‘Troubleshooter’ Accountants – The Insurance Industry”

The insurance industry has a low entry barrier and is a popular career choice for those seeking high earning potential and career growth opportunities. By mastering the tips of deal closure, the income potential is limitless, which can lead to considerations of investments, car and property purchases. Regardless of which direction one chooses to develop, it is important to know how to use commission effectively and tax saving
.

Tax deductions and savings are important to those in the insurance industry, as most insurance agents in Hong Kong are self-employed with no fixed salary, and their main source of income comes from commissions. Starting out in the industry, one may apply for an unlimited company to test the waters, but opening a company means having to file taxes return, and the question of how to deduct taxes becomes a concern. 

Unlike other industries, the only expenses that can be typically deducted in the insurance industry are entertainment expenses, as well as expenses related to hiring a secretary or hosting insurance-related seminars. However, entertainment expenses can only be deducted if they result in an increase in business or income. Therefore, many meal receipts for unsuccessful client meetings throughout the year are considered personal expenses and cannot be deducted. Given the high volume of client meetings, it is recommended to keep restaurant receipts well filed and to have commission records regularly handled by an accountant to avoid confusion.

When applying for a mortgage, stress tests are conducted, and commissions can be counted as income, but only if the income is stable enough. If the commission varies greatly each month, with sudden spikes and declines, it cannot be considered as an average monthly income.

As one’s career in the insurance industry matures and income stabilizes or continues to rise, many insurance professionals invest in real estate or seek new opportunities outside of the industry. It is recommended to seek professional advice from an accountant before implementing any new investments and tailor tax-saving investment projects to your specific needs, allowing income to be spent more tax effective.

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