I know medical professionals hate paying taxes. I don’t blame them. In my time as an expert tax advisor to medical professionals, I have seen some insane tax bills.
They are big enough to make me want to cry. And I’m not even paying for it.
So, when it comes to medical professional clients, I want to make sure you pay the least you can legally. Sometimes, I would like to do more, but that may lead to grey areas, and as long as our clients know the risks and what it may mean (usually a tax benefit, but if the ATO disagrees, then potentially more taxes, interest and fines), then I do not have a major issue with it.
And because the tax bills are so big, we often get some wild proposals put to us by medical professionals all the time. Most are illegal and from advice received from pub mates or other medical professionals whose accountants are not quite as clean. Seriously, during my time, I have probably heard them all.
So, red areas are a real no-go for me. Like most medical professionals, I am not prepared to put my reputation (professional and personal) on the line.
But when medical professionals pay more tax than they should? This makes me jolly cross. Ok, to be honest, this makes me act like a maniac fuelled by pure range and violence. Except you won’t see much violence. That’s because I am a bit of a wimp and too scared of getting punched in the face.
Anyway, I know what you are thinking. How is it possible to pay more tax? How stupid is that?
But I can tell you it happens—a lot.
And that is because most have accountants who are either not interested, cannot be bothered, are not engaged, or are simply so busy you do not want to disturb them.
This then means when you need advice, you will go it alone and do it yourself, hoping for the best. And we all know that hope is not a strategy. This, then, is going to be as successful as trying to convert the Pope to Hinduism.
So, a couple of weeks back, I was conversing with a young potential client who is a skin cancer specialist. She has a high Australian income, a property in the UK that is rented and is possibly looking to buy a home in Australia.
She had some spare cash, and because she had an accountant incapable of talking and impossible to contact or ask advice from, she did what you and I would. She did the best she could with her resources and paid off a large chunk of the loan on her investment property.
After asking her a few questions that took less than 10 minutes, we worked out that it was probably not a good idea from a personal perspective or a tax perspective. Here’s why:
- She would like to buy a home in Australia but as her savings have been used in the UK, she has less savings to use as a deposit.
- This is likely to result in having to pay mortgage insurance. This is expected to cost about $50,000, which would be added to her loan.
- The loan in the UK is tax deductible in the UK and also in Australia. As the loan has been repaid, the interest will fall, and her tax bill will increase – we estimated an extra $5,000 will be due in taxes from next year, and for all future years, she will keep the property. Over the years, there will be a lot of extra taxes.
- As she has less savings in Australia, she will need a bigger loan. Bigger loans mean larger interest bills. And because the loan is personal, it is not tax deductible.
Now, if I had identified this in less than 10 minutes, then so should her accountant, and they should have advised her accordingly.
And this is why professional advice that helps you is so important. Any accountant can do a tax return. Most can do it cheaply, too. But the value is not in the tax returns. The value is what an advisor can offer you on a daily basis. So, if you are looking for a new accountant or wondering if the one you have is right for you, ask these questions:
- Is your accountant contactable, and do they respond in a timely manner?
- Do they give you time to discuss any matters you want (within reason) without charging you a fee?
- Are they only interested in doing your tax returns?
- Do they try to educate you so that you work less, earn more and become wealthy (because that is what we have found most medical professionals want)?
- Do you know what your fees will be before they start your work?
If you find that you are unable to answer these questions positively, then maybe it is time to make a change.
Tax minimisation is step 2 of our 9 steps to working less, earning more and creating more wealth. If you would like more information, contact Hitesh at hitesh@medisuccess.com.au or call 1800 281 038.’
