After completing tax returns for medical professionals for more than 50 years, our tax team has heard their fair share of misinformation that clients have received from friends, colleagues or the internet. This article will help to dispel and unpack some of the most common misconceptions when it comes to Australian tax deductions for medical professionals.
I can claim car travel as a medical professional
Motor vehicle travel is deductible, however only in specific circumstances. Travel to and from work is considered private and therefore cannot be claimed. For doctors, common scenarios that are deductible include traveling between hospitals on the same day (for example you start at one location and then travel to another) or in instances where you need to transport equipment for work that needs to be transported by a vehicle (a doctor’s bag or briefcase does not suffice).You can claim this vehicle travel via two methods, these being cents per km or the logbook method.
I can claim meals and travel as a locum doctor
A common misconception amongst sole traders tends to be that all travel expenses can be claimed. Unfortunately this isn’t the case and you can only claim travel expenses if it is a requirement of your job. For example, your employer sends you somewhere to work or you need to attend a conference. Meals whilst working on a locum shift are considered private as you would be eating regardless of the shift you are working. A recent court case ruling shows that the ATO are clamping down on incorrect travel claims.
Can I can claim my medical professional work shoes
You can only claim your work shoes if they are protective shoes rather than conventional clothing. (ie a surgeon may claim non-slip shoes but can not claim their suit shoes for consulting).
I can redraw from my home loan to purchase my next property and then claim the interest against rental income
This depends on the original loan structure. If you have an offset account and haven’t paid down the loan, then it is possible however a redraw account doesn’t allow you to facilitate this. It is worthwhile seeking advice before any purchase to understand your options and how you might want to distinguish between deductible and non- deductible debt for future transactions.
Doctors don’t need to register for GST, because the income they earn is GST-free
This is half-true, the majority of income earned by medical professionals is GST-Free. This is because medical services that include any Medicare billing items are GST-free. Some doctors will perform work that does attract GST, for example private reporting (where another entity is billed as opposed to the patient) or guest speaking roles for other businesses.
However regardless of whether the income has a portion billed under Medicare, any Australian business turning over more than $75,000 of income in any 12 month period MUST register for GST.
This also means you MUST lodge a Business Activity Statement every quarter.
Why do I have to pay so much tax all at once?” Working privately and billing under an ABN is common after completing training, or even as a Doctor in Training looking to top up earnings through locum agencies. When you do this type of work, you earn income that is not taxed at its source. This means the tax must be paid in a lump sum when you lodge your tax return. Typically, your tax adviser will lodge a tax return with a payable amount on its due date, generally 31 March or 15 May the following year.
Why is my hospital telling me I must set up a company tax structure to be paid?
Some hospitals prefer doctors who work as sole traders to be paid under a company structure. This can mean the hospital does not have to incur costs of payroll tax, annual and sick leave, work cover and superannuation. However, this significantly increases the obligations for the individual. Please seek further advice to understand your obligations before entering into this structure.
Is it better to salary package or include electronic devices in a tax return?
It can be advantageous to salary package one electronic device per year and then include everything else that you use for work in your tax return. The reason for this is you can only claim a percentage of business use in your tax return, whereas you can claim 100% when you salary package.
If you have any further questions about tax deductions or what can and cannot be claimed, a DPM tax adviser would be happy to meet and discuss your tax circumstances further. We recommend consulting with a tax professional prior to proceeding with any tax strategies. Book a free no-obligation initial consultation to learn more.
Disclaimer: * The information contained in this site is general and is not intended to serve as advice as your personal circumstances have not been considered. DPM Financial Services Group recommends you obtain personal advice concerning specific matters before making a decision.