Friday, February 09, 2018

Getting your moneys worth

Claire Forshaw from Power Pays – a medical contractor management services company – reveals a secret to putting more of your hard-earned income in your own pocket through salary packaging solutions. If you work as a sole trader medical contractor (ABN) some or all of the time – this is how you can get your money’s worth.

“Rule Number 1. NEVER LOSE MONEY.
~ Warren Buffet

When it comes to making the most of your money, it’s worth taking a moment to look to the advice of Warren Buffet. The American investment guru is one of the richest and most respected businessmen in the world. And his approach to investing is simple – it comes from investing in yourself.

You are gifted people who are changing lives every day, yet there is a savvy tax minimisation strategy that many independent medical contractors operating as sole traders are currently missing out on – salary packaging benefits.

Do you work as a sole trader medical contractor some or all of the time?
I am not just talking to all the full-time lifestyle locums out there – although this is a big opportunity for them. This message is also for all of you undertaking additional locum work or working in a practice under an ABN as a sole trader, or who pay a fee in return for office facilities and administrative support in a clinic or health centre.

As medical contractors you’re very time poor, but adopting a medical contractor management solution will helps you put more of your income back in your own pocket so you can invest more time in yourself – and that is such a powerful opportunity.

One of the many key benefits of operating via medical contractor management solution is extra salary packaging options for those who already have it through their PAYG hospital employment, and the ability to capitalise on it if you don’t.

You can all enjoy extra salary packaging benefits for more money in your pocket.

Does an extra $15K sound nice? Imagine the holiday, or the dent in your mortgage or investing in your wellbeing that this type of extra money will bring – and you’re not having to do the extra hours to earn it.

While many of you already have salary packages through your hospital employer, but for locum or private practice work where you use your ABN, it’s possible to double your salary packaging benefits in addition to what you are currently receiving although it must be agreed pre earned income, never retrospective.

Many medical
contractors using an ABN are classified as employees by the ATO
This means you can engage in salary packaging (also known as salary sacrificing) – a savvy, tax-effective arrangement between you and your ‘employer’. So, if you fall under this classification (check with your accountant) for your sole trader work, you can pay for some items or services straight from your pre-tax salary and reduce your taxable income – and ultimately put more money in your pocket.  
If you look at a medical contractor management solution you will generally gain extra tax-effective salary packaging benefits in one of two ways:

  • Double your current salary packaging benefits or gain additional perks
  • If you’re a
    full-time hospital HMO, intern, resident or registrar undertaking additional sole trader (ABN) locum work; a full-time hospital doctor about to specialise and doing additional sole trader (ABN) locum work; or a returning fellow working full-time in a hospital and doing additional sole trader (ABN) locum work; then this is for you. 
  • For example, you may take some time off to travel to a remote area for a few weeks to support rural patients. A medical contractor management solution allows you to roll over your travel costs for this period into salary packaging for additional tax breaks. Or if you perhaps travel for some locum work; you can package a percentage of your accommodation, flights, per diems and incidentals not covered by the hospital offering the extra shifts as you’re engaged as a sole trader independent contractor for that additional work.
  • Gain salary packaging benefits not currently available
  • This is for all the independent medical contractors working as a sole trader (ABN) in a practice or paying a fee in return for office facilities and administrative support in a clinic or health centre. It’s also for the full-time sole trader lifestyle locums. Right now you don’t accrue super, you pay your own Work Cover, do your own BAS and tax payments and spend quite a bit of time on admin that’s non-billable hours.
    Plus you can’t salary package at all.
    However, if you switch to a medical contractor management solution, you can salary package things like untaxed living expenses and untaxed meals, and avoid the wasting hours of non-billable time wading through stacks of paperwork. 
  • For example, a full-time lifestyle locum working as a sole trader who earned $168,652 in the 2017 financial year after paying tax instalments, super and their accountant (plus factoring in the hours of non-billable time handling business admin, payroll and other needs) is left with just over $95K in the pocket. But switching to a medical contractor management solution allows them to salary package (and accrue super with included Work Cover) and end up with an extra $15,432.63 in the hand.
There is generally no restriction on what can be salary packaged

The benefits fall under three categories: fringe benefits, exempt fringe benefits and super. If you’re employed in non-profit such as a public hospital, popular salary package item include:

  • Living expenses – you can set aside up to $15,899 of your pre-tax salary each FBT year (1 April-31 March) to contribute towards rent, mortgage repayments, groceries and utilities. This will show as a grossed up amount of $30,000 on your PAYG summary.
  • Meal entertainment – an allowance where you pay for restaurant meals with pre-tax dollars.
  • Novated lease – pay for a car lease, rego, insurance and petrol from their pre-tax salary and avoid a deposit and GST.
  • Taxi travel – starting and/or ending at your place of work.
  • Tools of the trade – laptops, tablets and mobiles can be salary sacrificed as long as you can show they are used mainly for work purposes.
  • Protective uniforms – if you require a uniform for your field, you can package the cost here too.
  • Super - topping up your super for retirement, which is important to consider now, especially in light of the Government’s recent super reforms.
A medical contractor management solution helps you with money, time and compliance

As a medical contractor, your responsibilities include paying instalment tax, filling your BAS paperwork, covering your own insurances, invoicing and all of the tedious tasks involved in following up your payments, getting everything ready for your accountant and making sure everything is in order if you have an ATO audit. Don’t underestimate the unbillable hours it takes to make sure all of this is done correctly too. Salary packaging is also a very specialised field and requires advice from qualified accountants and tax advisors so you don’t incur any FBT liabilities and meet the new super rules that came in last year – especially if you hold a self-managed super fund.

In addition to salary packaging benefits, a medical contractor management solution removes risk, offers you Work Cover and super, and gives you back control and your lifestyle. You focus on your career and they manage invoicing your clients, paying you correctly as well providing access to these great salary packaging options.

In an interview, Warren Buffet reminds us that “…ultimately, there's one investment that supersedes all others: Invest in yourself. Address whatever you feel your weaknesses are, and do it now… Nobody can take away what you've got in yourself – and everybody has potential they haven't used yet.” It’s definitely time to relook at the way you manage you money.

Claire Forshaw from Power Pays 

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