There are six common mistakes that doctors make that are negatively impacting their financial future and are hurting them both now and when they retire.
Over the next six weeks we are going to look deeper into each mistake. Last week we looked at 1. Lack of a Detailed Budget.
This week: Non-existent Tax Planning
The second most common financial mistake that doctors are making is inadequate or Nonexistent Tax Planning. This is pretty straight forward, quite simply as doctors earnings increased over their career, particularly once they become either GP’s or Specialists, they pay the marginal tax rate. So in Australia the marginal tax rate being, heading to the top tax bracket, at $180,000 so when a doctor’s income moves from $180,000 to $280,000 per annum, they are effectively paying close to 50% of that additional $100.000 in tax. And this continues often over their entire career, so the additional tax that is paid is often unnecessary and if they planned earlier for tax effective strategies they would save an absolute fortune.
The other part of tax planning is our doctors are often poorly advised before coming to us with their taxation matters so they lodge their tax light, be it personal, super, trust or ABN type of tax returns and that can lead to potential fines. So the main point is that it’s seldom a proactive exercise, people just earn an income and pay a lot of tax and when that tax is paid it’s gone.
If you think that you have inadequate or nonexistent tax planning and would like more information from one of our Private Wealth Managers, contact us HERE