A question for my friends in the medical profession: does most of your income come from work you do personally? OR do you have employees using your company’s facilities and equipment? Not sure? Not to worry. We can figure it out together.
How you answer these questions can affect how much tax you pay. If you make your money from a business with significant income-generating assets and/or lots of busy bee employees, it’s probably thanks to the profit-yielding structure of the business (rather than from services you personally perform).
The more income-generating assets you have, the more likely it is that your income comes from the business structure.
Consider these factors as they relate to your business:
- The extent to which your income is not dependent upon your own personal skills, efforts or expertise
- The number of employees who work side by side with you or others engaged to perform work
- The presence of goodwill
- The extent to which income-producing assets are used to derive the income
- The nature of the activities performed
- The size of the business.
If you’re still stumped, about whether you fall in the business structure personal services basket, call us on 1300 528 717.
We’ll leave you with a case study:
GP Karen owns a flat-out suburban medical practice, with assets including fully equipped consulting rooms, countless jellybeans and lollipops, a nurses’ station, two nurses and seven other doctors who see up to 16 patients a day each. Karen, a mum of two kids under three, is employed as Principal but only sees a handful of patients per week.
Not knowing all the details, it is likely that Karen’s income is not derived from personal services. With the Tax Man more interested in the realm of ‘personal services’ these days, it’s worth double-checking to make sure you don’t fall foul of the ATO.