What could be a better time to discuss taxes when lodging time is just around the corner? Taxes are regrettably one of those areas that we, as physicians, tend not to spend much time studying. And while taxes are essential and, in our opinion, important, this does not imply that we should tip the government!
Doctors are among Australia’s highest-paid professionals. Yet, the marginal tax rate rises with income. But did you know that as a physician, you are qualified for a list of tax deductions?
We know that accounting for physicians is challenging because they busy working around the clock assessing and caring for their patients. So, we have developed this guide to help you get the most out of your deductions and save you some money. Let’s get started!
Table of Contents
What should you know about claiming deductions:
In general, there are four critical things to understand regarding claiming deductions as a physician:
- You must pay expenses out of your pocket (your company cannot reimburse them).
- The expenditures you claim are directly connected to your obligations as a physician.
- You must keep a record of the expense, such as a receipt or invoice, to claim deductions at the end of the fiscal year.
- You must distinguish between what part of the expense was used for personal use and what part of the expense was related to work.
Which tax deductions can you consider as a physician?
● Self-education expenses
While you may need to spend on education fees to keep your medical registrations up-to-date, the Australian Tax Office (ATO) regards self-education expenses to be work-related. Which is great and how it should be.
But many don’t know is that you can deduct all your education expenditures, including course fees and course materials, as a tax deduction.
However, you can only deduct educational costs if the course directly relates to your present job. For example, you can deduct costs of the education involved in advancing from being a physician to being a surgeon.
● Mobile phone bills
Mobile phone bills are a common deduction in accounting for physicians, but it might get a bit trickier if you only occasionally use your phone for work-related tasks.
The ATO provides fixed sums for incidental usage claims of less than $50. Alternatively, you can calculate the percentage of mobile use during a sample four-week period to base your deduction total for the whole year.
You must have paid your bill and not been reimbursed by your employer for the work-related percentage of your cost to claim a deduction. Employer-provided phone expenses are not tax deductible against your personal assessable income.
● Uniform and protective wear
If your profession necessitates an occupation-specific uniform, clothes, or protective wear, the corresponding expenses can be deducted from your taxes. This covers costs for purchase, hiring, laundry/dry cleaning, and repairs.
Conventional apparel, even if necessary for work reasons, unfortunately, cannot be claimed, which means that physicians who wear a business suit to work cannot deduct these spendings.
● Motor vehicles
In general, you cannot claim travel from home to work unless you are on-call (and have begun working from home), are an itinerant worker, or commuting to another workplace.
Travel between job locations (private clinic to hospital) is deductible, as is travel to and from conferences/seminars, courses, exams, and visits to your tax agent.
There are two ways to deduct motor vehicle expenses:
- A ‘cents per km’ charge (for up to 5,000 business kilometres per car)
- A logbook percentage
The taxpayer must keep a 12-week logbook as a reference for the logbook technique, which is valid for five years.
● Tools and equipment
You can claim a direct tax deduction if you spend less than $300 on tools and equipment for your doctor’s practice. You must claim the depreciation expenditure if the purchase price exceeds $300. Yes, your engraved stethoscope is tax deductible!
Your company normally bears this, but you can deduct it if you spend the money personally.
● Medical registrations
Professional membership costs with medical groups such as the Australian Health Practitioner Regulation Agency (AHPRA) or the Australian Medical Association, as well as renewal medical registration fees and practising certificates, are tax deductible.
In addition, work-related medical journal subscriptions are tax deductible for physicians.
● Donations
Any donations made each year are tax deductible. While there are certain restrictions to whether gifts and donations are deductible, a general rule is that if the donation was above $2, made to a deductible gift recipient, and did not provide you with any personal benefits for having donated, it should be OK to claim.
However, if you paid to a charity as part of a raffle, to win a gift, or to attend an event, these cannot be claimed as a tax deduction.
● Home office expenses
Just like mobile phone expense deductions, if you are a physician who usually works from home, you could have a designated location in your house to handle office admin tasks like bills and patient file updates.
As a physician, you can deduct the following home office expenses:
- Lighting
- Heating and cooling
- Depreciation on office equipment and furniture such as laptops and office chairs
- Internet usage
Vital records you should maintain
Strong record-keeping is critical during tax time, so keep track of your receipts and retain a complete set of receipts if you want to earn a good tax return. It is a good idea to hire a professional for your accounting needs in Sydneywho can assist you in staying on top of this throughout the year so it’s less of a headache come tax-time.
Remember that you do not have to preserve physical receipts, and it is fine to maintain a digital copy (such as an email receipt or a photo of a receipt) as long as the following is readable:
- The manufacturer’s name
- Characteristics of the goods or services
- The amount of money spent
- The date when the document was created
- The date when the expense was paid
The bottom line!
The ATO is known to consider a variety of variables when determining eligibility for deduction in the private sector. It is critical to speak with a skilled expert experienced in offering specific accounting for physiciansto see whether a tax deduction can be claimed in your situation
