Topic
Sole trader vs company vs trust for a doctor
Most doctors start as sole traders, and some later bill through a company or a trust. The right structure depends on how you earn, who pays you and whether the personal services income (PSI) rules apply, because they decide how income from your own work is taxed when it flows through a company or trust. These guides explain each option within the standard rules.
What these guides cover
- Sole trader, company and trust compared for doctors
- The personal services income rules and the tests behind them
- Paying yourself from a medical company
- Borrowing from your own company
- Service entities in medical practice, and what they are for
Guides in this topic
Guides for this topic are on the way.
Frequently asked questions
Is a company always better for a high-earning doctor?
No. Under the PSI rules, income from your own personal skills is usually taxed as yours even when a company receives it. A company can still suit some doctors, for example those running a practice with staff. Your accountant works through your situation with you.
What is personal services income?
Income that is mainly a reward for your personal skills or effort, such as fees for the consultations you perform. The ATO’s PSI rules decide how it is taxed when it is paid to a company, trust or partnership.
Can I change structure later?
Yes, and many doctors move from sole trader to a company as their private work grows. Changing structure has costs and tax consequences, so plan the move with your accountant.
Can DrBooks set up a company or trust for me?
Sleek offers company registration and discretionary trust set-up, and DrBooks looks after the accounting for each structure once it is running.
Do you advise on splitting income with family?
We explain the standard options within the PSI rules. We don’t suggest arrangements that depend on splitting income from your own work with family members.
Sources
Last reviewed: · Colin Lua, registered tax agent