Tax Deductions for Doctors in Australia
If you earn your income as a doctor in Australia, you probably have failed to claim tax deductions for your work related expenses at one point in time. You might even not be familiar with the deductions you can claim. As we are already in the new financial year, now is a perfect time to review your individual tax-deduction strategies more so the deductions that are often overlooked.
An accountant in Sydney will be happy to provide you with a list of the top forgotten deductions on individual tax returns. This list can be a great starting point when you want to keep a healthy bottom line by claiming as many tax deductions as you can. However, before we take a look at the top missed tax deductions for doctors in Australia, it is good to understand the requirements for claiming a tax deduction.
To claim a tax deduction in Australia, you must satisfy these three requirements:
- You spent the money yourself and you were not reimbursed
- The expenses were directly related to earning your income
- You have a record to prove your claims
With tax deductions, you will only be able to claim the work-related part of expenses. This means you cannot claim deductions for any part of expenses that relates to your own personal use. The good news is the ATO app myDeductions tool can help you keep track of all your expenses and receipts throughout the new financial year. With that out of the way, let’s take a look at the top missed tax deductions by doctors.
Cost of Bookkeeping and Accounting Service
Did you use an accountant in Sydney to prepare and lodge tax return in the last financial year? If you did, you can claim the amount you paid on this year’s return. You simply need to put the amount that you paid in the previous year into Section D10 – Cost of Managing Tax Affairs in your tax return. Lets find out what are the common tax deductible expenses for doctors that get missed.
In this area, the ATO allows a number of claimable categories. Take your take in order to take the full advantage of everything that you are eligible for:
- Preparation and lodgment. You should not forget to claim the costs of preparing and lodging both activity statements and tax returns. You will be able to claim the fees paid to a registered tax agent, cost of buying tax reference materials as well as the cost of getting advice from a registered tax agent. Any expense incurred when dealing with ATO about a tax matter is deductible.
- Travel for tax advice. If you incurred travel expenses for getting tax advice, this cost is deductible against your income.
- Administrative Appeals Tribunal (ATT) Appeals. Did you appeal to ATT in regards to a tax issue? If yes, the expenses you incurred are deductible.
- Valuations for deductible items. You can claim a deduction for expenses you incurred getting valuation for donation of property or deductible gift.
- Interest paid to the ATO. It is possible to claim deductions for any interests that were charged by the ATO
You can claim a deduction for self-education expenses if the course is a work-related expense. The course must have sufficient connection to your current job. It should also improve or maintain your knowledge or skills in your job. The course taken should be likely to lead to an increase in your income from your current employment.
Self-education expenses may cover the course fees, accommodation costs, computer consumables and the purchase of technical equipment that cost more than $300. Other self-education expenses that are deductible include the cost of professional journals, textbooks and the cost of running a home office. Parking fees, postage and stationary are also deductible costs. It is imperative that you track all your study-related expenses so as to claim all allowable items.
If the study was linked in a general way or designed to help you get a new job, you should not claim a deduction. For example, you will not be able to claim a deduction if the study was meant to help you move from a paramedic to a pharmacist. Always involve an accountant in Sydney to help you understand what is deductible and what is not.
Any fees paid to a union or membership that are related to your current occupation can be claimed. Professional membership fees are deductible against your income. Membership associations such as AMA will provide you with the pro-rata receipt to support your claim. As aforementioned, you must have spent the money yourself without being reimbursed in order to claim a deduction.
Work-Related Car Expenses
How you claim for car expenses will depend on whether you are a self-employed doctor or not. If you are self-employed, your business structure will be an important consideration. Unless your home is your base of employment, you cannot claim the cost of driving from home to work and vice versa. You can claim the following:
- Two workplaces. The cost of trips taken between 2 workplaces can be claimed. This is more so if you have a second job.
- Multiple sites of work. You can claim the cost of travelling from your regular workplace to another workplace. For example, if you travelled to a client’s location where you were still on duty, you can claim deductions for the trip back to your regular workplace or to your home.
- Alternative work site. You are allowed to claim for trips from your home to an alternative work site and trips from the alternative work site to back home or to your regular workplace. If the alternative workplace is your regular workplace you cannot claim these travel allowances.
If you are self-employed, you can claim deductions for the car you own, hire or lease. You cannot, however, claim for the private use of that car. Costs like servicing, repairs, fuel and registration are also claimable. You cannot claim for travelling from home to your business premises unless you work from home and you are travelling for business purposes.
If your business is structured as a trust or a company, you will be able to claim for vehicles you lease or own. This will cover the lease payments, financing repayments and any other running expense. Your vehicle must be used in the business’ every day running. This could also be a car that was provided to you as an employee.
It is crucial to keep a logbook to help determine the work-related percentage or to be able to prove a sensible calculation to the ATO if you use cents per kilometer method of claim.
Did you know that you can claim the deduction for the cost of hiring, buying, cleaning or mending certain uniforms that are unique to your job? As a doctor, you can claim deduction for expenses relating to your compulsory uniform or protective clothing that your employer requires that you wear. This includes surgical caps and lab coats.
However, when bookkeeping in Sydney, you should not claim deductions for the cost of buying or cleaning the plain clothing you wear at work. This is even if your employer requires you to wear it.
Mobile Phone Expenses
Do you use your cellphone for work purposes? If you are sometimes required to call staff members or patients on your personal phone, you can claim the cost of the calls as a deduction on tax deduction. You must only claim the cost of the calls that are work related and not your whole phone bill.
Home Computer Use
If you are a busy doctor, there is a chance you often find yourself working from home. If you consult from home in emergencies or work primarily from home, you can claim the cost of using your personal computer as well as internet. An accountant in Sydney will help you claim for the decline in the value of your home computer as well as the cost of internet.
Have you taken out a loan to invest in an asset? If yes, you might be able to claim the cost of the loan against your income. If you own a negatively geared property in which the net rental income is far less than the interest on the property loan, you can claim the loss against your income. It is also possible to claim deductions against expenses incurred in the process of earning dividend, interest or investment income.
Other top missed tax deduction for doctors include:
- Medical journal subscriptions and publications
- Professional indemnity insurance
- Medical equipment and insurance for the equipment
- Marketing expenses
- Part of home utility costs if you work from home for teleconsulting
While some of the items discussed here may seem small, when you add everything up, you could save a lot of money. It is always a great idea to review all your tax deductions and account for all of them before the new financial year starts.
Getting professional bookkeeping and accounting services in Australia when calculating your tax deductions is the best way to go. Needless to say, you will get tax deductions for the cost of managing your tax affairs.