What Are the Key Tax and Accounting Considerations for Doctors?
Accounting and Tax services for Doctors: We act on behalf of numerous medical professionals and know first hand the issues with regards to GST, Tax, Structuring, PSI as well as CGT and how they apply to doctors.
Doctors frequently need to manage multiple income sources, face higher tax rates and must meet various regulatory requirements. Having a solid understanding of appropriate accounting, tax & wealth planning strategies can help lower tax obligations, enhance cash flow, and safeguard wealth. This guide outlines the important factors every medical professional should be aware of.
What tax deductions can doctors legally claim?
Doctors may claim expenses that directly relate to their work, such as professional indemnity insurance, medical equipment, continuing professional development courses, AHPRA registrations, seminars & conferences, travel between work places, Income protection insurances, Service fees and also any other expenses that could directly relate to them being able to earn an assessable income.
The ATO permits deductions for expenses that are directly connected to earning an income. This includes things like membership fees, union dues, travel related to work, and the depreciation of equipment. It is important to keep proper records to support these claims.
Should doctors operate as sole traders or companies?
The best choice depends on income level, risk exposure & asset protection objectives, whether PSI or PSB rules apply and long-term goals.
Operating as a sole trader is simpler but involves higher tax rates, reduced flexibility as well as nil asset protection. Choosing a company or a trust structure can provide tax benefits, such as a lower tax rate of 25%, and offer protection for personal assets. This largely depends on whether PSI rules apply or not.
What is Personal Services Income (PSI), and how does it affect doctors?
Personal Services Income (PSI) refers to income earned from personal efforts, such as the work of a doctor. It affects how doctors can split their income or claim tax deductions if most of their earnings come from their own work, or skill and is not generated as a form of business but instead due to personal exertion or expertise.
Of course not every doctor could be considered a PSI and hence we can evaluate your circumstances and guide your decision making to determine the laws applying to your situation.
What happens if PSI rules apply to me as a doctor?
If PSI applies, the income is considered to belong to the individual. Not literally but simply speaking, it actually means your role is similar to an employee except that you are working on an ABN. This limits certain tax planning options. To avoid being classified under PSI, a doctor must pass certain tests. Once you satisfy the test as not being classified as a PSI, you can avail all the benefits associated with someone who is running a business, which means using the base entity provisions under a company structure in addition to other measures and benefits.
How should doctors handle GST and BAS?
Medical services that are serviced under the medicare scheme are GST-free, but doctors who are registered must still submit a BAS. Not all medical services are GST free.
Although medical treatment itself is GST-free, other services such as consultations and cosmetic procedures may be subject to GST. It is important to correctly classify these services.
The links below will refer you to GST free and non-GST free services by medical professionals.
Click here for GST Free Services for doctors:
Click here for GST inclusive services for medical professionals.
Would doctors receive a refund on service fee and other costs if income is GST free?
The short answer is yes, but there are important considerations. Yes there may be a GST refund, but this may need to be adjusted against any PAYG tax installments and PAYG withholding for employees prior to any refunds can actually land into your bank account.
What accounting & tax strategies help doctors build wealth?
“Building wealth comes from achieving a sweet spot between, debt, equity, income and tax, which then creates Assets.”
Doctors are high income professionals. With high income come high taxes too. We use our trademark Wealth Acceleration System to help doctors and medical professionals plan, execute and strategise their wealth accumulation objectives. Our strategy integrates – Income maximisation, tax minimization, debt structuring, asset allocations and equity recycling at the core of our service offering.
Doctors can utilise a range of tax, accounting, finance, strategy, Structuring, Legally available income streaming, Asset protection mechanisms as well as asset building options with our trademark wealth acceleration system.
Click to know how we can help doctors with our trademark “Wealth Acceleration System”:
Summary
Doctors need to carefully handle their tax responsibilities, select the appropriate business structure, and use strategic planning to reduce tax liabilities and increase financial growth. Given the complexity involved, it is important to seek professional guidance.
We assist doctors in optimizing their tax situations, organizing their income, safeguarding their assets, and developing long-term wealth strategies through tailor made and goal oriented strategies specifically designed for medical professionals.
We have many medical professionals we represent and we encourage you to book a consultation with one of our senior accountants to understand our offering as well as the value we bring through years of experience.
Q1. How much do you charge for consultation?
Consultations are no obligation, we would love to explain to you our service offering and how we could add value and at the same time take care of your compliance requirements too.
Q2. Can you help with tax structuring for doctors?
Yes, we focus on creating tax-efficient and compliant structures tailored for doctors.
Q3. Do doctors need a specialised accountant?
Yes, due to the specific rules related to PSI, GST calculations, deductions, and the complexities of income structure, having a specialised accountant is essential. The difference is having an accountant who lodges BAS’s vs having one who works along side you as your personal CFO, strategising and structuring your investments and shape favourable tax and wealth outcomes.
Q4. I have multiple years of pending tax returns, can you help me lodge them?
We can help lodge upto 25 years of backdated tax returns, for individuals, companies, trusts and other entities.
Managing the financial affairs of a doctor goes beyond submitting tax returns—it demands thoughtful planning. If your goal is to minimize tax liability and build wealth, seeking expert advice is essential. Reach out to us today to review your unique circumstances.
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Schedule a consultation now to improve your tax planning and overall financial setup as a medical professional.
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Also Read:
- How to setup companies/Trusts for Doctors?
- Can family members work within a medical practice/clinic?
- Can salaries be paid/income distributed to family members of doctors?
- Can car be claimed for doctors?
ATO’s guides for Doctors:
A summary video of our services for doctors & medical professionals from our official youtube channel: