On 15 March 2017, the ATO published an information sheet titled “Lump sum payments received by healthcare practitioners QC 51513 (Information Sheet)”.
This information sheet is specifically targeted at doctors working in corporate medical centres. There have been instances where practitioners have been offered large upfront, lump sum payments to encourage them to start work or continue working from these centres.
The ATO is concerned that representations may have been made to the healthcare practitioners who received these payments that the payments could be considered capital gains on the sale of their practices. As such there may be the ability to access CGT concessions to reduce this gain. This is an incorrect position and assumption.
The key features of these arrangements are that the healthcare operator provides the doctor with fully equipped consulting rooms, administrative services, clerical staff and facilities. The healthcare operator pays the healthcare practitioner a lump sum upon commencing work in the practice. This payment may have been classified as a payment for the sale of goodwill or as consideration for a restraint imposed, or for other terms or conditions. Upon signing the agreement, the doctors commences working at the practice and usually pays a higher service fee to the practice than what they might otherwise have paid.
The ATOโs view is that these lump sum payments should generally be assessable to the healthcare practitioner under s. 6-5 of the ITAA 1997 as ordinary income from the provision of services, rather than being treated as a capital gain.
Be aware if you have entered into an arrangement like this.
