Living Expenses
What living expenses can I package?
At Specialized Medical Services we are stream lining your Living Expenses to make it simple and easy.
You have available up to $30,000 grossed up which equates to $15,900 pretax. You can nominate this to go towards rent, mortgage or a loan. You just need to provide a copy of your rental lease, home loan statement or personal loan statement and we will set up the available amount to be packaged each pay period.
Things you need to know
- The maximum we can deduct each pay under this benefit is $15,900 divided by the number of pays remaining in the FBT year.
- Benefits that are salary packaged under your employer’s tax-free cap entitlement will give you a reportable fringe benefit amount.
- You must not salary package costs that have been claimed previously.
- You will be advised of your individual cut off date prior to the end of the FBT year.
Meal Entertainment
We aim to make Meal Entertainment simple and easy. Over the full FBT year you have a grossed up amount of $5000 available which equates to $2,650 pretax.
The cost of a dine-in meal for 2 or more persons (referred to as “Meal Entertainment”) can be salary packaged. The types of expenses that qualify for ‘Meal Entertainment’ include:
- Dine-in meals at restaurants, cafes, pubs, clubs, bistros; and
- Catered events (weddings, birthdays, engagements, etc).
- Hiring professional caterers to prepare and serve food and drink
- Attending a ball, gala event or charity dinner
The following expenses do not qualify:
- Take-away;
- Coffee, coffee & cake, sandwiches, snacks etc; and
- Entertainment – movies, theatre, theme park tickets etc. Only a meal qualifies, not ‘entertainment’;
- Takeaway, home delivery or drive through meals
- Food consumed in-flight
- Grocery and supermarket bills
- Alcoholic drinks that are not purchased in conjunction with a meal
- Pre-purchased restaurant vouchers e.g. Cudo, Spreetsetc
- Meals purchased by someone other than yourself or your spouse
Things you need to know
- The maximum we can deduct each pay under this benefit is $2,650 divided by the number of pays remaining in the FBT year.
- Each pay period the allocated set amount will be set aside pre tax. This allows for you to build up the balance if you wish to pay for larger items such as a catered event. Any funds not used in the FBT year will be paid to you as taxable income at the end of the FBT year.
- A valid Tax Invoice or Tax Receipt must be provided along with your expense claim form.
- Benefits that are salary packaged under your employer’s tax-free cap entitlement will give you a reportable fringe benefit amount.
- You must not salary package costs that have been claimed previously.
- You will be advised of your individual cut off date prior to the end of the FBT year.
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:
1. 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.
2. 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.
