Whether you’re a GP or trauma surgeon, pharmacist or physiotherapist – you need to pay tax. Tax planning is an essential process for your peace of mind and ongoing compliance.
Are you a medical professional struggling to keep up with your tax affairs?
Read more from the medical accounting division at Crest Accountants to discover why you need to prioritise tax planning.
Tax compliance is a must
The ATO expects taxpayers to comply with their tax obligations, and it is the responsibly of the taxpayer to seek specialist advice if they cannot manage their tax obligations alone. Busy medical professionals seldom have the time or energy to invest in managing their tax affairs, and often rely on professional advice to stay compliant.
The tax affairs of medical professionals can be complex and do require forward planning to ensure tax debts don’t inadvertently mount up. Often medical professionals earn their income as an ABN contractor (either as a sole trader, or through a company or trust structure). As an ABN contractor tax is not usually withheld at the point of earning income. It is the responsibility of the taxpayer to estimate their tax liabilities and have adequate funds set aside to pay tax debts when they fall due.
The realities of tax compliance negligence
Earlier in the year, the Administrative Appeals Tribunal denied the release of debt of a surgical registrar (the Applicant) from nearly $1.2 million owed in income tax, GST, PAYG instalments and general interest charge.
How did it come to this?
- The Applicant tried to manage his own tax affairs and found it ‘complicated’ due to earning business income.
- He eventually sought assistance from a tax agent, however he found gathering the information requested of him ‘time consuming’.
- He did not budget, putting none of his income aside for tax payment purposes.
- He had an extremely poor compliance history in respect of lodgement of personal income tax returns.
- The Tribunal found there was scope for him to substantially reduce his personal expenditure and maintain a reasonable standard of living, which would enable him to pay down his 1.2m tax debts.
- The fact that the Applicant may be rendered bankrupt if he were to meet is Tax Debts was found not to be relevant
Remember, you never have to navigate the Australian tax system alone. Accountants for doctors and other medical professionals are here to assist you.
ATO support for serious hardship – release of debt
There is support available from the ATO for people in difficult circumstances suffering from serious hardship. If you’re experiencing serious hardship, the ATO may release you from some or all of your tax debt.
What does the ATO take into account?
- Income and expenditure – do you have enough income to pay for food, accommodation, clothing, medical treatment, education along with paying down tax debts?
- Assets and liabilities – could the sale of a particular asset repay part or all of the tax debt?
- Other factors, including:
- How the debt arose
- Is the serious hardship is temporary
- Past compliance history
- Have you provided for future tax debts
- Do you have other debts you are unable to pay
- Have you disposed of assets without providing for tax debts
What can you do?
To avoid falling behind on your tax debt, there are a few things you can put in place now:
- Stay in the loop
Know your tax responsibilities and maintain compliance.
- Save for tax and budget
Tax is not usually withheld from income earned under an ABN. So it’s up to you to put money aside for tax purposes and budget accordingly.
Your Gold Coast business accountant is here to help you understand your tax responsibilities, plus we have a range of other services to manage your tax and accounting needs with ease.
Crest Accountants have the expertise you need and are chosen time and time again as Gold Coast accountants for doctors, pharmacists, dentists and allied health professionals.
Need a professional and confidential business accountant?
Contact Crest Accountants today to organise your initial consult.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.