A dental practice owner can most reliably reduce their tax bill by getting the ownership structure right, timing deductions such as equipment purchases and prepaid expenses before 30 June, and making concessional superannuation contributions. The biggest savings usually come from planning before the financial year ends, not from fixing things at tax return time.
Where the Real Tax Savings Sit for a Dental Practice
Structure is the largest lever. Many principals still own their practice in the structure they chose when they first bought in, often as a sole trader or partnership, which taxes all profit at personal rates. A company or trust arrangement, or a service entity that provides staff, premises and equipment to the practice, can lower the overall tax paid. Service entities must charge commercial, arm’s-length fees, and any restructure can trigger capital gains tax and stamp duty, so the numbers need to justify the change.
If the practice runs through a trust or company, how profits reach you and your family also matters. The ATO’s guideline PCG 2021/4 covers how principals of professional practices allocate profits, and arrangements in its higher risk zones attract attention. A well-documented allocation in the lower risk zone is usually the safer long-term position.
Dental equipment is expensive and depreciates, which creates planning room. Timing a chair, scanner or fit-out purchase before 30 June brings the deduction into the current year, and small businesses may be able to deduct eligible assets immediately, depending on the write-off rules in place that year. Prepaying up to 12 months of eligible expenses, such as insurance or professional memberships, can also shift deductions forward.
Concessional super contributions are deductible to you and taxed at 15 per cent inside the fund, well below the top personal rate. Higher earners pay an extra 15 per cent under Division 293, which usually still leaves a saving. If your total super balance is under $500,000, you may also be able to use unused concessional cap amounts from the previous five years.
Two cautions apply. Arrangements with associate dentists can create NSW payroll tax exposure even when the associates are contractors, so any structural change should be checked for payroll tax as well as income tax. And every strategy should be tested against the cash it costs, because a deduction only saves tax at your marginal rate.
Planning Ahead for Your Practice’s Tax Position?
Our accountants for dental practices look at structure, equipment timing and super together, ideally well before 30 June. MYC Partners Accountants is a CA ANZ chartered firm and Registered Tax Agent, and you’re welcome to get in touch to book a free discovery call.