Should Doctors Operate as a Sole Trader, Company, or Trust?
- Jenine L.
- 1 day ago
- 3 min read
Choosing the right business structure is one of the most important financial decisions a doctor can make. It’s not just about tax, it determines your liability, asset protection, succession planning, and long-term wealth outcomes.
Here’s what you need to know about operating as a sole trader, company, or trust in Australia as a medical professional.
Sole Trader
Many doctors begin as sole traders because it’s the simplest option.
Pros:
Easy and inexpensive to set up
You keep full control of profits
Minimal compliance requirements
Cons:
Profits taxed at your personal marginal tax rate (up to 45% + Medicare levy)
No protection for personal assets, you are personally liable for debts or claims
No ability to split income with family members
Best for locums or early-career doctors earning under ~$200,000 before moving into a more tax-effective structure.
Company
As earnings grow or you move into private practice, a company often becomes attractive.
Pros:
Flat company tax rate of 25% for base rate entities (must have turnover < $50m and ≤80% of income from non-passive sources)
Greater asset protection, liability is limited to the company
Ability to retain profits in the company for reinvestment at a lower rate
Easier succession and practice sale planning
Cons:
Dividends paid to you are taxed again, though franking credits offset this
Higher compliance costs (ASIC fees, director duties, annual accounts)
Clear separation required between business and personal finances
Best for established doctors or practices wanting tax efficiency, reinvestment options, and stronger protection.
Trust (Discretionary or Service Trust)
Trusts can be effective when structured properly.
Pros:
Flexibility to distribute income among beneficiaries (e.g., spouse, adult children)
Strong asset protection if set up and managed correctly
Commonly used in group practices alongside service entities
Cons:
More complex and costly to administer
If income is not distributed, the trustee may be taxed at the top marginal rate (currently 45% plus Medicare levy), and CGT discounts may be lost
ATO scrutiny under Section 100A and PCG 2021/4 means income-splitting arrangements are tightly monitored
Best for family wealth planning or when combined with a company for flexibility and protection.
Key Considerations for Doctors
Income level: The higher your income, the more beneficial it is to move beyond sole trader status.
Risk exposure: If you own significant assets, a company or trust structure provides protection.
ATO compliance:
PCG 2021/4 now applies to all professional firm arrangements (including doctors), assessing the risk level of how profits are allocated. Transitional relief ended 30 June 2024.
Section 100A may apply to trust distributions seen as reimbursement agreements, leading to tax at the top marginal rate.
Succession: If you plan to sell your practice, structure choice can affect value and exit options.
Talk to Us Today
At Dolman Bateman, we’ve worked with GPs, surgeons, and specialists across Australia to:
Set up structures that reduce tax and protect personal assets
Ensure compliance with the ATO’s professional services guidelines
Create succession and wealth-building strategies that work for medical professionals
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.