Unfortunately, this time of the year many doctors and dentists get either an unwelcome or very pleasant tax surprise.
Either of those should not really happen at all. We like to make sure all of our clients know what to expect before lodging their tax return.
Well, it is never ideal if you either get hit with an unexpected tax bill and haven’t provided for it, or if you get a big refund.
In the latter scenario, it means that you have overpaid tax throughout the year, and may have missed out on the funds offsetting your mortgage for example. It’s a bit like providing an interest-free loan to the tax office!
We like our clients to have smooth and reliable cash flow, as we apply that cash flow to strategies such as debt repayment and wealth creation throughout the year. Any distortion of this regular cash flow is most unwelcome.
So how you can avoid any surprises at tax time?
Well, it requires a more proactive approach from both yourself and your accountant.
If you are self-employed you can keep track of your tax obligations via your BAS reporting. Your accountant can check whether your current quarterly tax instalments track your current earnings, and then make adjustments where required.
If you are employed and have a lot of deductions that lead to big refunds, you may want to vary your PAYG tax to ensure you don’t end up overpaying too much tax.
What should you do if you end up with a big tax bill?
Don’t panic, talk to your accountant and the ATO if needed, and work out the most efficient funding mechanism – some people may need to negotiate a payment plan with the ATO or take on a short term debt. Learn from this experience to avoid it from happening again in the future.
If you get a big refund, don’t blow it! Apply it to a sensible strategy such as debt reduction or super contributions for example.
If you would like to discuss your tax planning or would like a referral to a specialist medical accountant, please contact me on 08 9381 2704 or Yves@affluenceprivate.com.au.