Accounting and Tax for Surgeons and Medical Specialists in Melbourne

The financial picture for a Melbourne surgeon or specialist is genuinely different from a GP’s — and often more complex. Private hospital billing arrangements, procedural income varying significantly by theatre time and case mix, the valuation of practice goodwill at buy-in and exit, the tax treatment of specialist equipment, and the relationship between employment at a public hospital and a private consulting practice all create specific issues that most accountants aren’t equipped to handle.

We work with surgeons and specialists across a range of disciplines — orthopaedic, cardiothoracic, ophthalmology, oncology, dermatology, and others. Many of the specialists we act for are based at or connected to hospitals in the Parkville Medical Precinct — Royal Melbourne Hospital, Peter MacCallum Cancer Centre, Royal Eye and Ear Hospital — and work a combination of public and private sessions.

The public/private split and what it means for your tax

A specialist working public sessions at RMH or a similar public hospital receives a salary. That salary has PAYG tax withheld and is relatively straightforward. The private side — billing through your own provider number, often through a practice entity — is where the complexity sits.

The interaction between the two streams matters for PSI assessment (if your private income is concentrated from a single private hospital, it may be classified as PSI), for deductions (work-related deductions from the public employment side are claimed personally, while deductions relating to the private practice can be claimed at the entity level), and for superannuation (some hospital employment arrangements include super on the salary component only — private practice income requires your own contributions).

Private practice structure for specialists

For a surgeon or specialist generating significant private billing, the structure question is where the money lands and how it’s taxed. Options range from a sole trader (simplest, but all income taxed at your personal marginal rate of up to 47%) to a company (income retained at 25% corporate rate, distributed as dividends), a discretionary trust (flexibility to distribute to lower-income family members, subject to PSI rules), or a service entity model (your consulting company bills for professional services, and a separate service entity provides rooms and infrastructure, charging a commercial service fee).

The service entity model is common and legitimate for specialists with their own practice, but it requires the service fee to be commercially supportable — the ATO benchmarks these against comparable practices.

Practice buy-in and goodwill

When joining an established Melbourne specialist practice, the buy-in price typically includes a goodwill component. This has CGT implications for the selling practitioner and, for the incoming doctor, creates a depreciable intangible asset. How the buy-in is structured — whether you buy into a partnership, purchase shares in a company, or buy units in a trust — affects your tax position, your liability exposure, and what happens when you eventually exit. We’ve worked through a number of these transactions in Melbourne, and the structuring decisions made at buy-in significantly shape the outcome on exit.

Related services

• Accounting and tax for doctors — full overview
• PSI rules for doctors and medical professionals
• Practice entity structuring
• Multi-doctor practice accounting
• CGT on the sale of a medical practice

Frequently asked questions

Do PSI rules automatically apply to Melbourne surgeons and specialists?
Not automatically. A specialist who has their own rooms, books their own patients, and bills across multiple private hospitals is in a strong position to pass the PSI business tests. A specialist working exclusively at one private hospital under a hospital billing arrangement is more likely to face a PSI classification.

How is goodwill taxed when I sell or exit a specialist practice?
Goodwill on the sale of a business is generally subject to CGT. The 50% CGT discount applies if the practice has been owned for more than 12 months. Small business CGT concessions — the 15-year exemption, 50% active asset reduction, and retirement exemption — may also apply and can significantly reduce the tax payable.

My surgical income varies significantly by year — how does that affect tax planning?
Variable income is a real planning issue for surgeons. In high-income years, maximising concessional superannuation contributions and reviewing deductible expenses is more important. In lower-income years, there may be opportunities to draw down company reserves or restructure distributions. We manage this as part of annual planning rather than as a once-off exercise.

Are you familiar with the financial issues that affect Parkville Medical Precinct specialists?
Yes — we are based in Melbourne CBD and work with a number of specialists connected to Royal Melbourne Hospital, Peter MacCallum Cancer Centre, and the private consulting rooms in the Parkville corridor. Doctors who split time between public hospital employment and private billing have specific structuring issues we deal with regularly.

Call us on 1300 212 663 or visit our Melbourne CBD office.