Tax Returns for Doctors: How to Get it Right

29.03.2021 You may be receiving a slightly bigger tax refund this year due to to the changes to the 2021 tax brackets.  Make sure you put it to good use!

As your salary climbs, you will pay a higher and higher effective tax rate (% of gross income paid in tax).  Personal services income (i.e. doctors’ income from seeing patients) is the most severely taxed income.

Optimizing your tax return is just the start to minimising tax.  Read more tips on reducing tax, and don’t forget to get independent tax advise to ensure any ideas raised are appropriate to your situation.

How do Tax Returns for Doctors Work in Australia?

Australian residents who earning over the tax free threshold need to submit a tax return.   The tax year runs from 1st July to 30th June, and tax returns need to be submitted by October 31st.

Accountants can delay your tax return longer, an advantage if you owe tax.    Failure to lodge a tax return can result in a “Failure to Lodge” penalty of up to $1050.

Employed individuals receive $18,200 tax free, then income is taxed progressively.  Your employer will calculate and withhold tax automatically.

The tax brackets cause some confusion about “crossing the tax thresholds”.

Below is a table demonstrating tax you would pay on $250,000 income.  Medicare levies and surcharges will add a little more for high earners.  The ATO have a tax calculator.

Income Marginal Tax rate Tax charged
1st $18200 0% 18200 x 0 = 0 0
18200- -37000 19% (37,000-18200)x0.19 = 3572
37001 – 90000 32% (90000-37001) x 0.32= 16959
91,000- 180,000 37% (180000-90001) X 0.37 = 33299
180,001 -270000 45% (270,000-18001) x 0.45 = 40499
Total Income Essential Tax rate   Total tax paid
$270,000 35%   94,327

One of the most powerful wealth building levers is Salary sacrifice – the ability to reduce taxation on around $17,000 of your income to 15%.

Tax Returns for Doctors: Deductions

Work Uniforms

You are able to claim for work specific attire – so scrubs with logos can be claimed, generic smart clothes for clinic unfortunately not.

Work Related Education Expenses

These include expenses involved in self education relevant to your current employment, as long as it is expected to help you earn more in the long run.  This often includes books, journals and course fees.

Other Work Related Expenses

Stationary – note books, pens, headphones, USBs and cables for work use can be deducted.  A bag purely for work use of reasonable cost, stethoscopes, otoscope and other work specific equipment is deductible.  Paper and ink for your printer is deductible if it is used for work purposes.

If you work from home sometimes, home office furniture and equipment (e.g. printer and laptop) cannot be claimed immediately if they cost more than $300, but can be claimed as annual depreciation.

Keep records for work related postage costs.

Costs of lighting, healing, cooling and cleaning your home office can also be deducted.

You can either deduct a proportion of the utility and cleaning bills associated with your home office, or claim 52c per hour worked from home.

Internet – A percentage of your internet bill can be deducted for the proportion of work use (more than just emails).

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Professional Expenses

AHPRA, specialty college, union and medical indemnity fees are deductible.

Work Related Travel

If you travel between workplaces (not just between workplace and home) you may be able to deduct some costs for car running costs.

Gifts and Donations

Donations to Australian deductible recipient (ADR) charities are tax deductible as long as no products are received.

A charity calendar for the RSPCA cost is not deductible, but a simple donation to the RSPCA would be.

Generally, donations to individuals through Go fund me or similar websites are not deductible, but all the big charities in Australia are ADRs.

Making sure your donating to an effective deductible charity is a great way to make your donations go further and make the world a better place.

Costs of Managing Tax Affairs

Costs of last year’s accountant fees are deductible.

Income Protection

Income protection for doctors is deductible if outside superannuation.  Consider getting it earlier rather than later, particularly if planning on a mortgage and kids.  Getting this locked in early can save money.

Tax Returns for Doctors: How to Keep Tax Records

There is an ATO app that you can record deductions on through the year.  It warns you not to rely on this.  The first year I used the app it wiped all my records before tax time.  Not recommended after that experience!

The easiest way to keep records is probably to take a photo immediately with your phone, and have your photos automatically backed up in a cloud service.  You can organise your cloud photos into categories such as “Tax 2020”.

It is important to keep your tax records so you can claim everything you are entitled to.  How much does an average doctor deduct?  According to this clever interactive tool , the average RMO earning $37001-$87000 deducts $7285 annually.

If we assume 2 hours tax return preparation, 1 hour to lodge and 2 hours over the year organising receipts, that could make your return $466 per hour (at 32% marginal rate)!

The ATO expects records to be kept for 5 years after lodgement.  Your accountant should keep a copy, but always make sure you have an electronic or physical copy in case ever asked.

A tax audit is a painful process.  The Australian Tax office is not a bunch you want to mess around with.

Tax fraud is one of the few crimes you can go to jail for in Australia!

Be truthful with your deductions, keep records and consider getting audit insurance if your deductions are above average.

If your accountant suggests something that doesn’t sound quite right – check!

The ATO will not accept ignorance as an excuse.

Tax Returns for Doctors: How to Find an Accountant

There are several accountant and financial planning agencies geared towards serving doctors.

Due to your eventual high income, you are attractive bait for companies looking for high net worth clients with complex (and expensive) tax and financial matters.

For a junior doctor starting out as an employee without investment properties, your tax is very simple!  If this describes your situation, your tax return should cost less than $300.

It is helpful to have a good accountant familiar with doctors’ tax returns, so ask around for recommendations at work.  After the first year, whilst things stay simple, you could even submit your own tax return via the ATO app.

Things get rather more complex entering self-employment.  Instead of tax being withheld from each pay automatically, self employed doctors need to withhold their own tax and submit a lot more evidence to the ATO.

Many doctors are hit with their 1st tax bill 18 months or more into self employment.

Some have saved significantly less for this bill than they needed, a very stressful start to self-employment with the debt accrued often taking years to pay off.

If you are planning to enter general or private practice, find a qualified, capable and trustworthy accountant to help you before setting up business.

Tax HECS Calculator

Most junior doctors will have substantial student loan debt.  Your employer will automatically deduct repayments once you reach the repayment threshold ($46,620 in 2020-2021).

Compulsory HELP repayments are based on your taxable income with a sliding scale from 1% to 10% once income hits $136740.

There is no interest charged on HELP debt, but it is “Indexed to inflation”.  Inflation is the factor by which the general cost of living increases each year – in recent times pretty low at 2%.

It is possible to make voluntary extra repayments, but there is no longer an incentive to do this.

If you have debt accruing more than ~2% interest, paying this down, or investing your cash is likely to be more efficient.

Extra HELP repayments may be more efficient than saving in a savings accounts.  The security of an emergency fund beats mathematical calculations every time.

HELP repayments are not tax deductible unfortunately.

Can you reduce HELP repayments below the minimum repayments and invest your savings instead?

The ATO calculates repayments in a way to make this impossible.  Repayments are based on your:

  • Taxable income
  • Net investment losses – If you buy a negatively geared investment property or gear (Borrow to buy) shares and make an annual loss, you will still have to pay HELP repayment on this amount of your income.
  • “Grossed up” salary sacrifice – By salary sacrificing $9010 this is calculated as $17000 gross income.  Most will still save by salary sacrificing but some of the tax savings will go into HELP repayments instead (link)
  • Foreign employment income

If you work overseas, you still have to make your HELP repayments.

The First Home Savers’ Scheme release of $30,000 is not treated as income, incurring no further HELP repayment.

Doctors should have an easy system to keep organised records to ensure they claim all deductions they are entitled to.  The beginning of the new tax year is a great time to start Tax New Year Resolutions by optimising your income for tax.

“You must pay taxes. But there’s no law that says you gotta leave a tip.”
Morgan Stanley

Get prepared for the 2020-2021 financial year end now.

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Benefits of Remote Medicine: Why, When and How

Have you worked in a regional or rural area? Are you planning a career in remote medicine?  

Many believe all doctors should try out rural medicine at some time during their careers. 

Some understanding of the conditions and resources available to your rural colleagues will give you a far better ability to coordinate patient care in the future.

Why Work in Regional or Rural Medicine

There are many benefits to getting out of the big city. 

There is of course a huge difference between regional, rural and remote.  Regional towns have most amenities of big cities, with reasonable transport links and often large hospitals. 

Rural and remote towns can be an hour drive to a big city, or an RFDS flight away from anything resembling a large centre. 

There is usually lots of clinical variety in a more rural setting.  Junior doctors get to step away from administrative duties to assess and treat, as well as practice procedural skills. 

There is more independence and autonomy on offer.  Although still supervised, a rotation in rural medicine is a good opportunity to practice stepping up. 

Local communities in smaller town often have a buzzing social calendar that compensates for the lack of expensive entertainment and retail. 

Rural doctors often enjoy the closer relationships and mentorship with senior medical staff, and a deeper connection with the local community. 

Many of these regional and remote locations are in stunning areas.  If you’re more into hiking and waterfalls than lattes and nightclubs, you will find plenty of entertainment on days off. 

Check out this rural doctor post about remote medicine from beautiful Thursday Island.

Financial Benefits of Regional or Remote Medicine

Most professionals outside medicine are paid significantly more to work in the big centres of Australia.  Sydney and Melbourne are the place, but suffer a very high cost of living.  

Doctors are needed everywhere in Australia, with smaller towns often having difficulty recruiting and retaining skilled staff. 

Many specialties have the option of metropolitan or a regional centre, and general practitioners can obviously work wherever they like. 

The pay for a GP or more general specialist (general medicine, anaesthetics, emergency, general surgery) is not necessarily less in a regional or rural setting. 

In some circumstances, doctors can be rewarded with more pay as an incentive to leave the big smoke to work in a smaller centre.  Skilled doctors often feel more appreciated in smaller locations.    

The difference in cost of living between big cities and regional or rural areas is an important factor to consider. 

The largest expense in most households is housing.  Transport and food are runner up expenses for Australian households.  Reducing the amount a household spends on the three biggest expenses is one of the most powerful ways to build financial security and eventual wealth.


Accommodation purchase prices and rentals tend to be dramatically cheaper in smaller cities and towns.  The median house price in Sydney is over 1 million dollars! 

Even at our current record low interest rates (3%) the mortgage repayment for the median house (100% Loan to value ratio) would come to ~ $4226 per month!  A mortgage for $500,000 would currently cost you around $2116 per month, leaving over $1000savings monthly to invest.  Some locations may even subsidise accommodation. 

The caveat to this is that houses in regional and remote areas may not benefit from the same capital growth you can expect from a carefully selected capital city property.  A house purchase is a massive financial decision, with long term consequences.  Consider carefully whether your location is a good place to purchase a property, and whether renting, or rent vesting may be a better option for you.

Commuting Time and Cost and Groceries

Traffic in smaller cities and towns tends to be far less severe than that in the big cities (although locals everywhere will still moan bitterly about horrendous traffic)! 

Coming from Sydney or Melbourne, you will usually find a far shorter commute and hours of time freed up a week as a result.   With a far shorter commute (or a bike ride), travel costs are also significantly reduced, and more importantly time freed up for more important hobbies.

Food can, however, be significantly more expensive in rural (not so much regional) towns. 

When is the Best time to Try Regional or Remote Medicine?

As A Resident Medical Officer

By PGY 3, most junior doctors are into the groove of hospital medicine, becoming more independent and considering stepping up to registrar. 

A rural rotation at this point, in my opinion, is a fantastic opportunity to practice stepping up in a location with lower acuity patients. 

This will allow a doctor to take on more responsibility and develop independence in decision making.  These are skills crucially required for working as a registrar, many would agree the most difficult transition in the journey to specialisation. 

If your single, without dependents it is obviously a lot easier to move around than to uproot a young family.  Early in your career is a great time to indulge that inner travel bug and see more of this great country (once COVID-19 restrictions lift)!

Trying rural medicine at this stage also provides opportunity to change careers if you fall in love with living and working outside of the city, before you have wasted time and money on exams.

As a Registrar

Life often gets pretty serious as a registrar, with postgraduate exams, increased responsibility and often marriage and babies often mean not much sleep between night shifts!

Life may be too busy to fit in a move, but if you get the chance an opportunity to work in your regional network before starting as a consultant, it will give you far better insight into the conditions and resources available to your rural colleagues, allowing you to provide better advise, coordination and education.  

Locum Doctors

Doctors often take time out of training to travel and locum around Australia. This is a wonderful opportunity to see more of this enormous and varied country, and check out some regional and rural medicine along the way.

Accommodation and travel expenses to the work place will usually be covered, allowing long stretches of time without accommodation costs.

I have little doubt that anyone who undertakes a year of adventurous work doesn’t have an amazing time, meet lots of new friends and develop into a better doctor as a result.


The term “Geographic arbitrage” means moving to a different location to take advantage of lower costs of living.  It’s why so many retirees move to countries like Thailand, Bali and South America. 

But it doesn’t have to be an international move.  Many older Sydney residents have benefited from the property boom over the past 20 years.  Many have sold up to relocate to cheaper towns, freeing up plenty of equity to retire in luxury with.

So even if you want to become sub-specialised and want to enjoy the career and research opportunities the tertiary centres have to offer, geoarbitrage can be something you utlise at the end of your career.

How to get into Regional or Remote Medicine

Almost all hospitals are linked to a regional network, and often organise rotations out to rural hospitals from their junior doctor pool.  These rotations can be very popular, so express interest early. 

Locum agencies are advertising work opportunities all the time, mostly for regional centres and rural towns.  There are several such agencies, “Locum Doctors Australia” is a facebook group you can join and ask for agency recommendations.

Regional and rural medicine offer great opportunities to develop skills, increase responsibility and see more of Australia.  As an added benefit, pay can be excellent with far lower cost of living than in the major capital cities.  This kind of geographic arbitrage is a powerful lever to pull in order to accelerate your journey to financial freedom.  It would be a shame to miss out!

Live Like a Resident: Will it Work for You?

Have you heard of the White Coat Investor? He is a US based emergency physician and finance blogger. I have followed his blog for years, inspired by his challenges to physician group think when it comes to managing money. An early article suggested a simple but highly effective tip: Live like a resident (trainee doctor) for the first 2-5 years of specialist practice.

Why Live Like a Resident?

Society believes doctors are rich.

Doctors earn above average income with a year or two of graduating. We can earn very generous salaries depending on specialty and practice location.

But the critical point is that a high salary is not the same as being wealthy. There are specialist doctors on salaries of $300,000+ per year with very little assets or savings, and unable to understand where all their high salary disappears.

Receiving a high salary is not the same as being wealthy.

My point is, you have to put some thought and a little effort in if you want to achieve financial peace. Savings and investments provide freedom to take a break from work, or cut hours worked, if life circumstances make this desirable.

Most doctors see a large jump in salary with their first specialist position. WCI’s point out this ideal opportunity to practice delayed gratification.

By continuing to live off your trainee salary for a few years and investing the rest.

Live Like a Resident: Compound Interest

The graph below demonstrates the advantage of saving aggressively earlier in your career.

Living like a resident (yellow) here means investing $50,000 annually for five years post fellowship. The alternative scenario (blue) is investing $10,000 annually for a 25 year specialist career.

Both scenarios mean a total of $250,000 is invested, a 7% inflation adjusted return is assumed.

The slow and steady approach produces a $632,490 portfolio value at the end of 25 years. The living like a resident scenario produces a portfolio value of $884,421 over the same period.

How Much Money do Doctors Earn?

Below is my after tax salary from PGY 1 to the first year of specialist practice. I have adjusted it for inflation so the values are in 2020 dollars.

Obviously, the actual numbers are going to vary according to health network, contracts hours worked, and speciality.

You can see a fairly generous increase in salary year on year during training from internship to fellowship.


The grey line represents my income if I had worked full time as a 1st year consultant. Plenty of room to save significant amounts and reap the rewards of living like a resident.

The orange line is what actually happened – I worked about 0.5FTE and received slightly less than my final registrar year salary

Live Like a Resident: An Australian Perspective

Most are in a fortunate position in Australia, in contrast to our American colleagues. Student debt in Australia is modest in comparison, due to subsidized university fees and inflation linked interest.

Australian doctors receive reasonably generous jumps in salary as they progress in postgraduate years.

Specialist income is very variable depending on whether you choose general practice, different hospital specialties and private practice. General practitioners and private specialists start out without any guaranteed salary, needing to build their businesses sometimes from scratch.

There is a bottle neck in some specialties, with more registrars finishing training than there are jobs available. It is not uncommon for newly qualified specialists to locum for a while in less popular locations, or work part time until their ideal job becomes available.

This time of life often coincides with other large expenses or less hours work due to parental leave, family commitments, buying a larger home and school fees. There can also be unexpected life events that affect your ability to earn income or work full time.

I think living like a resident is great advise for newly qualified specialists. I don’t think it’s wise to delay saving and investing as a junior doctor assuming you can make up for it with a specialist salary that is not guaranteed.

Live Like an Intern, Resident and then Registrar

Lottery winners and large inheritance receivers are commonly bankrupt within a few years. If you haven’t mastered managing a small income, it is likely you will continue to spend all you earn with a larger income.

Don’t be fooled into thinking doctors are too smart to make this mistake. Doctors are just as dumb with money as the general population. Many unscrupulous finance professionals have taken advantage of medical professionals’ financial illiteracy, lack of time and trusting nature.

It is critical that you learn to live below your means. This is the secret to building financial security and eventually freedom.

As an intern, this means spending less than you earn each month, paying off any consumer debt and building a small emergency fund. If When payroll forgets to pay you it’s less stressful to have enough in the account to cover expenses.

Each year as a junior doctor, you can expect your income to grow.

If you capture 50% of that increase or more you will be developing a great saving habit, and be far more financially resilient in case of future financial shocks.

The difficult part about capturing the extra, is that pay as a hospital doctor can be extremely variable. Pay varies depending on weekend, overtime, nights and public holidays worked. It’s also difficult to work out the effect of a small pay increase on after tax income, given the unfathomable complexity of your pay slip!

Aussie Doc Bank Account Structure

It is important to have a money management system that makes it easy for you to capture your savings, and doesn’t result in overdrawn fees (a common problem with too many accounts).

This is my suggestion:

  1. Open two accounts (or offsets if you already have a mortgage)
  2. Request all your pay is put in to your savings account each pay period.
  3. Calculate the average net pay received per pay period over the past 6 months or year.
  4. Set up a regular transfer equivalent to last years average pay period from your savings account to your spending account.
  5. Once regular expenses, non-essential spending budget per pay period (fun money) and transfer this amount to a 3rd account.
  6. Collect surplus effortlessly in savings account
  7. 6 months through the year assess savings, can increase spending (?fun money) by up to 50% of surplus if desired

I recommend saving a small a buffer (eg tax refund) before attempting to institute a money management system. A few less than average pays and an unexpected expense can easily sabotage the system otherwise.

Saving won’t earn you good interest.  To build wealth you need to invest.  Develop a wealth building strategy and remember, men and women, to invest like a girl to maximise your returns.    


Aussie Doc Freedom is not a financial adviser and does need offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.




Living on your previous year’s wage as a junior doctor is a great way to get into a savings habit without feeling as if you are making any sacrifices.  Set up your accounts to make capturing the extra income easy.  Use your savings as an emergency fund, start investing or saving a house deposit.  It’s a great idea to “live like a resident” for the first years as a specialist, but an even better idea to start saving now.