Tax Planning Guide for Established Allied Health Practices

If you run an established allied health practice, tax compliance is no longer just about lodging returns on time. As your clinic grows, the way your business is structured, how you claim deductions, and how you plan for future growth or exit can make a material difference to your after-tax outcomes.

Physiotherapists, psychologists, chiropractors, and other allied health professionals face unique tax considerations. Many operate multi-practitioner clinics, employ staff, lease or own premises, and plan for eventual succession or retirement. Getting the tax strategy right early, and reviewing it regularly, can save significant money over time.

Understanding Your Business Structure

One of the most important tax decisions for any allied health practice is the structure it operates under. The right structure balances tax efficiency, asset protection, and flexibility as your practice grows.

Sole Trader:

• Simplest and cheapest to set up
• Personal liability for all business debts and legal risks
• Income flows directly into personal tax return
• Limited tax planning and income splitting options

Partnership:

• Common in multi-practitioner clinics
• Each partner reports their share of income individually
• Without written agreement, ATO assumes equal profit split
• Essential to document income sharing, decision-making, and exit arrangements

Company:

• Separate legal entity providing strong asset protection
• Income retained and distributed via franked dividends
• Directors have personal liability for PAYG and superannuation obligations
• Best for established practices with significant assets

Trust:

• Flexible income distribution to beneficiaries based on tax situations
• Strong asset protection as trust owns assets separately
• Must operate according to deed with proper documentation
• ATO scrutinises arrangements to prevent tax avoidance

Your structure should be reviewed annually with a tax specialist, especially as revenue grows, new practitioners join, or premises are purchased.

Common Tax Deductions for Allied Health Practices

The ATO allows allied health professionals to claim a wide range of business-related expenses, provided they are incurred in earning assessable income.

Deductible expenses include:

• Professional indemnity insurance (including run-off cover in certain circumstances)
• Association memberships and journal subscriptions
• Work-related conferences and seminars
• Continuing professional development that maintains or improves current skills
• Medical equipment depreciation and insurance
• Personal protective equipment (gloves, masks, sanitiser)
• Work-related phone and internet costs (proportionate to actual work use)

Non-deductible expenses include:

• Personal medical expenses (dental work, GP visits, vaccinations)
• Ordinary commuting costs between home and work
• General grooming and clothing (unless occupation-specific protective gear)
• Initial qualifications or courses enabling you to start a new profession

Digital records are acceptable to the ATO, and tracking expenses as you incur them makes tax time considerably easier.

GST and Allied Health Services

Most allied health services are GST-free if the service is provided by a recognised health professional registered under state or territory law (or member of an approved professional association) and the service is accepted as necessary treatment. This applies to physiotherapy, occupational therapy, psychology, chiropractic, and other recognised allied health services. Products sold or services outside your recognised scope may be subject to GST.

If assistants work under your supervision, their services can be GST-free if you bill in your name, accept full responsibility, are involved in at least part of the service, and supervise appropriately. Getting GST treatment right affects your pricing, BAS obligations, and input tax credit eligibility.

Strategic Tax Planning and Record-Keeping

Tax planning is not something you do once a year in June. As your practice grows and circumstances change, your structure needs regular review.

Key tax planning strategies:

• Review structure annually as revenue and circumstances change
• Consideration of Income splitting through appropriate structures to lower tax brackets
• Time equipment purchases strategically (before year-end for immediate deductions)
• Maximise superannuation contributions (taxed at 15% versus higher marginal rates)
• Plan income and expense timing across financial years
• Separate personal and practice assets for protection

Record-keeping requirements:

• Keep records for five years minimum
• Tax invoices for equipment and supplies
• Receipts for conferences and professional development
• Vehicle logbooks if claiming car expenses
• Phone and internet usage records
• Insurance certificates and membership documentation
• Digital records are acceptable to the ATO

Good records protect you during ATO reviews and make tax planning far easier.

Buying Your Practice Premises and CGT Planning

Purchasing your own premises can provide long-term security, equity growth, and access to valuable capital gains tax concessions.

Whether the property is owned personally, through a trust, company, or SMSF significantly affects GST, land tax, stamp duty, and CGT outcomes. The ATO emphasises that arrangements need to be commercially realistic and properly documented. Getting this structure right from the start is crucial, as restructuring later can trigger tax events and may appear as tax avoidance if not done for genuine commercial reasons.

Succession and Exit Planning

Eligibility requirements:

• Aggregated turnover under $2 million OR net assets under $6 million
• Active asset test: premises used in business for at least half the ownership period (or 7.5 years if owned 15+ years)

Available concessions:

• 15-year exemption: Complete CGT exemption after 15 years of ownership and retirement
• 50% active asset reduction: Automatic if basic conditions met
• Retirement exemption: Disregard up to $500,000 lifetime limit, proceeds for retirement including super (subject to caps)
• Rollover options: Defer CGT by reinvesting in replacement assets

Working with Paris Financial

Paris Financial specialises in tax and accounting for allied health professionals across Australia. We understand the operational and financial realities of running a health practice, from structuring and compliance through to growth and succession planning.

Our services include annual tax planning and compliance, business structure optimisation, practice premises purchase advice, succession planning and practice valuations, CGT concession strategies, and asset protection structuring.

If you want clarity and confidence around your practice’s tax position, professional advice can make a meaningful difference.

Contact Paris Financial today to discuss how we can help optimise your practice’s tax position.

This article provides general information based on current ATO guidance. Tax laws are complex and subject to change. Always seek professional advice specific to your circumstances from a qualified tax advisor or accountant specialising in allied health practices.

Source:
ATO: https://www.ato.gov.au/businesses-and-organisations/starting-registering-or-closing-a-business/starting-your-own-business/business-structures-key-tax-obligations
Paris Financial: https://www.parisfinancial.com.au/advisory-services/allied-health/established-practices/