With the increasing demands for health services, the question of how to expand practices with new practitioners often arises.
By choosing the right structure, a practice can ensure that their growth is maintained in a well planned and cost effective manner beneficial to all parties involved. Careful planning in introducing the new practitioner will ensure that the next step taken to grow the practice is a rewarding one.
What Are The Most Common Choices When Introducing A New Practitioner?
What Are The Major Issues Affecting The Practice And Practitioner?
Salary Packaging tends to be about keeping your employees happy, however this in itself can be a competitive advantage to a practice especially with supply shortages of many practitioners. Commonly packaged items that usually provide concessional tax treatment are laptop computers, relocation costs, novated car leases and superannuation. Salary packaging arrangements are not available to contractors or associates.
Compulsory Superannuation of 9% can apply to a contractor who provides a practice with personal services similar to those services a normal employee would provide. Therefore new medicos engaged by the practice as employees or contractors will have no choice but to receive part of their remuneration as superannuation.
Some may say that this feature is good due to superannuation’s very attractive tax concessions, however an associate has much greater flexibility in determining how much of their earnings will be contributed to superannuation as they are considered self-employed and not subject to any mandatory contributions. Deductibility of contributions can however be problematic for an associate who receives superannuation through other sources such as employment at another practice.
Payroll On-Costs are additional costs that a practice must bear as the number of contracted or employed staff increases. Additional costs such as payroll tax and worker’s compensation insurance compound the expense of attracting and retaining highly skilled practitioners to a practice. Significant cost advantages exist for those practices that choose to expand using the ‘associateship model’ as associates are considered to be separate businesses which means that payroll on-costs are avoided.
Deduction Restrictions – from the perspective of a practitioner who is engaged by a practice as an employee (and to a lesser extent those engaged as personal services contractors), limitations exist on their ability to access the range of deductions that an associate could. This will mean that many tax management strategies such as debt structuring, employment of spouses, superannuation etc will not be available to employees.
Liability Exposure – as a practice grows, it assumes partial responsibility for those who practice for and within it. To limit medico-legal exposures, it is suggested to reduce the number of employees or contractors directly engaged by the practice and restructure their positions as associates (where possible). As associates run independent medical businesses, the practice role is reduced to offering administrative support (as opposed to a direct provider of medical services) which greatly reduces the medico-legal exposures of the ‘host’ practice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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