Salary Packaging | Healthcare Workers

Tax Advice for Doctors: Salary Packaging 101

Doctors and other Medical Professionals often qualify in the highest tax brackets for their annual salary, resulting in less income ending up in their pockets. A good tax-saving strategy, such as salary packaging, is therefore integral to maximising returns at tax time.

At Smith Coffey, we provide long-term holistic advice to Doctors and Medical Specialists and help our clients achieve financial independence throughout their working lives. We understand tax structures for Doctors and are constantly looking to develop long-lasting and financially beneficial tax strategies for your income. We’ve put together this guide to salary packaging to help you understand how this strategy contributes to a reduced tax bill when it comes time to lodge your tax return with the Australian Taxation Office.

Looking for more tailored tax advice specific to Doctors? Book a free initial consultation with us, and we’ll let you know how we can help you grow your wealth.

How do I make the most out of my salary packaging arrangements in the healthcare industry?

For Doctors and Medical Specialists either working full time, part time, or in some form of a permanent position for either the WA Metro or WA Country Health Service, salary packaging should be available as part of your employment contract.

Salary packaging is an effective way to pay less income tax because public teaching hospitals are classified as Public Benevolent Institutions (PBI) status employers. PBI-status employers enjoy a tax concession (sometimes called a PBI benefit) in relation to fringe benefits tax (FBT), with similar arrangements also being available for eligible employees of churches, charities and not-for-profit institutions. By choosing a salary package (e.g. salary sacrifice), you allocate a portion of your pre-tax income each fortnight to pay certain expenses before income tax is calculated on your remaining taxable income, allowing you to enjoy tax-free benefits.

How can Doctors package their salaries and use fringe benefits tax to save on taxes?

For the WA Metro and WA Country Health Service, eligible employees are entitled to claim an amount of up to $9,010 tax-free each FBT year, sometimes referred to as the FBT cap or threshold. These funds can be used for mortgage repayments, rent, school fees, everyday living expenses, and other expenses. The FBT year runs from 1 April to 31 March and is a different accounting period to the Financial Year. Typically, top marginal tax ratepayers stand to save around $4,054 on claiming the total amount of the threshold each FBT year.

Additional tax savings are available for packaging FBT-exempt items over and above the $9,010 threshold. These items include a meal entertainment benefit, where an annual amount of $2,650 can be used for dining in meals at restaurants and cafes anywhere in Australia. You just need to ensure that you are not dining alone when the expense is incurred.

Portable electronic devices, including laptops, tablets, mobile phone handsets and smartwatches, are also claimable. There is a requirement that these devices be used at least 50% for work use for a claim to be allowable. Airline lounge membership is also packageable, and this expense can be claimed even if you only use the membership for private purposes.

Salary packaging the maximum amount allowable for meal entertainment will see top-rate taxpayers save another $1,192 pa, with even further savings for claiming portable electronic devices. Other FBT-exempt items that are concessionally taxed include Superannuation contributions and Novated Leases on cars.

These are some of the main items that Doctors and Medical Specialists can salary package, but numerous other items fall outside this article’s scope. Typically, taxpayers can save around $7,000 a year or more by taking full advantage of the very tax-effective benefits available via salary packaging.

Tax-effective Wealth Creation Strategies for Doctors

Are you looking for tax recommendations specific to the medical industry that’ll see you pay less tax on your annual salary? At Smith Coffey, we execute specialised tax-saving strategies for Doctors, Medical Professionals, and private practices to reduce your tax bill at the end of the year, help you get more out of your pre-tax salary, and maximise your earnings for your entire career.

We understand that Doctors and Medical Professionals have specific needs when it comes to getting the most out of their take-home pay. Learn more about our tax advice, strategies, and planning for Doctors, or get in touch with us for a free initial consultation.