Top 10 Missed Tax Deductions for Doctors!

Are you a doctor or medical professional working in Australia? You’re probably stranger to the fact that the more you earn, the harder you’re taxed. As it turns out, you could actually save yourself a lot of money the next time you submit your income tax return.

1. Tools, equipment & other assets

If you purchase tools, equipment and other types of assets to assist with generating income, you might be able to claim for all or part of the cost. As with home-office equipment, you’ll need to assign a percentage for business use and work out the deductible amount from that.

The ATO has rules for items within certain price ranges. For example, items that aren’t part of a set and cost $300 or less or are part of a set that costs $300 or less in total, you can claim an immediate deduction for the total cost. If you buy an item that costs more than $300 whether individually or part of a set, you claim on the basis of a decline in their value.

These tools and assets can include everything from calculators, safety equipment and desks, to software, protective items and professional libraries. Repair and insurance costs can also be claimed, along with interest on any loans you took out to purchase the items.

Doctors can incur a range of costs when it comes to work-related expenses, investments and travel, so it’s a good idea to make it a priority to track your expenses throughout the year and keep your receipts, especially if your employer doesn’t have a reimbursement program. You can use apps and other tools to simplify the process, and as long as you get into the habit of recording your outgoings, you can minimise your tax bill and avoid paying more than you have to when it comes to tax time.

2. Work-related self-education

Doctors are required to complete a certain amount of continuing professional development to maintain their registrations, so it’s no surprise that work-related self-education is a key claimable expense for medical practitioners. For those undertaking specialist training, there can be additional expenses.
Have a system in place for tracking all your education costs, including textbooks, materials, fees, and even home-office computers and furniture for study. Other self-education expenses that you incur over the course of a year can include photocopying costs, student services fees, and course-attendance-travel costs.

3. Other work-related expenses

Other work-related expenses cover many types of expenses that you incur in the process of earning your assessable income. This might include purchasing a briefcase, buying a stethoscope and other equipment, or phone and internet expenses. You might be able to claim for travel and accommodation costs for attending a conference, membership fees for professional associations, and journal subscription fees. Insurance and medical registration fees also come under this category.

Remember, when claiming a work-related expense against your assessable income, you must have already paid for it yourself and not been reimbursed by your employer for the cost.

4. Home-based work expenses

As an employee medical practitioner, if you work from home at times, you might be able to claim for expenses such as using your computer, phone, and internet for work purposes. Heating, cooling, lighting, office-equipment depreciation, and at-home professional library could all be tax deductible expense. However, you can only claim for the portion of the expense that’s used for work purposes.
For example, if you buy a new computer and use it 40% of the time for home-based work for your employer, you can only claim 40% of the costs of your computer. If you use 30% of your home internet access for work purposes, you can claim $30 a month on a monthly internet bill of $100.

5. Cost of managing tax affairs

Another common expense to claim is the cost of managing your tax affairs. The ATO permits a range of claimable categories in this area, so make sure you take advantage of everything you’re eligible for.

  • Preparation and lodgement: Don’t forget to claim for the costs of preparing and lodging both your tax return and activity statements. Under this category you can claim for buying tax reference materials, the fee paid to your registered tax agent (RTA) for lodgement, and the costs of getting advice from your RTA. If you’ve incurred costs while dealing with the ATO about tax matters, these expenses are also deductible.
  • Travel for tax advice: If you’ve incurred travel costs for getting tax advice, this cost is also deductible against your income.
  • Administrative Appeals Tribunal (AAT) appeals: If you’ve appealed to the AAT in regards to tax issues, the expenses are deductible.
  • Valuations for deductible items: You can claim a deduction where you’ve incurred expenses for getting a valuation for a deductible gift or donation of property. You can also claim if you obtained a valuation for a deduction for entering into a conservation covenant.
  • Interest paid to the ATO: You can claim a deduction for interest charged by the ATO.

6. Work-related clothing

If you wear uniforms, protective clothing, or other specialised outfits for work, you could claim for the cost of buying these. Included under this category might also be the dry-cleaning costs for maintaining these clothing and uniform items. Don’t forget any special footwear and protective items you might have needed to purchase for work.

7. Vehicle & travel expenses

While you typically can’t claim for travel costs incurred for getting to work and back home, you might be able to claim for travel costs if you were required to travel between hospitals or medical centres for work. Other types of claimable travel expenses for medical practitioners include travelling to do work in remote, rural, or interstate areas, and travel for functions and events that are related to your work. If you attend and present at a function or conference for example, you might be able to claim for everything from airfares, accommodation, meals and the cost of having conference materials printed out.

If you travelled partly for work and partly for personal reasons, you can only claim on the part that was for work purposes. Note that if your home is a base of employment in that you started your work at home and then travelled to a workplace in continuation of the work, you could claim for these travel expenses.

Vehicle expenses

For motor vehicle expenses that are work related, you might be eligible to claim whether you owned, leased, or hired (under a hire-purchase arrangement) the car. You’ll usually need to keep written evidence of your car expenses, along with your logbook and odometer records.

There are two options for calculating your car expense, and you’re free to opt for the choice that gives you the biggest deduction or the one that’s the easiest for you.

Cents per kilometre – This method has you working out the total kilometres you drove for work in the last financial year and multiplying it by the current set rate (by the ATO; currently 66 cents) to obtain a dollar amount. Note that you can claim up to 5,000 kilometres per year, per car.

Logbook – This method involves working out the business use percentage of your expenses for using the car. Note that your expense includes running costs, fuel and oil costs, and decline in value, but not items such as purchase price, car financing principal amount and improvement costs. You need to keep a logbook with the odometer reading for the given logbook period.

You can also claim for depreciation for decline in value, but only if you use the logbook method to calculate your vehicle expenses and you owned the car or hired it under a hire-purchase agreement.

8. Insurance

Medical practitioners are required to maintain professional insurance, such as professional indemnity insurance. Other types of insurance could be income protection insurance, cover for audits and inquiries by Medicare, and tax audit cover. If the insurance policy is work related, you might be able to claim it against your assessable income.

Some types of insurance might not be tax deductible, even if they appear to be work or career related. These could include life insurance, trauma insurance or critical care insurance. Check with your accountant if you have any doubts about what types of insurance you can claim against your assessable income.

9. Gifts & donations

Don’t forget to claim for your donations made over the last financial year. The donation usually must have been over $2 in value and the charity needs to be a deductible gift recipient. Be mindful that there are some exceptions to tax-deductable donations, and these are usually those that provide you with some personal benefit for making the donation.

For example, if you purchase a fundraising-dinner ticket that has a donation amount factored into it and you believe it’s a donation, you might find out that it’s actually not tax deductible because you received a personal benefit in exchange for it.

10. Investments

Medical practitioners are usually high-income earners and it’s common for doctors to hold investments. If you took out a loan to invest in an asset, you might be able to claim the costs of the loan against your income. For example, if you have a negatively geared property where the net rental income is less than the interest on your property loan, you can claim this loss against your income. You can also claim a deduction for any expenses you incur in the process of earning interest, dividend or investment income.

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