9 March 2021

Doctors’ trusts and companies in ATO sights

Comment Finance KnowCents

Doctors and practices that use medical practice companies and trusts to reduce their tax are likely to be affected by a new ATO ruling that starts later this year.


On 1 July the Australian Taxation Office (ATO) will introduce a new ruling that sets a higher and more complex bar for doctors who income split to family members or related entities that pay a lower amount of tax.

Doctors and practices that use medical practice companies and trusts to bill their patients predominantly for labour services to reduce their tax are likely to be affected by this ruling.

The change is likely to be particularly relevant where doctors working in a practice are not reporting an income which reasonably aligns with the amount of work they are performing.

Principal of healthcare advisory and accounting practice Health And Life David Dahm is warning all doctors to take particular note of this change, saying it is potentially so big that many doctors will need to see their accountant to determine their position in relation to the ruling.

In an analysis for tomorrow’s Money & Medicine newsletter, he says the ATO is getting better at data matching to identify practices to audit in respect of a rule like this and that a DIY approach to the change would be ill advised.

“The new robot data matching using STP and E-invoicing by the ATO is making it easier to automatically audit practices, so simply keeping your head down and crossing your fingers isn’t a good idea in this instance,” Dahm says.

“Being an honest fool is not a legal defence, so blaming it on your accountant is off the table, especially if you don’t ask the right questions in writing,” he adds.

To protect themselves personally a doctor will need to be able to clearly explain the commercial reason for their particular tax structure and be able to point to relevant business models and documentation in the case of an audit.

He emphasises that “tax minimisation” is not an acceptable reason.

“If your accountant cannot explain the commercial reason behind your structure, you may need to look for another accountant to manage this change.

“At the least you might want to get a second opinion from an experienced lawyer or accountant who solely specialises in this area”.

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