Congratulations! You are having a baby, one of life’s true joys, to ensure you get the most joy out of your finances during this tricky time, here are some tax considerations for doctors on parental leave you might like to consider along with the costs associated of cot, pram, clothes, nappies and bottles!
Tax and Salary Packaging
Believe it or not, a baby affects your tax position. Appreciating this may be the last thing on your mind when you’re about to have a baby, however if you work in a hospital setting and are taking extended maternity or paternity leave, you should consider effective ways to utilise your salary packaging to improve the tax benefit. Depending on the time of year in which you are taking leave, it may be an option to use up all of your benefits within the Fringe Benefit Tax (FBT) year (pre-31 March and again between 1 April and 30 June). This would assume your income in the following financial year is going to be much lower thus the tax benefit will be lower too.
By the same token, you may bring forward any tax-deductible expenses in the financial year in which your income is highest, which will allow you to see a greater tax benefit at lodgement time. It is important you work closely with your tax consultant to consider whether this option is appropriate for your particular circumstances.
In the swirl of preparation for the arrival of your baby, you may also apply for the Government’s paid parental leave. You need to earn under $150,000 (after adding back packaged income) in the financial year before you have the child, or you lodge the claim. You must be on leave/not working to receive the pay.
It is always a good idea to speak with your accountant to ensure your lodgements are up-to-date as required.
Your partner will be able to claim Dad & Partner Pay, again this is subject to them being under the $150,000 income threshold.
When your baby has arrived, the paperwork doesn’t stop. If you plan on returning to work you will most likely enrol your child into a childcare structure, there are government subsidies available to assist you. The amount of the subsidy you receive is determined by your family income.
Now is a great time to review any insurances or consider increased cover, so that your precious new addition to the family can be provided for if something was to happen to either of you or your partner. It is important to discuss your options with a specialist insurance consultant, to ensure your family is protected at all times and not financially burdened in future.
Wills and Powers of Attorney are also a key component of someone’s life when having a baby. It is a good reason to establish these documents or review what’s already in place. The team at Fletcher Clarendon, our preferred partner for legal services to medical professionals, does a fantastic job.
As a new parent, this is naturally the last thing you want to think about, however an estate plan doesn’t just cover the transferral of assets, but also who would be charged with caring for the child if something serious was to happen to your partner and you.
Similarly, you should also review your superannuation beneficiaries and, as it’s considered a non-estate asset, we suggest discussing with your estate planning solicitor.
Should you have any queries about tax considerations for doctors on parental leave, a DPM tax adviser would be happy to meet and discuss the details of your exciting journey ahead. You can book a free no-obligation initial consultation.
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.