Financial Advice for Doctors

February 2nd, 2012

With the festive season behind us, 2011 has arrived and we now have less than 6 months of the financial year to plan for tax. For medical specialists it is important at this time of the year to review superannuation contributions and ensure that they are heading for the right mark as at June 30. For the high income earner superannuation should always be monitored to ensure the tax benefit is being maximised. Elements of superannuation contributions are concessionary taxed at 15%, presenting a compelling 31.5% tax saving when compared to the personal rate of 46.5%. These elements can consist of employer contributions or member contributions depending on the circumstances.

As this saving is so generous, naturally the taxman applies a maximum concessional contribution level, currently this is set at $25,000 for those under age 50 and $50,000 for those over 50. In previous years this limit for the over 50 tax payer was $100,000 and currently is due to fall back in line with the younger limit of $25,000 at 30 June 2012. These limits are constantly under review as the Government seeks to find a balance between encouraging the tax payer to save for their own retirement and being overly generous to those who are already secure in their retirement planning.

There are of course penalty tax rates that apply where a member has exceeded their concessional limits. In this situation the super fund charges penalty rates in order to match the highest personal marginal tax rate of 46.5% and the excess contribution goes toward your non-concessional limits for the year.

In recent years there has been a wave of new insurance policies being implemented via superannuation, it is important to understand that these premiums are often funded from non super sources and a deduction claimed by your accountant. As a deduction is claimed these premiums also form part of the concessional limit.

So for the 40 year old medical specialist with a young family and reasonable insurance premiums to fund, it can be very easy to inadvertently breach the limits, thereby turning an otherwise deductible item into a non-deductible. As with most taxation items, the error is only identified well after the end of the financial year where the opportunity to correct the error has passed.

Superannuation is indeed a core tax planning tool for the high income specialist, however it is a constantly changing landscape and one that requires specialist advice. If you would like to have a review of your superannuation/insurance arrangements to ensure you are not heading for penalty tax, please contact us on 1300 589 527 to make an appointment with one of our Medical Wealth Strategists.