your goals with investing. Some people like not having to contribute to Super, because this means they have more cash in their pocket now (albeit after paying slightly more tax) to do with what they want, e.g. build a cash buffer (if you have no leave), buy a home, invest in shares or property, pay down existing debt etc. A wealth adviser will help you assess your goals to ensure you can retire comfortably. They will work hand-in-glove with a tax adviser to ensure you adopt the most tax-effective strategy whilst also considering your need for cash throughout your working life.

The how-to

The process for contributing your own funds to Super and claiming a deduction is:

  1. Login to your super fund member page and navigate to contributions;
  2. Find the BPay details for making personal contributions and transfer the funds;
  3. Complete the ‘Notice of Intent to Claim a Deduction’ form to advise your fund that you wish to claim a tax deduction;
  4. Await receipt of the Section 290 letter from your fund before lodging your tax return.

If you would like specific advice on Super contributions, how much to contribute and when and how this will impact your investment asset position over the long-term, a good place to start is to speak to your accountant for him or her to refer you to a financial planner or reach out directly to a DPM wealth adviser.

They can hold a no-obligation initial consultation with you and provide specific advice via a Statement of Advice compliance document.

Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.

Authors

Anthony Pane

CA, B. Comm

Consultant
Melbourne

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Anthony has been working in tax and accounting since 2010 and started at DPM as a Tax Consultant in 2015. He looks after doctors at various stages of their career with a customer-centric approach. His clients value his ability to guide them through their issues and provide them with personalised solutions for their taxation, structuring and salary packaging needs.