Who would have thought two years ago, we’d be living through a global pandemic that would change the world as we know it. To help combat the spread, thousands of COVID-19 clinics have been mobilised to test and vaccinate the Australian population. These essential clinics have introduced an alternative avenue for doctors to earn additional income while providing much needed support to the community in the fight against COVID-19.
While the pay rate for COVID-19 clinics can be pretty attractive (often between $130-$140 per hour), there are some key considerations and tax implications you need to take into account.
The tax trap
Although you may be earning significantly more at COVID-19 clinics than your public hospital work, you need to keep in mind that income tax is not being taken out of your pay automatically.
Unfortunately, this doesn’t mean you get away with not paying tax, it just means you’ll be required to pay a lump sum of tax owed at the end of the financial year, just like if you were completing locum or private assisting work.
Tip: If you’re doing a lot of this type of work, it can really add up so the best way to manage this is to set aside a percentage of your income each time you’re paid so you’re not having to cover a shortfall at the end of the year. Your accountant can guide you as to what percentage is appropriate for your personal situation.
Don’t forget about HELP debt repayments (if you have one)
The other thing that will not be taken out of your pay automatically but will still be payable at the end of the tax year is your HELP debt repayments. Your repayment amount is proportionate to your income so if you’re earning significantly more than last year, your HELP debt payments will be higher too. Again, the easiest way to manage this is to set aside a percentage of your income each pay cycle which could be up to 10%. You can check out the repayment thresholds and rates here.
Do you need to pay Goods & Services Tax (GST)?
Depending on how many hours you are working in COVID-19 clinics, you may need to register for GST.
If you are earning $75,000 or more from your private work, you will need to register for GST online through your ABN and notify your COVID-19 clinic employer to start charging for GST (the current rate of GST in Australia is 10%). If you’ve already gone over the $75,000 earning cap, you will need to go back to your employer and get them to issue new invoices for anything that has exceeded the limit.
By law, you’ll also be required to start preparing quarterly Business Activity Statements (BAS) that help manage GST payments that you have collected come tax time.
Be prepared for a more complicated tax return!
From a tax perspective, if you are working in COVID-19 clinics, you are essentially self-employed. This means that your tax return is likely to be much more complicated than previous years and good record keeping will become essential to manage the annual reconciliation. If your records don’t match what is reported by your employer direct to the ATO, it’s highly likely that you will be audited.
So what can you deduct?
When submitting a tax return you are entitled to claim deductions for expenses incurred while working. Generally, work-related deductions can be claimed if:
- you have a record to prove it
- you have spent the money yourself
- you have not been reimbursed for the cost by your employer
If the expense you are claiming is for both work and private use (for example a phone or laptop), you can only claim the portion of the cost used for work.
For doctors working in COVID-19 clinics, you may be able to claim some motor vehicle deductions, but only if you are travelling from one workplace to another. So, travelling from the hospital to a COVID-19 clinic, or moving between different COVID-19 sites throughout the day is deductible, but your travel to and from work each day is not.
Other deductions which potentially may be claimed include any Personal Protective Equipment (PPE) that you have paid for and are using for work, a percentage of your phone bill if you are using your personal phone for work calls and any accounting fees for your tax return and preparation of your BAS. Click here to learn more about other tax deductions that may be available for doctors.
What’s the tax deadline?
If you are planning to complete your own tax return, you need to ensure that it is submitted by 31 October or risk ATO penalties. If you are using a registered tax agent, you have more time up your sleeve with an extended deadline of 15 May.
I’m earning a lot more than previous years, what should I do with the additional income?
Invest, purchase a property or save it?
If you are clocking up a lot of hours in COVID-19 clinics, you may have seen your annual income skyrocket and may be wondering what to do with the excess cash. Before you make any firm decisions, it can be a good idea to wait until your tax return is lodged so you know exactly how much of the income is ‘yours to keep’, and what needs to be allocated to your tax and HELP debt repayments.
While it might be tempting to consider a large investment such as a property purchase, you also need to keep in mind that your COVID-19 clinic work is technically ‘seasonal income’, so as the availability of this work decreases, so too will your overall income. You’ll need to carefully consider whether you’re going to be in a position to meet the ongoing repayments in future without the additional COVID-19 clinic income.
If you’d like to have a no-obligation chat with either a Lending Specialist or a Private Wealth Consultant to discuss your potential investment options, you can book an appointment here.
The wage you are receiving from COVID-19 clinics does not include any super contributions, so depending on how many hours you are working ‘self-employed’, you may consider making extra super contributions. Depending on the type of contributions you make, you may be able to claim tax deduction on the contribution amount when you complete your tax return. You do need to be mindful of how much your regular employer is contributing to your superannuation however and be sure not to exceed the annual caps. To find out more about what type of contributions would suit your circumstances and how much to consider, book a no-obligation chat with a DPM Wealth Consultant.
Saving for your first home deposit
You could also consider taking advantage of government incentives available for first home buyers such as the First Home Super Saver Scheme (FHSSS). The scheme is designed to help eligible Australians boost their savings for their first home by allowing them to save part of their deposit inside the lower-taxed environment of the superannuation system.
Keep in mind there are annual limits for total voluntary super contributions you can make (including the FHSSS) so it can be a good idea to wait until June to ensure that you remain within the annual caps. Read our article The First Home Super Saver Scheme – what you need to know to learn more.
If you have any questions regarding the financial implications of COVID-19 clinic work or want some more information about what tax deductions there are, get in touch with us on 1800 376 376 or request a free initial consultation.
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.