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Part Time Business Practice Companies

Many doctors, particularly medical doctors, run what are in effect a series of compartmentalized distinct practices. These may comprise, say, one or more public hospital appointments and a one day a week practice in one location and a second one day a week private practice in a completely different location.

Sometimes circumstances present where on an overall basis a practice is a personal services income practice, but where it is still possible to carve out a distinct separate practice that, on its own, is a business according to the Australian Taxation Office. An example is an obstetrician with a diploma of radiology who completes his own scans and those of his colleagues by employing a full time radiographer and leasing an imaging machine worth more than $300,000.

This scanning activity can be quarantined in a separate company, with the shares owned by a separate family trust, and the profit on it will only be taxed at 30%.  And there is a possibility of further savings if a fully franked dividend is paid out in circumstances allowing a refund of franking credits tax in the years to come.

Example

Assume Dr Veribusy is a full time obstetrician and a part-time radiologist. The radiology practice makes $200,000 profit a year after employing a full time radiographer and leasing the imaging equipment. If Dr Brown uses a practice company to run the radiology practice, Dr Brown will save $33,000 tax a year, every year [ie $200,000 times (46.5% less 30%)]. And there is a possibility of further savings if a fully franked dividend is paid out in circumstances allowing a refund of franking credits tax in the years to come.

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