Medicine is one of the most financially complex professions in Australia. High incomes, complex entity structures, professional service business rules, significant superannuation obligations, and a practice environment that blends employment, contracting, and private enterprise — it’s a combination that most general accountants simply aren’t equipped to handle at the level you deserve. I work with a number of medical professionals across Melbourne, and in this post I’ll explain what makes the tax and structuring position of doctors and specialists genuinely unique, and what good advice in this space actually looks like.
The Unique Tax Position of Doctors and Specialists
Medical professionals in Australia typically operate across multiple income streams simultaneously:
- Employment income from a hospital or health service
- Contracting income from providing services to medical centres or GP clinics
- Private practice income from patients billed directly or through Medicare
- Procedural income for specialists — often lumpy, high-value, and unpredictable
The interplay of these income streams creates complexity that a standard small business accountant isn’t trained to navigate. For example, the ATO’s personal services income (PSI) rules can prevent doctors from splitting income through a company or trust — a critical constraint that determines the structure options available.
Practice Structure Options for Medical Professionals
- Sole trader: Simple but fully exposed — all income at personal marginal rates, no asset protection, limited flexibility.
- Partnership: Used in group practices. Partners share income and expenses.
- Service trust: A trust that provides services (administrative, nursing, facilities) to the medical practice and charges a service fee. This is one of the most powerful structures available to medical professionals — but it requires careful structuring to survive ATO scrutiny.
- Incorporated practice: Subject to the PSI rules and relevant state medical board requirements.
Superannuation Strategies for High Earners
- Concessional contributions: Maximise the $30,000 annual concessional cap. At a 47% marginal rate, the tax saving on a full $30,000 concessional contribution is approximately $9,600 per year.
- Catch-up contributions: If your super balance is under $500,000, you may be able to carry forward unused concessional cap amounts from the previous five years.
- Division 293 tax: High earners (income above $250,000) pay an additional 15% tax on their concessional contributions.
- SMSF: For medical professionals wanting more control over their superannuation investments, particularly those who want to invest in property or specific assets.
Trust Distributions to Family Members
Where income can be structured through a service trust, distributions to family members in lower tax brackets can significantly reduce the overall family tax bill. However, the personal services income rules must be analysed carefully — if more than 50% of the income comes from one payer, PSI may apply, preventing income splitting.
Loan Arrangements and Division 7A
If you operate through a company, be very careful about Division 7A. Any loans, payments, or forgiven debts between your company and you personally can trigger Division 7A — causing the amount to be treated as an unfranked dividend. Read our full Division 7A guide here.
Investment Property for Medical Professionals
- Negative gearing benefits are greatest when your marginal rate is highest
- Structure for property investment — holding property in a trust vs personally vs a company has different CGT, land tax, and income tax implications
- Depreciation schedules — commissioning a quantity surveyor’s report to maximise depreciation deductions is almost always worth it
How Pinnacle Approaches This With Medical Clients
When medical professional clients come to Pinnacle, the first thing we do is map their entire income picture — employment, contracting, private practice, investments — and determine the PSI status of each income stream. This analysis drives every structural recommendation we make.
From there, we advise on the optimal structure for the private practice component, the service trust arrangement (if appropriate), superannuation strategy, and investment structure. Learn more about our advisory approach here.
If you’re a doctor, specialist, or allied health professional who isn’t confident your current accountant truly understands your tax position, contact Pinnacle today for a confidential review.
Frequently Asked Questions
Can a doctor operate through a company or trust in Australia?
Yes, in most states — subject to the applicable Medical Practice Act and the ATO’s personal services income rules. Some states require an incorporated medical practice (IMP) registration. Speak to Mina for a PSI analysis specific to your practice.
What is a service trust for a medical practice?
A service trust is a separate trust entity that provides management and support services to a medical practice and charges the practice a service fee. The fee is deductible to the practice and becomes income of the trust, which can be distributed to family members in lower tax brackets.
What is Division 293 tax?
Division 293 tax is an additional 15% tax on concessional superannuation contributions for individuals with income above $250,000, bringing the effective tax rate on those contributions to 30% — still far below the 47% personal marginal rate.
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