Working as a medical professional in a private or public hospital allows you to access a tax free salary sacrifice benefit.
This equates to a tax free amount of around $9,000 per year coming straight off your gross income that can be spent on non deductible private expenses such as rent, a home mortgage, gym memberships, car registration, private health insurance or personal travel.
Good for Cashflow, Good for HECS Repayments
But often new doctors entering the salary sacrifice system with HECS debts do get an unwelcome surprise in the form of a tax bill. This is because the salary sacrifice reduces the income tax and Medicare you owe, but does increase the amount of HECS repayment that is calculated on your tax return.
In simple terms, the salary sacrifice will give you access to about $343 tax free per fortnight. If you take this up and increase the fortnightly tax you pay by $80, then it should ensure no nasty tax bill surprises. This can be done via submitting a form to payroll.
And the other benefit is that, the salary sacrifice actually channels less into paying income tax and more into repayment of your HECS debt – meaning you will get to pay your HECS debt down faster.
For example, if you earn $100,000 of taxable income without salary sacrifice, and have private health insurance, you will pay $24,327 in tax, $2,000 in basic Medicare Levy and $7,500 in HECS repayment.
If, however, you take roughly $9,000 of your $100,000 in tax free salary sacrifice, then you will pay around $21,000 of income tax, $1,800 in basic Medicare Levy and $8,600 in HECS repayment.
These final figures also can be reduced by tax deductions on your return, such as exam/college fees, medical registration, and tax deductible insurances such as medical indemnity and income protection.
If you would like an assessment of your personal tax/HECS situation, click through the image below and get in touch with your details.