Junior Doctor's Corner Podcast

Podcast | Salary Packaging & Income Protection for Junior Doctors

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Anthony Dickinson, Tax Consultant at DPM and expert in junior doctors’ financial journey, sits down with Dr Helen Zhang, host of podcast series Junior Doctor’s Corner, to discuss the topic of salary packaging & income protection for junior doctors.

This podcast will provide answers on the following:

  • What is salary packaging? Who it is for?
  • How does salary packaging work? What can you salary package e.g. mortgage / rent?
  • When does the salary packaging year start? Does this give any extra benefits for interns in the first 6 months of working?
  • What is the Fringe Benefits Tax?
  • How much can one save by salary packaging? Does salary packaging more mean having to start paying back HECS fees earlier?
  • Why does it matter which company salary packages your income? Is it hospital specific?
  • What is income protection? Why is it important for junior doctors to have income protection?
  • Who is DPM and who we provide services for?
  • What is the DPM Medical Student Hub? What makes DPM unique from other medical financial services companies?

If you have more questions about salary packaging or how DPM can help you start your financial journey in a medical career, click here to book a no-obligation free initial consultation.
– If you’re currently a medical student, you can sign up for free to become a DPM’s Student Member (lots of benefits incl. free yearly tax return and access to valuable educational resources such as the Medical Student Hub).
– If you just graduated or are in your intern year, there’s a special offer for you too. Check out the DPM Intern Package.

The Junior Doctor’s Corner is a podcast created by a resident medical officer who was surprised at how lacking the support can be for junior doctors in the work environment. This podcast aims to help medical students and junior doctors not only survive, but thrive in their careers. It covers topics and conversations that doctors seldom broach but wish they had. For more information about the Junior Doctor’s Corner and the incredible work they do, visit:
Website: juniordoctorscorner.com
Instagram: @juniordoctorscorner
Facebook: Junior Doctor’s Corner

DPM hopes you enjoy this podcast but please remember that the information discussed here is of a general nature and is not intended to serve as personal advice as it does not consider your personal circumstances. The views and opinions expressed in this podcast are those of DPM, not Junior Doctor’s Corner.  DPM Financial Services recommends you obtain personal advice relevant to your circumstances concerning specific matters before making a decision.

Dana
Welcome to junior doctor’s corner the podcast that helps medical students and junior doctors like yourself not only survive but thrive in your careers. We cover topics including doctor well being, career, and life outside of medicine. My name is Dana and I am your host for this podcast. Are you ready for a healthy dose of support, motivation and inspiration? Then let’s start this episode. Hello, welcome back to another episode of junior doctors corner. Today’s episode is sponsored by DPM. DPM is a financial service provider that catered to medical professionals and medical students. And today we have Anthony Dickinson joining us on the podcast interviewed by Dr. Helen Zang. They’ll be covering the topic of salary packaging and a little bit about income protection. So if you’re a final year medical student or you are starting internship this year, this is the episode to listen to sort out two very important aspects of your financial health. Without further ado, let’s jump into the show.

Helen
Hi everyone. Today, we’re talking about salary packaging and income protection, which are both two really important topics which I can say I didn’t know a lot about before I started working as an intern. But today we’re very lucky to have Anthony from DPM, talk to us about these two topics. Anthony, thank you so much for today. Do you mind giving her as to what you do and also what your company DPM does?

Anthony
Yeah, of course. Thanks for having me. Hello. So my name is Anthony Dickinson. I’m a tax consultant at DPM, masala DPM is to help doctors achieve their goals, whether it be personal. So I’ve got a client base of students, intern residents and registrar’s. So as you can see, it’s very diverse. And essentially, my role as a tax consultant is to help all my clients with their salary packaging taxes and introducing them to other services that we do have at the firm. So those services been insurance, wealth lending, as well as property advocacy, legal and self managed super funds. So DPM being a financial services company, it’s pretty much a one stop shop for all.

Helen
Yeah, that’s fantastic. I can definitely say, I don’t speak for everyone, but a lot of medical students and junior doctors graduate without that much knowledge in finance. Given that we spend so much time just studying and learning, you know, people can you tell me also, just so we know who does DPM sort of provide for is it as statewide or a nation.

Anthony
So DPM base, so we’ve got an office in Melbourne, we got an office in Sydney, but we do have a wide, and if COVID has taught us anything, it’s that everything has gone online. So it doesn’t really matter where you’re from, we are able to help clients, you know, wherever you may be.

Helen
Cool. Well, let’s get into the nuts and bolts of it. So let’s start off with salary packaging. Can you tell us what exactly is salary packaging?

Anthony
So salary packaging what it is? It’s a unique tax saving for anyone that works in the public hospital system. So what it does, it allows you to apportion part of your income to certain expenses, therefore, we reduce your taxable income and increase your tax pay. So yeah, to benefit doctors can apply for it. And yeah, it’s a really good way of helping you increase your take home pay.

Helen
Right, cool. Just out of interest? Do all professions have salary packaging? Or is this like a medical specific thing?

Anthony
Unfortunately, not. I sit down with a lot of my clients and teach them about packaging and the best ways to save tax, but I’m not allowed to do it myself. It is very unique. You can do it if you work in the public hospital systems. So yeah, I really recommend the doctors do take full advantage of it. Because it’s definitely one of the few industries there are other industries. Don’t get me wrong that do. But yeah, it’s a really unique offering for doctors, or anyone just wouldn’t.

Helen
So how does it work? Exactly.

Anthony
So how works is your portion part of your income taxes, where you reduce your taxable income and increase your take home pay. So a fringe benefits pretty much a benefit from an employer to so what you do is you got to spend certain money on certain expenses, which are allowed by hospitals. every hospital has different rules, which I’m sure but what you do, is there certain things you’re allowed to spend money on salary packaging, you then submit these to salary package writer, every hospital will have a different salary package administrator, some will have been the same. But pretty much what you do is your your dues, you spend the money, then you submit the evidence, and then your salary packaging administrator will contact payroll at the hospital, and you’ll start to get paid some of your dollars tax free.

Helen
Right? Okay. So it gets it allows us to spend a certain amount of money on certain things, and we don’t have to pay tax on those things. Is that right?

Anthony
Yes. So pretty much what you do is you’re allowed to spend money on certain things that are non tax deductible. So those things being real rent, meals, loans, credit cards, things like that, which we’ll go through in a moment. But pretty much you can spend money on you know, living costs, as well as meals, that and then you need to submit the evidence, and then we reduce your taxable income, so you don’t pay as much tax. So essentially, you submit the evidence you spent, you spend the money, you submit the evidence, and then the the amount of tax you pay each fortnight when you’re paid, will be significantly reduced. So therefore, you’re earning more money.

Helen
Okay, that sounds really great. So what exactly can you salary package? And in particular, I think what a lot of junior doctors might be interested in is whether you can salary package your mortgage or your rent.

Anthony
Yep, yeah, definitely. Are there things you can package. So there’s two parts to salary packaging. There’s what I call Part A, which is living expenses. The things here you’re allowed to package is rent large. So for rents, and depending on where you go as well, and it’s probably a wise decision to file earlier. From when you start intern because you can actually sometimes backdate expenses depending on the hospital you go to. So you can use your rent from your final year, say, for example, and package it as soon as you start your internship. But for rent, you need to need your rental agreement in a submit evidence of that to your administrator, and then you’re able to just for loans, so if you have a personal loan, car loan home loan, you can definitely say package these as well. All you need for them is for also for living expenses, and it is $9,010 cap, you can also sell a package credit card repayments. So it doesn’t really matter what you spend the money on the credit card on. You just can sell you can sell a package. So essentially, that’s a way of an artist salary package, you know, grocery shopping sort of whatever you like, because it doesn’t matter what you spend the money on it. There are payments made to the card. So on the living expenses side, you do have a cap of $9,010 and that’s per FBT year. An FBT year is a fringe benefit year is the main takeaway you want from this is a fringe benefit year is run separately, just to make it confusing for us from a calendar year and from a financial year. So a fringe benefits tax sheet is run from April 1 to march 31. And that’s what the salary packaging year runs on as well. So throughout a calendar year, that sometimes means that you can sell our package multiple times, depending on the state. But yeah, pretty much you’ve got $9,010 to use on those expenses that I just touched on the red, the loans, and then there’s also salary packaging, which has a cap of $2,650. And the things he can package under this cup is a combination and venue hire, believe it or not, not many clients in 2020 were salary packaging, venue, hire accommodation, but there are definitely benefits that you can sell a package hopefully going forward. And you’ve got $2,650 to use per fringe benefits tax you per employer as well. From the meal side, and you pretty much just need to keep your receipts. Yeah, these days a lot of the hospitals now our takeaway because it used to be you have to have a main meal you had to dine in and yeah, deferrals. COVID came in. Yeah, they changed the rules on that, which is an extra benefit. So keep your meals receipts, submit them to your salary packaging administrator, and then you’ll be able to say there are a lot of things a salary package. So it’s just too good to have an understanding of what your salary package in every individual is different. Some people might not be renting some people might own their own home some people might not be doing a they might be living at home. From the park Bayside. You know, if you’re looking at traveling, you might sell a package or a combination, you might trip. But as I touched on, every hospital does have different rules around what you can sell a package. Every step is different as well in that regard, but they’re really the main things that you can use

Helen
So thank you for that was really helpful. I personally, I didn’t even know that we could now.

Anthony
If you have any advice there is before you start your intern, if you’re in your final year, you should find it out. And once you find out your position of where you’re going to be interning, find out the rules around the salary packaging, and incur in expenses the time. So it’s really just about, you know, sitting down, having a salary packaging plan. And then just following that, if you’re unsure about anything to ask questions, ask your administrator, ask a financial advisor, because there’s definitely people that help. And if you take full advantage of it, you will increase.

Helen
Um, so how much can you roughly save by salary packaging? Is it the number that you’ve mentioned the 9000 plus the 2000-ish?

Anthony
No, it’s not unfortunately. So it’s your tax rate is what you’re pretty much saving. You know, the individual and what hospital you guys are, and how many times your salary package throughout the year. So some residents might save, you know, $3,000 per year, some interns might save $10,000 per year, it’s really different depending on the individual. If you fully maximize both the $9,010 and $2,650 caps, then, you know, you can save your tax rate, you know, probably about 25% of that, which is roughly two and a half three grand, but if you go packaged multiple times throughout the year, and you know, as well. So it’s a pretty difficult question, to say the exact figure on but it’s definitely at the end of the day.

Helen
Yeah. And when you say salary packaging multiple times, is that what you mean by for example, interns starting out and doing it again? Or if a resident changes at all?

Anthony
Yes, correct Helen. So, if you’re to move hospitals and change employer, you’ll, you’ll get access to the caps again, the $9,010 and $2,650. And then if you’re to cross over, you know, as an intern, if you cross over multiple years, then you’re I was a package there as well. Yeah, keep in your mind the $9,010 and $2,650, that’s Victorian New South Wales, and Queensland a little bit different in that regard. So you might not have access the full capsule of these. And so it’s best to check with someone about what hospital you’re going to, and to really get an understanding of your own personal position in regards to salary packaging.

Helen
And, if you salary package more, what I’ve heard is that, it may mean that you have to start paying back like your uni fees, your hec fees earlier. Can you tell us a bit about this?

Anthony
Yeah, really good question. And it’s a really common question we get asked, and it is one you sort of needs to be aware of. So what happens when we salary package is we reduce your tax, you reduce your taxable income. So by reducing your taxable income, you’re paying less tax. But when it comes time to do your tax return, you need to bird the salary package in a manner which goes back up your income. So once we bring that back up, it means that you’ve probably left a shortfall of your hec debt repayments. So these needs to be caught up come tax time. So tax returns pretty much a reconciliation between you know, the tax you’ve paid, and it gives us a taxable income figure. So then we work out exactly how much you should have paid of your hec or help debt during that two year, and a lot of the time because you sell a package, you reduce your taxable income, you miss those repayments, so then reconciles pretty much what you’re doing, you’re still definitely better off anxiety attacks on this, but you pretty much just making up the difference of what you need to pay if you have debt. And this is just a debt off. And it just really burst out you know, so you might be in a tax position come tax returns depending on you know, your personal situation, what you reductions will be, there’s not uncommon for this to occur at tax time for a lot of interns. There are a lot of times we get asked how you can combat that out what I should do, there’s two options. And you’re actually you can tell your employer to be tax, still definitely salary package as much as you can. The other way is just to be aware of it coming. So it’s not usual for interns to really have a tax payable, because so most of the time, it’s you don’t have to pay your debt back into earn over $45,000 and then it gets teared up from there to how much so it’s just really been aware that once you know you’ve earned over $45,000 That you will need to pay some back and just how much it just sort of depends on you know how much you’re working, what overtime you’re doing.

Helen
And you’ve mentioned it, you have like it’s best to clarify with your hospital and with your administrator, what exactly what benefits exactly you can get from salary packaging. So is it is it a hospital specific sort of thing.

Anthony
it is very hospital specific so that what happens is the hospital sets the rules around what you can package. And then each hospital is going to have a salary packaging administrator. So you can’t choose who your salary package administrator is the hospital or chooses. And that’s how you salary package with. So every hospital does have different rules. So what I’d advise is sitting down with a financial advisor down and working on salary packaging plan, personalized and tailored towards yourself. Because everyone’s personal position is different, every hospitals rules are different. So that’s what we sort of offer in regards to a lot of final years or even in turn sit down with us. And we’ll go through a plan tailored towards them, what they’ll package and the hospital they go into. So we’ll we’ll sit down, write a plan for you to follow. And then that’s just how we salary package from there. But as I said, Every state’s different, every hospital is different. So everyone’s gonna have a different plan. A lot of people will, you know, speak amongst hospitals, but they might not be able to do the same things at their hospital. So it’s a very different, very unique. So it’s just what applies to you, and who you’re going to be selling packaging with. And a lot of hospitals use an internal administrator, some use a lot of external administrators. So it’s just setting up an account with them and making sure you provide the evidence to that administrator. But yeah, DPM is offering is really just sitting down writing the plan, and making sure you maximize your side packaging to create the best tax saving for yourself. Awesome. Sounds great.

Helen
Okay, now let’s move on to the next big topic of income protection. I personally, I don’t actually have income protection on my salary at the moment, Anthony. So you might have to do to teach me a bit and also any other, you know, junior doctors or medical students in the same position, and maybe convince us as to why why we should get income protection. So let’s start off with what exactly is income protection?

Anthony
Yeah, you’re not mean to tell me that Helen, but nah that’s fine. That’s completely understandable. But what income protection is, is income protection is if you’re unable to work due to illness or injury, you’ll still be paid a pipe your salary, up until when you can return to work. If you can’t return to work, you’ll be paid up until retirement age. And the reason it’s really important is for doctors is because it’s quite occupation specific, your income is going to be a biggest asset throughout your career, you’ve worked so hard to start any net income, you’ve got through a university, you’ve graduated from med school, and you start to earn an income, it’s going to be your biggest asset for the rest of your work and your rest of your life. Because you know, if you couldn’t earn your income, you wouldn’t be able to, you know, sort of live. So it’s really important to start thinking or to have some sort of income protection in place at some stage of your career. So pretty much there’s different types of income protection, different waiting periods. But it’s essentially, if you’re unable to work, you’ll still be paid a portion of your salary. So it’s usually about 75% of your salary. And it’s up to you, it’s going to climb on. But if you’re able to work again, you’ll still be paid up until retirement age.

Helen
And I’m guessing this sort of like if you’re unable to work, is it not possible to say ask the hospital to pay, you leave that sort of thing?

Anthony
So it really depends on and that’s a really good question. It really depends on your leave balances. So you know, when you start off, you’re probably not going to have any. If you’re, you know, something was to happen to you, and you’re unable to work. How long would you be able to get by without any income? If you have a good life, if you have a good life balance you decide to develop on, you know, you’d say you’re a resident you’ve been working for a few years, you might have a few weeks in the bank, how long until you need income, how would you be able to get by as to, you know, working in the medical industry, I’ve like it. Everyone else out there, they see what goes on in place. And so things do happen in people’s lives. So it’s really important to you know, start thinking about protecting So, you know, it’s really just working out how long you’d be able to get by without income. And you know, if you have debt or dependents as well, that’s a really important one. Because you know, if you weren’t able to work still repay these, if not, you know, something like income protection could be really important, too.

Helen
Yeah, definitely. You never really know what could happen in the future. Yeah, being careful and protecting your income does does make sense. So Anthony, would you be able to give us an rough idea about how much income protection?

Anthony
Yeah, really good question how I have a really difficult one to answer actually. And just because it’s really, really different for every individual. So the fee your pay will interpretations based upon really what your income is how much you’re sort of protecting, it’s also based on a fact find your health, sort of what you do in your life as well. So every client is different. So you’re not trying to the question at all, it’s just really, really difficult to answer. And it’s one, you probably need to sit down with an insurance consultant. And they’ll be able to give you a much more precise idea of exactly how much you’ll pay there.

Helen
But there’s definitely no like percentage that you could roughly approximate. No?

Anthony
Unfortunately, not, it’s really based upon, so you know, how much you earn, that will play, you know, if you have had praises and health issues that will come into play. If you do high risk, things like you know, you’ll enjoy rock climbing every week that will come into play. So there’s just so many things.

Helen
Where, Yeah, sounds good.

Anthony
So, you know, if you did want to have sit down and work out an idea, and do speak to an insurance consultant, and they’ll be able to tell you, you know, give you you’ll have to fill out a fact find things and then they’ll be able to tell you, you know, exactly goes on how much you’ll pay. It really depends on you know, waiting periods, and what sort of the exact product you to choose, and what type of income protection you do get as well.

Helen
Yeah. Cool. Makes sense. So to wrap things up, can you tell us a bit about DPM, his new medical student hub.

Anthony
During COVID, we actually started a medical hub at DPM, where we got together as a team and sat down and just started to produce some resources that we thought would be really helpful for students at all different stages of their career. It’s really just about understanding, you know, the sort of medical career and the doctor’s journey. So do go check it out. There’s some really useful things on there. And it’s really just about you know, sort of giving back to students and helping guide them through and you know, sort of pointing out things that they might not necessarily think about during their med degree. So it’s just really a hub for all our student members. So what you need to do is sign up for a free student membership, and then it gives you access to all those resources and tools. And yeah, we’re more than welcome to, you know, ask any questions, and any feedback would be great on it. And what you’d like to say would also be good for them.

Helen
I almost want to sign up. But do you have anything similar that your offer junior doctors, instead of medical student hub?

Anthony
so we do have free student members free student membership, that gives you access to all our resources and tools, it gives you free student tax returns. And then once you graduate, we have an internship package. The internship package is what we offer interns. We also do have a residency package as well. It costs you is $550. To join up to DPM, as it is for the internship package that’s tax deductible and inclusive GST and you don’t actually pay it until you submit your 2021 or whatever year that year’s tax return of your GP. What it gives you is access to the areas I’ve sort of touched on so you know insurance advice, wealth advice, initial consultations, it gives you tax advice, your salary packaging plan, that’s where you’re going to save the most money in terms of tax. It gives you your tax return, as well as unlimited advice from your tax consultant as well.

Helen
And what does DPM offer and what makes DPM unique to other sort of financial services companies?

Anthony
DPM’s real unique offering is the understanding of the medical career pathway and all the different milestones and obligations that doctors will face throughout their career. Whether you’re a student intern, resident registrar, consultant, whatever stage you’re at, understanding of what you’re about to intake is really important. And what we find our clients really get a lot of use out of DPM is just actually break down the websites where they do we do now have a roadmap on the website. So you can go online and that’s a useful tool. We sort of understanding you know, what’s ahead for you. There’s some worksheets on there about you know, sort of setting goals and sort of what you want to achieve. So we do have that on the web. So feel free to check that out as well. But yeah, it’s called a roadmap bot.

Helen
And so how can we get in contact with DPM and all the services that you provide?

Anthony
There’s a few ways you can get in touch with us. You can jump online and visit www.dpm.com day you You can also jump on our socials so you know you can respond to our Instagram account to get in contact you can respond to our stories you can message us on Instagram, Facebook, things like that or you can email grad@dpm.com.au if you do have questions that you want answered.

Helen
well, thank you so much for your time, Anthony. I’m sure a lot of people would have found this episode really, really helpful.

Anthony
Thanks for having me.

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