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How can doctors save tax and pay off their mortgage faster?

In a previous article, we have already established that the main frustration for many doctors is paying too much tax. We also highlighted 3 strategies to build wealth and save tax. You can read this article by clicking HERE.

However, there is one additional strategy that can help doctors save tax and also pay off their mortgage faster. It involves the use of an offset account.

What is an offset account?

Offset loans allow you to use your mortgage as your cash hub. This means that you have one account into which you can direct all of your income, and also draw your living expenses out of, by using a credit card, EFTPOS or ATM withdrawals. Typically, your mortgage repayments would also come out of this account.

The funds in the account offset your mortgage loan balance (usually dollar for dollar).

How can an offset help doctors save tax and pay off their mortgage faster?

Instead of earning interest, any money you have in your offset account works to offset the interest you are paying on your home loan.

For example: You have a mortgage of $500,000 at a 5% interest rate. You also have a practice savings account with $50,000 earning 2.5%.

You would incur interest on your $500,000 mortgage at 5% or $25,000 p.a. You would earn interest of $1,250 p.a. on $50,000 but will also pay tax on that interest. Your net result (assuming tax at 49%): a $24,360 interest cost.

However, if the $50,000 was held in an offset account against your mortgage, you would only incur interest on $450,000 which is $22,500 p.a. You would not earn any interest on your savings account.

Your net result: interest costs of $22,500 representing $1,860 of savings compared to the first scenario. Every mortgage repayment you make will also repay more principal when funds are sitting in the offset account. You could potentially shave years off your mortgage repayment.

How can doctors take advantage of this strategy?

Many doctors in private practice only pay tax quarterly. In that time, significant funds may accrue in the practice account. Depending on the advice of your tax accountant, you may be able to ‘park’ those funds in the offset account against your mortgage. You will not only save interest, but also save tax and pay off your mortgage faster. Three powerful outcomes for doctors.

About me

I specialise in managing and coordinating the financial affairs of medical professionals and have been recognised as one of the best financial planners in Australia. I am a Certified Financial Planner and member of the Financial Planning Association of Australia.

As I understand your time is extremely valuable and scarce, I am able to offer flexible meetings times, including outside business hours and during the weekend. I can even come and meet you somewhere convenient, or talk via videoconference on Skype.

My first consultation is free. I allocate up to 90 minutes to discuss your personal circumstances and to establish how I may best assist you. Where you already have an existing adviser, I would be happy to offer a second opinion. I always quote a fixed dollar fee before we start working together.

Please contact me on or call me direct on 08 9381 2704. You can follow me on Twitter @YvesSchoof or connect with me on Linkedin to receive new articles.

Disclaimer: Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making a decision.

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