By Anthony Dickinson, CA, B. Bus (Acc) Tax Consultant at DPM Financial Services
You’ve established your practice, your billing is solid, and the clinical work is going well. But when was the last time you reviewed your medical practice structure?
For most medical consultants, the answer is either when I first set it up or I’m not entirely sure. And that’s understandable as you’re focused on patients, not paperwork. The issue is, what worked when you were starting out might not be serving you well now, and the gap between a good structure and the wrong one can be expensive.
The trigger points that matter
Your income has shifted significantly
Dr James started as a sole trader doing two theatre lists a week and some consulting. Five years later, he was doing four lists, had rooms in two locations, has staff and his billing had more than doubled.
When he came in for a review, we could see a service entity would serve him much better. We established a service entity to employ the staff, provide rooms and general medical practice administration, which delivered asset protection and gave us a better foundation to help him continue growing the practice. Because we made the change before his income climbed even higher, the transition was straightforward and cost-effective.
Learn more about operating as a sole trader vs company vs trust.
The reverse matters too. If you’ve scaled back for lifestyle reasons, or you’re winding down towards retirement, your structure should reflect that. You don’t need the same asset protection or tax planning when you’re doing two days a week as you did when you were working full-time.
You’re taking on partners or associates
Dr Sarah had established her own practice and was working solo in her rooms. When another consultant wanted to buy into the practice, and she was thinking about adding a registrar as well, she came in to talk through the structure.
We helped her work out how the new consultant would be paid, who owns what, and what happens if someone wants to leave. But more importantly, we made sure the practice structure protected Sarah’s personal assets from any business liabilities, and that she had the right agreements in place to mitigate risk when bringing on staff. Getting this sorted before she shook hands meant everyone knew where they stood, and Sarah’s personal wealth was protected if anything went wrong down the track.
You’re buying into rooms or practice property
Owning your consulting rooms can be a solid investment. But should you own them personally? Through your practice entity? A separate property trust? Through your super fund?
Dr Michael was thinking about buying his consulting rooms. He came in to discuss whether to buy them personally, through his practice entity, a separate property trust, or through his super fund.
We walked through the pros and cons of each option based on his longer-term plans. He wanted the flexibility to potentially sell the practice but keep the property as an investment down the track. We structured it so he could do exactly that without creating a capital gains liability later.
This isn’t theoretical. The ATO pays close attention to how medical professionals structure property ownership, especially when it’s used in the practice.
Read our guide on what you need to know when buying medical consulting rooms.
Tax bills keep surprising you
If you’re regularly caught off guard by your tax obligations, it’s time for a review. We work closely with our clients throughout the year so they know what the next twelve months should look like. No surprises, just proper planning.
A good structure doesn’t eliminate tax, and you’ll always have to pay what you owe. But with the right advice, you can plan for your tax obligations, time payments appropriately, and make sure you’re not paying more than necessary through proper use of an appropriate structure.
Dr Lisa was a new client who came to us with a structure that her previous accountant had set up. She was still paying top marginal tax rate on everything because no one had explained how to actually use the structure properly.
We showed her how to make super contributions, pay herself an appropriate salary, and use appropriate tax rates more effectively. Same structure, completely different tax outcome. She wasn’t eliminating tax, just paying what she actually owed rather than leaving money on the table.
Read our guide on tax deductions for doctors.
Life has changed outside work
Got married? Divorced? Kids heading to private school? Elderly parents you’re supporting? Planning your estate?
Your practice structure needs to work with your life, not just your work. Asset protection matters more when you’ve got a family home and investments to protect. Estate planning gets complicated when you’ve got a company or trust that needs to be dealt with in your will.
Dr Andrew set up his structure 15 years ago when he was single. By the time he was married with three kids, investment properties, and a self-managed super fund, his practice structure hadn’t kept pace with his life.
He came in for a comprehensive review. We sorted out his structure to work with his current situation, fixed up his estate planning so his family would know who owns what, and made sure his asset protection was actually protecting the right things. It took a few months to untangle, but now everything works together properly.
Review our Aged Care Financial Planning for doctors and their families
What actually happens in a review?
A proper structure review isn’t your accountant trying to sell you another entity. It’s looking at:
- Your current structure and whether it’s actually being used properly
- Where you are now versus where you were when you set it up
- Where you want to be in 5-10 years
- What’s changed in tax law and regulations
- Whether there are gaps in asset protection
- If there’s a better way to do things
Sometimes the answer is you’re fine, keep going. Often it’s “here are three things we should adjust”. Occasionally it’s “we need to have a serious conversation about restructuring”.
The cost of not looking
The obvious cost is tax. If you’re in the wrong structure, you could be paying more than you need to.
But the hidden costs matter too. Asset protection gaps you don’t know about. Complications when you want to bring on a partner. Problems selling the practice because the structure’s not right. Estate planning issues for your family.
And here’s the thing, the longer you leave it, the more complicated it can be to get right. Restructuring after 10 years of trading is considerably more complex than reviewing things regularly and making small adjustments.
When did you last look?
If you haven’t reviewed your practice structure in the last few years, or if any of those trigger points sound familiar, it’s worth having the conversation.
Tax law changes. Your circumstances change. What worked brilliantly five years ago might be costing you now, or leaving you exposed in ways you haven’t thought about.
Book a financial health check with the team at DPM or explore our tax and accounting services for medical professionals. We specialise in medical practices and have seen every variation of structure going. Better to review it now when you’ve got options, rather than when you’re trying to solve a problem under pressure.
Anthony is a Chartered Accountant and Tax Consultant at DPM Financial Services. Since joining DPM in 2018, he’s specialised in working with medical professionals at every career stage, from medical students through to established private practitioners. Anthony advises on tax planning, practice structures, and financial strategies that align with both your professional and personal goals.
Disclaimer: The information contained in this article is of general nature only and may not be appropriate for your needs and / or circumstances. No warranty is given in relation to the accuracy or reliability of any information. The readers should not act on the basis of information contained herein and are encouraged to contact their DPM Consultant for advice concerning specific matters before making a decision
