General Advice Warning. This article contains general information only and does not consider your personal objectives, financial situation, or needs. It is not personal financial product, tax, credit, or legal advice. Examples and figures are illustrative only — individual outcomes vary. Before acting on any information, seek personal advice from a qualified adviser.
The single most expensive financial decision most Australian doctors make is also one of the earliest — and one they rarely revisit. The business structure question. Sole trader. Company. Family trust. Service trust. Hybrid. Each has different tax outcomes, different asset protection profiles, different setup and ongoing costs.
This article walks through how to think about the choice, what's typically right at each career stage, and the common mistakes we see in doctor business structures.
Why this decision compounds
A specialist generating $450,000 of practice income loses around half of every dollar above $190,000 to marginal tax. At that rate, structural inefficiency compounds aggressively. The difference between the worst and best structures for a typical specialist sits in a range of $20,000–$40,000 of tax annually — every year, indexed to inflation, for the length of a career.
Compounded over 25 years and reinvested at modest returns, the gap funds a substantial property portfolio or accelerates retirement by 5–7 years.
The decision compounds because structure tends to be sticky. Once you've registered a company or set up a trust, the inertia and switching costs (stamp duty on asset transfer, CGT crystallisation, lost franking credits) discourage changes. So an early decision lingers far longer than it should.
The four primary structures, compared
Sole Trader
The default for most doctors starting out. You operate as yourself. Practice income flows directly to your personal tax return. All deductions claimed against personal income at your marginal rate.
When it suits: Income below $180,000–$200,000. No spouse or related beneficiaries on lower marginal rates. Career stage early. Wanting simplicity over optimisation.
Limitations: No income splitting. Full personal asset exposure to creditors and claims. Caps out fast as income grows. Becomes increasingly inefficient above $250,000 of practice income.
Setup cost: Free. Just an ABN.
Ongoing cost: Standard personal tax return preparation.
Company
The doctor's practice income is generated through (or distributed to) a private company. Corporate tax rate is 25% (for small business companies) or 30% (for base rate entities), substantially below the highest personal marginal rate.
When it suits: Income above $250,000. Want a fixed corporate tax rate on retained earnings. Have legitimate business expenses justifying the structure. Less family flexibility needed.
Limitations: Money is "locked" in the company. To use the cash personally, you take a dividend (taxed at your marginal rate again) or a salary. Doesn't easily flex distributions year-to-year. No income splitting to family. Personal Services Income rules may still attribute income directly to the doctor regardless of the company.
Setup cost: $1,000–$2,500 for company registration and basic compliance.
Ongoing cost: Annual company tax return, ASIC fees, BAS lodgement.
Discretionary (Family) Trust
A separate legal entity holds income on behalf of beneficiaries — typically the doctor, spouse, adult children, related entities. The trustee has discretion to distribute income each year to whichever beneficiaries are most tax-efficient.
When it suits: Practice income above $250,000. Spouse or other related beneficiaries available at lower marginal rates. Long career runway. Want flexibility year-to-year.
Limitations: Trust setup and ongoing compliance more complex. Trustee must operate the trust correctly (deed terms, resolutions, distribution patterns). Personal Services Income rules block the trust from receiving the doctor's clinical income — only operational/support income can flow through.
Setup cost: $2,000–$5,000 for properly drafted deed and corporate trustee.
Ongoing cost: Annual trust tax return, distribution resolutions, deed amendments as needed.
Hybrid Structure (Service Trust + Operating Vehicle)
The most powerful structure for established medical practices. The doctor's clinical income (Personal Services Income) is received personally or through a vehicle that satisfies the PSI rules. A separate service trust provides administrative/support services (staff, rooms, equipment, IT) to the practice for a commercial fee, and distributes that fee income across family beneficiaries.
When it suits: Practice income above $400,000. Genuine operating overhead (real staff, real equipment, real premises). Spouse and related beneficiaries available. Career stage allows for 5+ year runway to amortise setup cost.
Limitations: Must comply strictly with ATO PCG safe-harbour fee benchmarks. Operating substance required — paper-only structures invite Part IVA. Annual review and proper documentation essential.
Setup cost: $4,000–$8,000 for properly drafted structure and initial advice.
Ongoing cost: Annual returns for each entity, service agreements, distribution resolutions, structural review.
Illustrative comparison — specialist on $450,000
The numbers below are illustrative only and depend on individual circumstances. They use FY2025–26 brackets and assume a non-working spouse and standard practice expenses. Personal advice is required for any specific decision.
| Structure | Approximate net tax | Notes |
|---|---|---|
| Sole trader | $140,400 | All income personal. Full marginal rate. |
| Company only | $125,800 | Corporate rate on retained earnings, marginal on extracted dividends |
| Service trust | $114,200 | Service fees distributed to spouse and bucket company |
| Hybrid (recommended) | $107,238 | Optimised across personal, trust, and corporate rates |
The illustrative gap between sole trader and hybrid: around $33,000 annually for this profile. Over 25 years, even before considering investment growth, that's $825,000 of tax that could otherwise have been invested.
Individual circumstances vary materially. Restructuring decisions require personal advice from a registered tax agent.
What structure is right at each career stage
Stage 1 — Registrar, Resident, Junior Doctor
Income typically $80,000–$180,000. Sole trader is almost always correct. Structure complexity isn't justified by the tax saving at this income level. Focus on cash flow, debt management, and starting concessional super contributions.
Stage 2 — Early Specialist (years 1–5)
Income transitioning $200,000–$350,000. The decision point. If you have a spouse or related beneficiaries on lower marginal rates, a discretionary trust may start to make sense as private billings grow. If income is still concentrated and family situation simple, sole trader can continue.
Stage 3 — Established Specialist
Income $350,000–$700,000. A hybrid structure typically pays for itself within the first 12 months. Family trust receives service income. Bucket company holds retained earnings at the corporate rate. Personal salary takes the doctor's clinical income directly. Each component plays its role.
Stage 4 — Senior Specialist / Practice Owner
Income $700,000+. Multiple entities legitimate. Practice ownership through company. Service trust for operational support. Family trust for investment income. SMSF for retirement-focused assets. Bucket company for distribution buffering. The structure becomes a system — but each piece must justify its presence and operate substantively.
Stage 5 — Approaching Retirement
Structure transitions from accumulation to distribution mode. Some entities wound up; others retained for income smoothing in retirement. Capital gains tax planning becomes the dominant variable. Estate planning ties the structures to the next generation.
Common mistakes we see
Setting up a company "just in case" without modelling the comparison. Many doctors register a company in early career because someone recommended it, without comparing against sole trader or trust. The company sits unused for years, accruing ASIC fees and complexity.
Operating a trust without proper distribution patterns. A trust with a corporate trustee but no annual distribution resolutions, or distributions only to the doctor themselves, doesn't achieve the tax flexibility the structure is designed for.
Service trusts set up retroactively. The structure exists, but the practice still invoices and operates as if the doctor were a sole trader. Substance and form don't match — Part IVA exposure follows.
Personal Services Income rules ignored. A doctor channels clinical income through a company or trust without satisfying the PSI tests. The ATO attributes the income directly to the doctor anyway, eliminating the intended benefit.
Asset protection treated as an afterthought. Structure decisions made purely for tax, with no consideration of asset protection profile. The doctor ends up with all wealth in personal name despite operating in a high-litigation profession.
No review as income grows. A structure that suited $250,000 of practice income is wildly inefficient at $600,000. Many doctors never reassess until they're forced to (audit, restructure, sale).
How to think about your decision
Three questions to ask:
1. What is your current and projected practice income for the next 5 years?
The structure question is income-sensitive. The right answer at $200,000 is different from the right answer at $500,000.
2. Do you have a spouse or related beneficiaries on lower marginal rates?
If yes, structures with distribution flexibility (trust, hybrid) start to pay off. If no, simpler structures may suffice.
3. What is your asset protection exposure?
A high-litigation specialty (obstetrics, neurosurgery, anaesthetics) carries more asset protection consideration than lower-risk specialties. Personal-name asset holdings become a vulnerability.
If you answer these three questions and you're not confident your current structure matches, you almost certainly have an unaddressed structural cost.
What to do next
The right structure for a specific doctor depends on facts that can't be assessed in an article. But the comparison can be modelled.
Use MNM Group's business structure calculator to compare the four structures against your specific income. Or book a free 15-minute consultation for personal advice on what structure (or restructuring path) makes sense in your case.
This article provides general information only and does not constitute personal tax, legal, or financial product advice. Tax outcomes depend on individual circumstances and current tax law. Structures referenced have setup, ongoing compliance, and legal implications that require personal advice from registered tax agents and qualified financial advisers. MNM Group Financial Services Pty Ltd · ABN 52 934 978 906 · AFSL 503737.