T: +61-7-3221 5677 - Enquiries: enquiries@walshs.com.au - Mortgage Broking: lending@walshs.com.au

Walshs

I am newly self-employed, should I make super contributions?

One of Queensland’s leading financial planning, accounting and lending firms for medical and private clients. Providing accounting, mortgage broking and strategic financial planning advice.

T: 61-7-3221 5677
Email: enquiries@walshs.com.au

Walshs
Level 24/10 Eagle Street, Brisbane QLD 4000

Open in Google Maps
  • Medical Clients
  • Private Clients
BOOK A MEETING

Walshs Insights

I am newly self-employed, should I make super contributions?
Tuesday, 31 January 2023 / Published in Walshs Blog

I am newly self-employed, should I make super contributions?

As a newly self-employed doctor, there are a significant number of considerations that need to be worked through, for example; registering for GST, managing practice obligations, managing tax liabilities and finding new patients. Often, growing wealth at this time can be difficult or become a low priority.

When moving into private practice, you become self-employed and therefore, no one is making superannuation contributions on your behalf. Whether or not you make super contributions comes down to a number of factors, including available cash flow, profitability of your practice, cash flow priorities and other financial planning objectives, like buying a home or paying off debt.

Generally, for most clients the focus in the first one to two years of private practice is more on developing the business. This means reinvesting cash flow back into the business in order to build the practice over time. Therefore, our recommendation is that a client only makes superannuation contributions at the point in time that they are willing to forgo this cash flow into superannuation and not be able to access it until age 60.

If a doctor is not able to make superannuation contributions in the current year, the good news is the government introduced legislation in 2018 that allows for superannuation contributions that are unused in any financial year to be carried forward for five years. This is called the carry forward provision. This strategy allows a self-employed person to make retrospective contributions for previous years. Therefore, once the practice is well established and the doctor has a comfortable level of income that could be allocated to long-term wealth creation, the doctor then is able to make contributions to super including those retrospectively.

In the long-run, our suggestion is that every self-employed doctor should maximise their superannuation where they are able to do so as it is the most tax effective vehicle to grow wealth in Australia.

As a self-employed person when making a superannuation contribution, you can claim a tax deduction up to the limit of $27,500 per year. So, depending on the person’s marginal tax rate they might receive a tax benefit or saving between $10,000 and $14,000 (assuming a tax rate of 39-47%). Once the money is inside the superannuation account these funds are only taxed at 15% (or 30% if adjusted taxable income is greater than $250,000), which is a lot better than a person’s individual tax rate of generally between 39 and 47%.

In addition to the tax savings, superannuation offers doctors a place to allocate their money that is creditor protected. Meaning that if anything ever went wrong with the practice, all funds held in the superannuation account could not be accessed by creditors in the event of a bankruptcy.

Alongside creditor protection, superannuation offers a method of reducing long term retirement risk. Most doctors will aim to sell their practice at the end of their working life and in doing so, risk their retirement savings, depending on what the value of the business is at the time. If the market conditions, legislation or economic climate is not favourable at the time of the sale, the practitioner may not receive very much from the sale of business, therefore not allowing them to fund a comfortable retirement. If superannuation contributions had been made throughout the practitioners working life, there would be a significant hedge against the sale of the business which would help build for a comfortable retirement.

So, in short, a doctor does not necessarily need to make immediate superannuation contributions when starting out in private practice, they have the flexibility to be able to focus on their practice and can make retrospective contributions. However, it is in a practitioner’s best interest to maximise super contributions thereafter at $27,500 per annum, or as soon as they are able to do so.

Walshs are committed to our clients’ needs, we welcome you to contact us for specialist medical, accounting, lending and financial advice on 07 3221 5677, enquiries@walshs.com.au or you can book a meeting here.

By Peter Hodgson, Director, Walshs

  • Tweet
Tagged under: accounting, ATO, brisbane medical accounting, Business, cash flow, financial advice, financial planning, Growing Wealth, legislation, medical practice, private practice, retirement savings, self-employed, Superannuation, Tax, tax liabilities, walshs

What you can read next

I am newly self-employed, should I make super contributions?
2022-23 Federal Budget – What’s in it for you?
I am newly self-employed, should I make super contributions?
The benefits of outsourcing bookkeeping for medical practices
I am newly self-employed, should I make super contributions?
The vital role of a tax planning meeting with your accountant and some tips for 2023!

Recent Posts

  • student at desk working out loan debt with a clock and graduation cap on the desk

    What’s Happening with the Government’s Promised 20% HECS-HELP Reduction?

    The Albanese government’s promise to cut studen...
  • Busy Medical Centre reception area with a visiting family and two staff in scrubs

    Starting a Medical Practice in Queensland: How to set up for financial success

    Establishing your own medical practice is one o...
  • Brisbane home with map showing Brisbane location

    Where should you invest in Brisbane? Top property insights for smart buyers

    At Walshs, we’re all about helping you make sma...
  • Australian Orthopaedic Association regional Alliance Partnership with Walshs in Queensland Announcement

    Walshs is Proud to Support AOA Queensland as a Regional Alliance Partner

    Walshs has strengthened ties with the Australia...
  • 2 women and a man in a blue suit in a tax meeting - they are happy and smiling

    Maximise, strategise, save! Tax Planning that pays in 2025

    Gone are the days of setting a tax strategy at ...

Contact

  • PHONE: 61-7-3221 5677
  • FACSIMILE: 61-7-3221 5744
  • EMAIL: enquiries@walshs.com.au
  • MORTGAGE BROKING: lending@walshs.com.au

Location

  • OFFICE: Level 24/10 Eagle Street, Brisbane QLD 4000
  • POSTAL ADDRESS: GPO Box 12, Brisbane QLD 4001
I am newly self-employed, should I make super contributions?

Connect with us

MAKE AN ENQUIRY OR BOOK A MEETING HERE
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
I am newly self-employed, should I make super contributions?
All advice on this site is general in nature and does not take into account your personal circumstances. Please do not hesitate to contact one of our adviser accountants or financial planning advisers if you have a query that is specific to your circumstances.
ABN 11 248 978 295 Walshs Financial Planning Pty Ltd AFSL 432636 ABN 82 122 293 912 Corporate Authorised Representative No. 463774 of Walshs Finance Australian Credit Licence 459119

Liability limited by a scheme approved under Professional Standards Legislation.
  • Privacy Policy
  • Financial Services Guide
  • Credit Guide
  • Complaints Policy
TOP
lending-15-min-ph

If the time you would like is not available, please contact our office on 07 3221 5677.

Make a booking with Darole Evans

If the time you would like is not available, please contact our office on 07 3221 5677.

GET IN TOUCH

If you would like a Walshs adviser to contact you or to receive marketing material from Walshs and/or be advised of upcoming seminars and events please provide your contact details.
[contact-form-7 id=”18018″ title=”Contact form 1″]

Book 15 minute lending call

If the time you would like is not available, please contact our office on<br>07 3221 5677.