Doctors are among the highest-taxed people in Australia — and among the most heavily marketed-to by promoters of structures that do not survive ATO scrutiny. Between the personal services income rules, the NSW payroll tax position on medical centres after Thomas and Naaz, Division 293 tax on super, and service entity arrangements the ATO has been examining for two decades, a GP, specialist, dentist or allied health professional needs an accountant who knows exactly where the lines are — and which side of them the common “doctor structures” actually sit.

Trinity Accounting Practice has acted for medical professionals across Sydney since 2003 — GPs, specialists, dentists, physiotherapists, psychologists and practice owners. This guide covers the four issues that dominate medical tax in 2026: PSI and the limits on income splitting, payroll tax for practices engaging contractor doctors, service entities done correctly, and super strategy when Division 293 applies.

Personal services income — why most doctors cannot split income through a company

Personal services income (PSI) is income earned mainly from your personal skills or efforts — which describes most clinical income. The PSI rules in the tax law exist to stop exactly the arrangement many doctors are sold: billing through a company or trust and distributing the profit to a lower-taxed spouse.

The practical position:

If your income is PSI and you do not pass the results test or qualify as a personal services business (which most individual clinicians do not — patients and Medicare pay for your personal work), the income is attributed back to you personally, regardless of the entity that banked it.
Even where the PSI attribution rules are technically passed, the ATO has made clear (including in PCG 2021/4 on professional firm profits) that arrangements diverting professional income to associates with little commercial substance attract Part IVA (the general anti-avoidance rule) risk.
Deductions are also restricted under PSI — for example, you generally cannot pay a spouse for non-principal work beyond market value, and rent paid to an associate for a home office may be denied.

What remains legitimately available is different from zero: a properly run practice entity with genuine staff, equipment and business risk can be a personal services business; market-rate wages for genuine administrative work by family members are deductible; and income from owning a practice (as distinct from practising) is not PSI at all. The skill is in knowing which bucket each income stream falls into. The ATO’s PSI guidance is the reference point.

Payroll tax on medical centres — the post-Thomas and Naaz reality in NSW

For practice owners, the biggest structural shock of the last few years is payroll tax. In Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue, a medical centre that engaged contractor GPs under facilities-and-services agreements — collecting patients’ Medicare benefits and remitting 70% to the doctors — was held liable for payroll tax on those payments under the “relevant contract” provisions. The NSW Court of Appeal refused leave to appeal in 2023, settling the position: in many common arrangements, payments flowing to contractor doctors may be wages for payroll tax purposes, even though the doctors are genuinely independent practitioners.

Where NSW stands now:

The threshold and rate. NSW payroll tax applies above $1.2 million of taxable wages at 5.45% (2025–26). A practice remitting $1.5 million a year to contractor GPs could face a payroll tax bill in the tens of thousands annually — backdated up to five years in an audit.
The bulk-billing rebate. From 4 September 2024, NSW provides an ongoing payroll tax rebate for payments to contractor GPs at clinics meeting bulk-billing thresholds — at least 80% of GP services bulk-billed in metropolitan Sydney (70% elsewhere in NSW). The rebate covers contractor GPs only — not employee doctors, non-GP specialists or allied health.
Structure matters enormously. Whether money flows through the practice entity (practice collects and remits) or directly to the doctor (doctor collects and pays a service fee to the practice) can change the payroll tax analysis. So can the contract drafting, the flow of funds and the day-to-day conduct. Revenue NSW looks at substance, not labels.

Dental and allied health practices engaging contractors face the same relevant-contract analysis, without the GP bulk-billing rebate. Every Sydney practice paying contractor clinicians should have its arrangements reviewed against the current Revenue NSW guidance — before a payroll tax investigation does it with five years of interest attached.

Service entities — still legitimate, still scrutinised

A service entity (commonly a family trust or company that owns the rooms, employs the reception and nursing staff, and charges the practitioner a service fee) remains a legitimate structure — the ATO’s long-standing guidance accepts service arrangements at commercial rates. The requirements that matter:

Market-rate fees, benchmarked and documented. Service fees grossly above commercial rates (the historical rule-of-thumb ranges came from the ATO’s service entity guidance) invite adjustment.
Real services, really provided. The entity must actually employ the staff, hold the lease, own the equipment and bear the costs.
Written agreements and actual cash flows that match the paperwork. Journal-entry-only arrangements fail when examined.
Interaction with payroll tax. Post-Thomas and Naaz, the design of the service arrangement also drives the payroll tax outcome — the income tax and payroll tax analyses must be done together, not by two different advisers who never speak.

Super and Division 293 — the high-earner’s long game

For a specialist earning $450,000, super is the most reliable tax shelter that remains. The 2025–26 settings:

Concessional cap $30,000 (rising to $32,500 from 1 July 2026), taxed at 15% in the fund instead of 47% in your hands.
Division 293 tax adds another 15% on concessional contributions once income plus contributions exceeds $250,000 — so high earners effectively pay 30% on contributions. That still beats 47%: a $30,000 concessional contribution saves roughly $14,100 in personal tax and costs $9,000 in fund and Division 293 tax — a net saving of about $5,100 every year, compounding inside super. (We cover this in detail in our Division 293 guide.)
Carry-forward concessional contributions can let doctors with super balances under $500,000 use up to five years of unused cap — particularly powerful for registrars stepping up to consultant incomes.
Non-concessional contributions ($120,000 in 2025–26, rising to $130,000 from 1 July 2026) and SMSF strategies — including owning practice rooms inside an SMSF and paying market rent to your own fund — round out the long-term picture for practice owners.

Practice structures — what actually works for each career stage

Employed or VMO doctors: simple individual returns, but with salary packaging, motor vehicle, self-education and Division 293 planning still worth real money each year.
Contractor GPs and specialists: usually PSI — a company adds compliance cost without splitting benefit for clinical income, though it may still assist with insurance, timing and super contribution flexibility in some cases.
Practice owners: the practice (a genuine business with staff and premises) may sit in a company or trust; the practitioner’s clinical income is analysed separately; a service entity may hold premises and employ staff. This is where structuring genuinely adds value — and where payroll tax design now has to be built in from day one.
Approaching sale or retirement: goodwill in a well-structured practice may access the small business CGT concessions; the structure chosen 10 years earlier decides whether that door is open.

Worked example — the Beverly Hills GP practice restructure

A Beverly Hills GP owned a practice with four contractor doctors. The practice collected all Medicare benefits and patient fees centrally and remitted 65% to each doctor — about $1.42 million in total doctor payments per year, alongside $420,000 of admin and nursing wages. Post-Thomas and Naaz, that flow-of-funds pattern sat squarely in the relevant-contract danger zone: combined “wages” of roughly $1.84 million implied a potential payroll tax exposure of around $35,000 per year, with up to five years of retrospective risk approaching $175,000 plus interest.

The review produced three changes: the practice’s bulk-billing rate (83% in metropolitan Sydney) was documented and the contractor-GP rebate claimed under the NSW Bulk Billing Support Initiative; the agreements and fund flows were restructured prospectively on advice so that doctors collected their own fees and paid the practice a service fee, supported by genuine conduct; and a voluntary disclosure dealt with the historical period on far better terms than an audit would have. The owner also commenced maximum concessional contributions with the carry-forward rules, saving a further $5,000 a year despite Division 293. The combined result was a manageable, documented position instead of a six-figure contingent liability the owner had not known existed.

A Trinity insight from 22 years in practice

The most dangerous advice a doctor receives is usually at a dinner, from a colleague, beginning with “my accountant puts everything through a trust.” Medicine is the profession where the gap between what colleagues say they do and what the tax law actually allows is widest — because incomes are high enough to make aggressive promoters profitable. In 22 years, the doctors who have done best with us are not the ones with the cleverest structures; they are the ones who maximised the boring, bulletproof levers — super to the cap every year, a clean service entity at market rates, payroll tax designed in rather than discovered — and slept well during every ATO and Revenue NSW review cycle.

What this means for you

If you bill clinical income through a company or trust: have the PSI and Part IVA position reviewed — attribution may already apply, and the structure may be cost without benefit.
If you own a practice paying contractor doctors: a post-Thomas and Naaz payroll tax review is now baseline hygiene, and the NSW bulk-billing rebate may be claimable if you meet the thresholds.
If you run a service entity: confirm fees are benchmarked, agreements are written, and the cash actually moves.
If your income exceeds $250,000: Division 293 applies — but concessional super still saves you roughly 17 cents in the dollar. Use the cap.
If your super balance is under $500,000: check your carry-forward concessional cap — there may be a large one-off deduction available.
If you plan to sell your practice within a decade: the CGT concession eligibility is decided by today’s structure, not the sale-year paperwork.

How Trinity can help

Trinity Accounting Practice acts for medical professionals across Sydney — GPs, specialists, dentists and allied health — covering PSI analysis, practice and service entity structuring, payroll tax reviews and Revenue NSW disclosure support, Division 293 and contribution strategy, SMSF establishment for practice premises, and practice purchase or sale planning. Principal Ramy Hanna (FIPA, FTIA, Registered Tax Agent) oversees every medical file personally, and our Xero-based systems give practice owners monthly visibility rather than an annual surprise.

Book a medical tax chat with the Trinity team →

General advice only. This article contains general information current as at June 2026 and does not constitute tax, financial or legal advice. It does not take into account your personal circumstances, objectives or needs. Before acting on any information in this article, you should consider its appropriateness to your situation and seek professional advice from Trinity Accounting Practice or another qualified adviser. Liability limited by a scheme approved under Professional Standards Legislation.