Superannuation: Tax-effective Structure for Doctors and Dentists
Updated: 5 hours ago
If you've watched my recent video on investment and education bonds as a tax-effective investment structure, you'll know medical professionals have several ways to build wealth more efficiently. In this post, I'll dive deeper into one of the most powerful tools available: superannuation.
Tax Benefits at Every Stage
One key reason superannuation is so attractive is that it offers tax advantages throughout its lifecycle when you contribute, while your money is invested, and when you withdraw in retirement.
Contributions
As a self-employed doctor or dentist, you may be able to claim a tax deduction for your super contributions. The tax rate on concessional contributions is just 15%, well below the top marginal tax rate of 47%.
For high-income earners, another consideration is Division 293 tax. This adds an extra 15% on contributions if your income exceeds the threshold. Even so, a 30% tax rate is still well below the top marginal rate.
Investment Earnings
Once your money is in super, the tax benefits continue. Investment income is taxed at a maximum of 15%, and capital gains are taxed at just 10% if the asset has been held for more than 12 months. For gains on assets held less than 12 months, the rate is 15%.
Retirement Phase
This is where super really shines. In the pension phase, investment earnings and capital gains can be taxed at 0%. And any funds you withdraw after age 60 are typically tax-free.
Why Start Early and Think About Your Spouse
Given these benefits, high-income doctors should maximise their concessional contributions. But something's often overlooked: your spouse.
There are limits to how much each individual can accumulate in super tax-effectively. By contributing to both your own and your spouse's super, you can make the most of these caps and build wealth more efficiently as a household.
I'm also seeing more clients start contributing from a younger age, including after-tax (non-concessional) contributions. With recent changes to family trust taxation and capital gains tax rules, many are rethinking their long-term strategies. Superannuation often comes out on top as the preferred vehicle for tax-effective retirement savings, even with potential legislative changes down the track.
A Complex Area: Get the Right Advice
Superannuation is a powerful tool, but it's also complex. Contribution limits, individual caps, and changing legislation mean it's important to get tailored advice for your situation.
If you have questions or want to explore how super fits into your broader financial plan, feel free to reach out. We're always here to help.
Yves Schoof
Director & Principal Adviser | Affluence Private Wealth
