3 July 2019
by Maree Macphail
- Related topics
- Medico Specialist
Having dealt with a wide range of medical specialists over the years, we have seen many structures established by sole practitioners, a group of doctors and medical practices.
Whilst different structures impact the overall business in different ways, sound structuring provides practitioners with asset protection and facilitates tax efficiencies. It is important to note that a practitioners’ set of circumstances are specific to them when evaluating the most appropriate structure.
When considering a suitable structure for medical practitioners several key attributes should be considered:
- Provision of services– what services are being provided to assist the medical practitioner in conducting their business?
- In business with others? Service agreements form a basis for which doctors share expenses and ultimately contribute to the provision of such services. A well formulated management/service agreement is key to outlining the set of rules in which each party follows.
- Do you have business real property? It is typical for medical practitioners to hold their place of practice in an entity that is separate from where the business is conducted – a key form of asset protection.
- Tax Efficiencies– By structuring a practice in an appropriate manner equitable outcomes can be achieved through creating tax efficiencies through an overall reduction in a group’s effective tax rate.
- Acquiring existing businesses or joining a practice?Buying into an existing practice requires due diligence and a thorough review of legal and other documents to know ‘what you are buying into’.
It is imperative that advice is sought with regards to any service entity arrangements contemplated. The Australian Taxation Office has firm views on what it believes are appropriate commercial profits from a variety of business structures, and medical practitioners are no different. For any arrangements entered where the ATO perceives there is excessive shifting of income, Part IVA may apply to disallow deductions made by a practitioner to a service entity.
For this reason, we like to gain a deep understanding of what our clients wish to achieve in both the short term and long term to enable us to determine the most suitable structure for their specific circumstances, this includes the ability to enter or exit any arrangement made upon retirement in the future.
For further questions on how developing your own plan or your medical business in general, please contact us or speak to Maree Macphail on 02 9283 1666.