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Taxation of Lump Sum Inducements in the Health Industry

In recent years it has become more common for medical practices run by large corporates to offer health professionals, particularly general practitioners, a large lump sum inducement to purportedly sell the goodwill in their own business. At the same time the health professional is expected to enter a contract for service for a specified period, often 5 years. Some practitioners had previously sought to treat these proceeds as a capital gain on disposal of goodwill and apply the small business capital gains tax concessions to significantly reduce or eliminate tax payable on the proceeds.

MedicalInducements

The Australian Taxation Office has released a new guide outlining their view of the correct treatment. The guide advises that the proceeds should be treated as ordinary income and as a result the small business capital gains tax concessions are not available to be applied. 

More details can be found within the guide published by the Australian Taxation Office here

If you are concerned you may have been involved in one of these arrangements and are not sure if it has been treated correctly for tax purposes, please do not hesitate to contact us with any questions you may have.