Lately we have had an influx of Medico’s getting started on their own. General Practitioners, Podiatrists, Psychologists, Geriatricians and Anesthetists, all starting out again leaving their first experience as an employee and venturing into the world of a sole trader. It is an exciting time in life, but it also comes with steep learning curves, differing opinions, and stress about tax obligations.
Tax planning as a medical professional is critical to ensure tax bills are accounted for in your budget. The truth is, any individual earning substantial money pays tax, and sometimes large amounts. It may seem balancing between multiple part time roles, working 1 or 2 days a week as an employee and then as a contractor / sole trader, is hard to plan for. But is it really?
Last week I met with a new practitioner, who came into our office overwhelmed with the obligations they faced and had been told about. The truth is simple record keeping and tax planning is not that hard.
A well laid out excel template to record your revenue and business-related expenses (insurances, professional development, room rent, resources and travel) can save expensive subscriptions while you’re starting out. While, this may not be appropriate for large scale businesses, e.g. a whole practice with multiple staff, it is perfect for the starting sole trader. A good spreadsheet will give you a tally for the month, quarter and year.
Understanding if you need to be registered for GST, and what this means for you, is an important starting point. Often when a practitioner starts out they are still employed in another role parttime and will not be required to register for GST. How do you know when you need to register for GST? What isa BAS? How is the BAS completed and when do you pay the ATO? Can you get money back?
What is it? Tax planning helps you calculate, based on your earnings, what money will be needed to cover you tax obligations to the ATO. Recently we calculated tax required for a client with multiple income streams, two jobs and work as a fresh sole trader, with a HECS debt. What this shows our client is that for now, the money they have set aside for tax (the total earnings of their sole trader role so far) is more than they need. Knowing this has freed up some of their cash to do other things, like super contributions, travel, or developing their business further.
A timeline showing when your tax debts will be due can be reassuring. When will you need to do a BAS, when will your tax return and any payment be due, when will you begin paying income tax instalments? We can estimate all of this for you.
Begin with the basics by having a discussion on what you can claim (and what’s a no-go). This will help frame your business decisions and record keeping. A particular focus here can be work travel, driving to and from client’s locations, or even between workplaces.
Whilst it might seem like a foreign language to you, so is medicine to us. Come and have a chat to us at Accru Hobart so we can set you up right from the start and let you do what you do best.