Having the correct financial structure in place is arguably the single most important element in the accumulation and preservation of your wealth. This isn’t hyperbole; it’s a plain and simple fact.
If you have the wrong structure in place, it could cost you hundreds of thousands of dollars over the course of your career. An Oral and Maxillofacial Surgeon operating through a company structure, for example, could be paying tens of thousands of dollars (unnecessarily) each year, in payroll tax and other expenses. The right structure, however, will help you reduce your tax and create wealth.
So how do you ensure you have the right structure in place?
Firstly, it’s vital to understand that the structure relevant to your needs in the past may not be so now. As your professional (and family) circumstances change, your structure may also need to change to address risks and take advantage of opportunities presented by changes in circumstances. This means you need to regularly review your structure.
For example: if you’re looking to grow or expand your practice through the introduction of other principal dentists (practice owners) you need a structure that allows for easy entry and exit of dentists from the practice. A sole trader or company structure won’t readily facilitate this, so perhaps you need to change the practice structure to incorporate a Unit Trust via a service entity arrangement. In addition to facilitating the introduction of other dentists, these structures have further benefits including the ability to provide asset protection and income tax efficiency.
While the benefits of a legitimate service entity structure are profound, you also need to ensure it is run commercially and also fits within the Australian Taxation Office Taxation Ruling which is very prescriptive. Before jumping in and making changes you need to ask whether there are any implications in changing structures.
There may be some tax consequences to changing your current structure, such as stamp duty or capital gains tax. These costs (which can potentially be reduced with careful planning) need to be compared with the potentially larger costs of having the wrong structure.
Please don’t hesitate to contact one of our award winning advisors if you’d like to discuss your Practice Structure.