As practices in the health industry mature, one of the most common and consequential questions we see is: ‘Is our current structure still fit for purpose?’
The structure you choose for your practice affects far more than taxes. It influences profit sharing, risk management, succession planning, admission of new practitioners and how easily you can scale or exit. Yet many practices continue operating in structures designed for a solo practitioner phase long after they’ve become a multi‑doctor or multi‑site operation.
With the recent changes proposed in the Federal Budget, the question around which structure is right for you has just become even more crucial. For more details on the proposed changes to taxing trusts, see our article Federal Budget Analysis 2026 | Trusts – William Buck Australia
Companies – Control, containment and simplicity
Companies are often used in group practices for service entities, employing staff and holding non‑clinical assets.
Why practices choose companies:
- Limited liability: Risk is generally contained at the corporate level
- Clear governance: Directors, shareholders and decision-making roles are well defined
- Flat tax rate: Company tax, generally 25% for base rate entities, can assist with short term cash flow management
- Easier banking and leasing: Lenders and landlords are comfortable with companies
Limitations:
- Profit extraction: Getting profits out tax effectively can be challenging once dividends are paid
- Inflexible profit sharing: Shareholding often doesn’t reflect clinical contribution, part time roles or changing provider mix
- Succession friction: Transferring shares can trigger CGT and stamp duty issues and requires careful planning
Companies are excellent operational vehicles or dynamic profit sharing between practitioners whose incomes fluctuate year to year to apply, different classes of shares are required. They provide certainty of income and structure as well as tax outcomes.
Unit Trusts – Flexibility in profit distribution
Unit trusts are commonly used where multiple practitioners share profits, particularly in specialist or multi‑disciplinary practices.
Why practices choose unit trusts:
- Proportional profit entitlement: Income is distributed according to units held
- Scalable: New practitioners can buy in by acquiring units
- Asset holding: Trusts are often used to hold business goodwill or property
- Tax planning: Units held by discretionary trusts allow income streaming to family members, subject to integrity rules
Limitations:
- Fixed entitlement: Units lock in profit ratios, which may not reflect sessional load, productivity or changing roles
- Valuation sensitivity: Each unit has a market value, impacting buy ins, exits and disputes
- Cash flow mismatch: Distributions must align with trust income, even if some practitioners contribute less clinically in a given period
Unit trusts suit practices with stable ownership and predictable contribution levels but can feel rigid in high‑growth or high‑turnover environments. If trusts are considered fixed trusts they are proposed to be excluded from the Federal Budget changes.
Hybrid Unit Trusts – A practical solution for Group Practices
Hybrid unit trusts combine fixed equity interests with discretionary profit allocation, making them particularly effective for modern Group Practices.
Why hybrid trusts are used:
- Equity vs effort separation: Units reflect ownership, capital, goodwill or risk, while discretionary distributions reflect clinical work, leadership roles or management contributions
- Fairer profit sharing: Adjust distributions without restructuring ownership
- Simplified onboarding: New practitioners can earn into profit participation before buying equity
- Succession ready: Allows gradual transitions rather than ‘all in’ buy ins
Where we have seen them work best:
- Multi GP clinics with varied FTEs
- Specialist practices with mixed seniority
- Allied health groups with contractor like clinicians
- Practices introducing non clinical investors or founders stepping back
Limitations:
- Banks can have an issue with hybrid trusts due to the discretionary nature of the income, so if bank financing is required they may not be practical
Hybrid Unit Trusts provide commercial realism, recognising that ownership and contribution are not always the same.
Most practices don’t start with their final structure. As practices grow, add owners or plan for succession, structures often need to evolve. The issue is rarely whether a restructure is needed, but when and how it’s done.
Common triggers for a restructure include:
- Admitting a new practitioner as an owner
- Growth from a single principal to a true Group Practice
- Profit sharing no longer reflecting contribution
- Succession planning or founder transition
- Expansion into multiple sites or specialties
Restructures can trigger Capital Gains Tax (CGT), stamp duty and increased ATO scrutiny, particularly around goodwill transfers, service entity arrangements and PSI. For this reason, restructuring should be strategic rather than reactive.
There is no ‘best’ structure, only the right structure for where your practice is today and where it’s heading next. What worked when you had three practitioners may hinder you at ten.
Recent Federal Budget announcements, together with ongoing ATO compliance activity, reinforce a tightening environment for trust-based structures, particularly discretionary and hybrid unit trusts. For group practices, this means profit allocations, especially to corporate or lower-tax beneficiaries, must reflect genuine entitlements and commercial reality, not purely tax-driven outcomes. Hybrid trusts may remain viable, but only where there is clear alignment between legal rights, economic contribution and distribution outcomes, supported by robust documentation and governance. Older trust structures should be reviewed to ensure they remain defensible under current ATO interpretation.
If you’re unsure whether your current structure still supports fair profit sharing, growth or succession, now is the right time to review it. Contact your William Buck advisor to get started.
