Navigating the financial landscape as a medical professional in private practice can feel like a complex diagnosis in itself.
While the primary focus is undoubtedly on patient care, a crucial element of long-term professional well-being lies in safeguarding your financial future through effective asset protection strategies. Often, this leads to considerations around the best way to structure your practice – perhaps as a sole trader or through a company or trust.
To unravel some of these complexities, particularly when considering the implications of operating as a sole trader versus a company, let’s consider a typical GP setup as a practical case study.
By examining this scenario, we can break down key financial considerations that, while illustrated through the lens of a GP, hold valuable insights for medical professionals across all specialties contemplating their business structure. This article aims to lay out these practicalities, addressing common misconceptions and potential pitfalls.
Asset Protection
Operating via a Company or Trust does not provide personal asset protection for a GP in relation to medical services. The GP treats patients under their own provider number, and is personally liable for their clinical actions, regardless of the business structure.
- Any negligence claims will be made against the individual doctor, not the entity.
- Medical indemnity insurance is also held in the doctor’s personal name, not the company or trust. This is a good opportunity to ensure your insurance portfolio has you adequately covered.
Takeaway: There is no practical asset protection benefit in the context of patient treatment risk.
Tax Planning
There is no tax splitting or deferral advantage in operating via a company or trust due to the Personal Services Income (PSI) rules:
- The GP’s income is from personal exertion, and must be included in their personal tax return, even if earned via a trust or company.
- Deductions and allowable expenses remain similar, regardless of the structure.
Takeaway: Having a trust or company structure for your medical practice does not enable tax minimisation under PSI rules for most GPs.
Superannuation Obligations
Using a company structure can alleviate superannuation obligations by the practice, but only under certain conditions.
- The GP’s company is treated as the service provider, not the individual.
The practice may not be required to pay super if:
- The GP bills patients directly,
- Pays a service fee to the practice, and
- A clear, independent service agreement is in place confirming this arrangement.
However, if the practice pays the doctor directly, or controls how the doctor operates, it may still be liable for superannuation payments under Super Guarantee rules, even if the GP uses a company.
Takeaway: Super contributions may not always be required, but the structure and relationship must be properly documented and implemented.
PAYG Withholding
If the medical practice is deemed to have an employment-like relationship with the GP, it may be required to withhold tax under the PAYG withholding regime.
- This applies when the GP is paid directly by the practice as an individual and is not invoicing via an ABN-registered entity.
- If the GP uses a company or trust and invoices the practice, PAYG withholding generally does not apply, assuming the arrangement is genuine.
- However, if the GP does not provide an ABN, or the ATO determines that the GP is operating as a de facto employee, the practice may be required to withhold tax and remit it to the ATO.
Takeaway: PAYG withholding can apply if the GP is paid as an individual and the relationship resembles employment. Clear contracts and genuine independent structures help mitigate this.
Payroll Tax (Victoria)
Payroll tax can still apply, even if the GP provides services via a company or trust, because:
- Medical services contracts can be deemed “relevant contracts” under Victorian payroll tax law.
- Even if paid to a company, payments from practice to practitioner may be aggregated as wages.
Exemptions are limited and depend on the GP:
- Working across multiple practices,
- Not being integrated into the practice (i.e. not under control/supervision),
- Not being paid by the practice directly.
Takeaway: A company or trust does not necessarily avoid payroll tax in Victoria. You should make sure you’re aware of any payroll tax responsibilities you have to ensure you comply with all ATO requirements.
WorkCover
WorkCover may still apply to the practice if the GP is seen as a worker under the Workplace Injury Rehabilitation and Compensation Act.
- A company or trust does not automatically avoid WorkCover obligations.
- If the practice dictates hours, fees, or restricts the GP from working elsewhere, WorkCover premiums may be triggered.
Where the GP:
- Works independently,
- Bills patients directly,
- Works at multiple practices,
- Earns less than 80% of income from one practice,
…then the risk is lower, but still must be reviewed on a case-by-case to ensure you remain compliant.
Takeaway: A company or trust may help reduce WorkCover exposure, but is not a guaranteed shield.
Cost and Complexity
When operating through a company or a trust as a GP, there are administrative costs you should be aware of, including:
- Company setup
- Ongoing ASIC fees
- Tax and compliance costs
- Potential additional costs for bookkeeping, BAS, etc.
Takeaway: Higher costs, minimal benefit unless used for non-clinical income, investments, or staff arrangements.
Overall Summary
For a GP who is billing under their own provider number and deriving income from personal exertion, operating through a company or trust generally offers minimal tax benefit or asset protection. The only potential benefit lies in carefully structuring relationships to minimise super, PAYG and payroll tax obligations, but this is nuanced and must be documented clearly. As a doctor you will have truly unique personal and professional circumstances and therefore we recommend a custom approach to create a tailored solution that suits you.
If you’d like to chat to one of our specialist team members about your tax needs, get in touch here and book a free, no-obligation appointment.
