A range of healthcare professionals and businesses trust us to look after their taxation and accountancy affairs so they can focus on more important things like the health and wellbeing of their patients. Here are nine ways we help healthcare businesses and professionals.
1. Taxation legislation compliance
Medical practitioners are typically among the highest earning group of professionals in our society due to the amount of training and knowledge needed and the importance of the work they do. Unfortunately, a higher income also correlates to closer ATO scrutiny in relation to tax avoidance activities. Our experienced advisers provide medical practitioners with advice regarding compliance with tax legislation specific to the healthcare industry whilst still achieving the best tax outcome.
2. Personal Services Income (PSI)
Legislation relating to the healthcare industry states that the lion’s share of income must be promptly passed on to the medical practitioner generating that income. Depending on how the provision of your medical services are structured, you may be considered a ‘Personal Services Business’ and not subject to the strict PSI rules. AMG assists medical professionals in understanding and complying with PSI regulations.
3. GST
Most services provided by medical professionals are GST-free but this is not always the case. Whether or not GST must be charged depends on the type of service being provided (e.g. cosmetic vs non-cosmetic) and who the service is being provided to (patient vs third party). Our team helps healthcare businesses determine which services require the addition of GST to their fees.
4. Lump Sum Inducement Payments
It is now common for some medical practitioners to operate from medical centres run by third parties and pay them a lump sum inducement payment. There is a concern that these lump sum receipts are being reported as capital gains (which may be eligible for reductions) instead of ordinary income. AMG helps healthcare professionals ensure they’re correctly reporting to the ATO.
5. Income Tax Deductions
Income tax deductions specific to the healthcare industry typically include professional indemnity insurance, AHPRA registration fees, AMA/medical professional association membership fees, medical journal subscriptions, union fees and uniforms. However, there are also a range of additional non-occupation-specific deductions around which healthcare professionals may be eligible. AMG can look at your specific situation to determine exactly what can and can’t be claimed.
6. Private Practice Structuring
If you are an experienced medical professional looking to exit the public health sector or a registrar going into private practice you will need to give proper consideration to the trading structure you will operate under. Medical professionals have a very high level of personal risk given the nature of the work they perform. They typically also have greater asset protection needs due to their higher income which generally corresponds to higher wealth. Professional indemnity insurance is the primary source of asset protection (indeed it is mandatory for registration with AHPRA), however, the use of entities (Company/Trust) over operating as a sole trader or in a partnership should still be considered for asset protection purposes.
Furthermore, it is not uncommon for medical practices to mandate that contracting medical professionals use a particular structure (e.g. to minimise their exposure to unintended payroll consequences such as superannuation guarantee). AMG provides discerning structuring advice to medical professionals.
The range of healthcare professions we look after is diverse and includes general practitioners (GPs), dentists, surgeons, anaesthetists, nurses, obstetricians, gynaecologists, gastroenterologists, paediatricians, geriatricians, psychiatrists to name a few. Their employment status varies from employees, contractors, registrars going into private practice and self-employed practitioners leading a team in their own medical practice. Some medical practitioners pay service fees to the service entity which typically derives a small profit, thus providing an opportunity to distribute income to tax effective recipients. A service entity is a separate legal structure established by medical practitioners in private practice to employ support staff, lease premises, supply equipment and other supplies to the medical practitioners working within the practice. The final three items on this list are specific to the establishment and running of service entities in the medical industry.
7. Classification of Payments to Contracted Medical Practitioners
Consideration needs to be given to the service agreement to minimise any deemed employee relationships arising for payroll tax, worker’s compensation insurance or superannuation guarantee purposes. When advising healthcare professionals, we always insist that any contracting arrangement be documented in writing and drafted by an experienced solicitor.
8. Calculation Rates
The ATO requires service fee calculation rates to be on a commercial basis and has issued guidelines about what % of patient fee revenue is reasonable depending on the circumstances. Our team helps service entities to ensure they’re following correct procedures and rules when making these calculations.
9. Service Entity Structuring
The service entity is legally considered to be conducting a business, so a Company or Trust structure is generally appropriate for asset protection purposes. Separating the activities of the practice from the individual medical practitioner will generally help them avoid the strict PSI rules and provide an opportunity to distribute income to tax effective recipients. AMG helps clients understand and choose the best structure for their healthcare business.
AMG Accountants and Advisors specialise in servicing the unique needs of healthcare businesses and professionals. Our experienced, attentive team can help you with the financial and accounting challenges you may face.
