Contributing
to superannuation in order to claim deductions on income tax is one of the most
effective ways that doctors can slash their tax liability. Using a practice
called salary sacrificing, doctors can contribute to the super using pre-tax
income. This allows them to claim a deduction on their taxes and attract a 15
per cent rate, a significant reduction from their marginal tax rate of up to
46.5 per cent.
Doctors
should be wary about contributing too much to superannuation, however.
Concessional contributions, or contributions made before tax, are capped at a
limit predetermined for each year by the Australian Taxation Office. When going
above this limit, doctors may be charged an excess concessional contributions
charge that would add a further 5.6 or 5.8 per cent to their tax liabilities.
Upon
reaching the age of 60, doctors also have another superannuation tax
minimisation strategy at their disposal: transition to retirement. This allows
them to withdraw up to 10 per cent of their super account balance each year.
This pension, which is tax-free, can then be used as an additional source of
income.
When
dealing with superannuation tax minimisation strategies, doctors should work
with experienced accountants to ensure that these are correctly put into place.
This will help them avoid any problems that they might otherwise be unaware of,
as well as keep their tax minimisation efforts on track with the latest changes
to caps and excess concessional contribution charges released by the ATO.
