Overtime is not a badge of honour: it is a warning sign!- Part One

This is Part One of the article Overtime is not a badge of honour: it is a warning sign! It Overtime and staff burnout is your greatest challenge and opportunity. Three game-changing things you can do to stop it. 

Overtime is not a badge of honour: It is a warning sign! 

This is part one of our three-part article on how to ethically and legally comply with the new ATO and Fair Work Overtime Award “robo debt red tape” compliance tool. I look at the top 6 common mistakes practices make.  The No. 1 Mistake: “We are OK: We pay way above the Award rate!”. 


From 1st July 2021 wage theft is deemed to be a crime. Be prepared to do time in Victoria, Queensland is underway.

COVID-19 has put many practice staff under the pressure for longer than expected work hours. In addition to changing job descriptions and hours of work are leading to staff burnout and staff leaving that could lead GP practices’ viability under enormous stress.

  

A new threat is that The Australian Taxation Office has new payroll disclosure rules commencing on the 1st July 2021. It will be mandatory from 1st January 2022. The ATO’s “softly softly” approach to Single Touch Payroll will not last long. It is important to revisit your payroll data. They are taking a closer look at how you pay your employees. They have a keen eye for unpaid overtime and ‘wage theft’. “Off the Clock” or “fake timesheets” violations are not a great idea.

The remarkable convenience of digitisation of your payroll is a game-changer. It is naive not to think that the Tax Office and Fairwork would not use this as a cheap back door to ensure compliance. Do not be surprised if within the next 12 months you receive a Medicare-like ‘please explain’ letter. Although, it may be a bit too late to do something, I am attempting to give you a 6 month head start.

Even large national law firms that thought they had done the right thing with their high-profiled advisers have been caught. In many big law firms, despite being paid (up to $500,000 p.a.) over the Award, their legal staff had worked so many extra hours it brought them under the minimum wage rate they were entitled to.

The Tax Office and Fair Work are after small to medium enterprises.  Smaller practices are less well-resourced. You are not “too small for them to care”. This may provide a false sense of security. Technology and times have changed from my father’s day of hanging up your “shingle”. 

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Smaller practices are a “low hanging fruit”. They are an opportunity to establish an exemplary case to encourage compliance. Expect automated Medicare-like ‘please explain’ letters for possible non-compliance. Now is not the time to go cheap on the biggest investment (overheads such as wages) and risk your practice. The good news is – there is a way out.

  

No time to read this?

For those who feel they do not have time to read this article, to manage the Australian Tax Office’s new employment wages reporting requirements, click here for a quick  Medical and Healthcare Employment Compliance checklist. You should look at this before completing your End of Year Payroll Checklist

In the second part of this article, I will explain why exceptional staff quit and how to identify it before it happens. Stay connected, communicate and collaborate with your staff for a solution. The final part is on how to break free from insane workloads and prevent claims of excessive overtime and burnout. 

  

Regular overtime is no longer an option or a badge of honour. 

Death by regular overtime

Overtime is potentially a ticking time bomb that needs to be actively managed and stamped out. 

For the well-intended, things can go horribly wrong. I am an extreme case. As a young graduate accountant, overtime nearly killed me. I crashed my car into a tree at 5:30 am on a Tuesday morning 5 minutes from work after falling asleep at the wheel. Nine operations later, now you know why I am into promoting safe healthcare. 

Excessive overtime can do harm: David Dahm’s car crash (actual photo) 

For the $9.00 per hour I was getting paid, it really was not worth it. However, learning the lesson was the best thing that ever happened to me. 

Victoria’s recent young doctors class action is unprecedented and is another example of how ignoring this important issue can dramatically and systemically escalate. 

Medical mistakes/errors and staff turnover breed a toxic workplace; you feel it and your patients feel it. This makes everyone slightly on edge. In the end, you want people to like what they are doing and not feel their goodwill exploited or taken for granted. It is much harder to recruit and retain people when morale is at an all-time low. 

Understandably, staffing shortages do not help. Healthcare workers are ethically and morally torn to do the right thing but at what cost? Is it legal or sustainable?

To all our brave doctors and practice staff, WE GIVE A HUGE THANK YOU at this most difficult time. Every person’s life you touch is precious. For everyone directly and indirectly involved in healthcare, the expectations are becoming insanely and unfairly high. 

It is relentless, exhausting and overwhelming. Doing more with less is the norm until you reach that breakpoint where you do more harm than good. 

I can only hope this piece may shine a light on how to get your practice to higher ground.

General Practice: under pressure

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A new case in point is the General Practice Pfizer vaccination Expression of Interest (EOI) practices need to apply for. For no additional funding for set-up and training, it adds another nail in the coffin. 

This is especially for those who had just gotten over implementing the AstraZeneca vaccination rollout. 

The Sword of Damocles hangs and infests more than a plague of rats. It is a treacherous minefield; there are weekly changes to ATAGI, unclear MBS and policy procedures, medico-legal issues, pending no jab no job rules and contracting rules. There are copious and endless meetings that continue to haunt underfunded practice owners and staff! It would take a more than full time 24/7 Chartered Accountant, Harvard MBA and Philadelphia lawyer to stay on top. 

Only dramatically changing how you work on and not in the practice, and implementing better systems will save the practice the ignominy of an audit or complaint. 

Time is running out

I would not blame you if you feel the initial goodwill to help out the country is starting to wear thin as it begins to bite into your own personal wellbeing. This is felt when you feel you are not in control of your own destiny.

The risk of a staff member making a complaint or regulators stepping in is at an all-time high.

The dark side to this story is unspoken and unpaid overtime and/or misclassification of Award entitlements. Jobs are regularly changing as practices pivot to meet changing demands.

 New electronic backdoor “robo debt red tape” rules?

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As mentioned earlier, the new threat is that The Australian Taxation Office has new payroll disclosure rules commencing on the 1st July 2021. It will be mandatory from 1st January 2022. The ATO’s “softly softly” approach to Single Touch Payroll will not last long. It is important to revisit your payroll data. They are taking a closer look at how you pay your employees. They have a keen eye for unpaid overtime and ‘wage theft’.

Using changes to Single Touch Payroll from 1st July, the Australian Tax Office will be mandating from 1st January 2022, there will be unprecedented greater scrutiny on your payroll accounting systems. Single Touch Payroll was introduced in 2018. Wage theft is a big issue.  One significant recurring issue is overtime. 

The Australian Tax Office with their friends, such as Fair Work, may be taking a serious look by accessing your payroll records with a mooted $10m funding project to look at payroll safe harbouring rules.  

The additional information you need to report should already be captured in your current payroll software.

 The key changes to the STP reporting include disaggregation of gross:

Currently, your STP report includes a gross amount, which is the total of many different components and payment types. Because some of these are treated differently, for social security purposes you will now need to report more detail.

Your STP report will separately itemise the following components of the gross amount:

For many businesses, up-to-date employment contracts are not being correctly mapped to payroll systems. This has led to many “big-end-of-town” successful underpayment of wage audits. The days of excessive overtime are numbered and marked with “eye-watering” penalties of up to $660,000 for corporations per incident. 

The twin non-compliance enemies are: hubris and ignorance.

The ABC ($12m), Healius GP and Pathology company ($15m), top-paying law firms, and many others were prosecuted for the underpayment of wages. Now it is your turn. 

Even with their top lawyers and advisers, many of the best and brightest organisations have been caught flat-footed. Poor contracts, poor advice, systems, misunderstandings and lack of attention to the details, or a combination appear to be their main undoing. Many were paying above the Award and thought they were doing the right thing and/or were above scrutiny.

Small to medium businesses are next in line. Like many medical payroll audits, expect little leniency because you are saving the world. Working for the greater good or ignorance is not an excuse. You are expected to walk and chew gum at the same time on this one.

It is a good idea to carefully review whether you have a tax and Fair Work audit insurance policy.

No matter how generous the goodwill of your staff, employers under the Fair Work Act can no longer keep paying for “unreasonable overtime”. 

You cannot contract out of this obligation even if the employee agrees.

The recent announcement by the Australian Tax Office (ATO) enables them to “robo audit” how your practice may get caught. 

The ATO has taken this to a new level. 

  

We have seen (and they have stated) that they are allowed to share data with agencies like Fair Work, Payroll Tax, WorkCover and Superannuation Guarantees. The timing could not be worse. 

This is a sensitive time for general practice. 

Practices are facing a new wall: Pfizer vaccine demand based on limited resources. To vaccinate Australia with insufficient Medicare funding is tying both hands behind its back. Unless you have your systems and numbers right, something will break. Hopefully not you or your practice.

Proactive practices have done a great job and they will continue to survive and thrive. It is an unpredictable environment. This is compounded by a clever electronic robo debt red tape machine. It is hungry to feed the Government’s massive budget deficit appetite in the smartest and quickest way possible.

  

Top 6 Mistakes Practices Make

 

Assuming you do not have a problem,  failing to double-check can be a problem within itself. 

The breeding ground for a systemic underpayment of wage error is usually created in the way you set up your practice. I am yet to see an Award compliant process in place. 

This starts with not accurately monitoring your staff morale. Simple and cost-effective tools such as Officevibe can get you there to seek timely appropriate professional advice. 

From the outset, many practices do not seek  specific legal or tax advice. Accordingly, they fail to update their systems correctly and  legally prepared employment contracts. 

I end with the deadliest and most common mistake practices similar to yours may make. 

  1. Don’t assume: “I am an honest person so we will be OK”

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Practices that have “assumed” they are doing the right thing are most vulnerable to the new change. 

Never assume you are doing the right thing the right way. Employment laws are not static; they change every year.  Copying other practices’ employment contracts or using generic employment templates that are not customised to your practice or industry may leave a painful systematic risk.

That feeling is a loss of “trust”. If not handled carefully, it may permanently damage staff morale forever. 

Hope is no longer a strategy. Sadly,  the most vulnerable are practices preparing for the COVID-19 vaccination. Move from risky behaviour to preventative behaviour. 

  1. You do not have the time or money to deal with it

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Saying you have no time because you are saving lives may fall on deaf ears. This is a hip pocket issue. A practice cannot continue to save lives if the patient survives but the practice dies.

Nobody is above the law. The ultimate responsibility falls on practice owners, shared with their accountants and bookkeepers depending on their role in your practice. It is not a choice if you do not want to fend off an expensive and embarrassing audit. 

Risking a fine of up to $660,000 per breach should help make this a priority if nothing else will. The ATO and Fair Work do not believe medical practices deserve special dispensation or are poor. To the contrary, the smaller ones that people can identify with, make great case studies. 

You can turn this potentially negative situation into a real positive.

  1. Do-It-Yourself

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You do not have to look far or wide to find a practice who has copied another practice’s template and modified or even written their own contracts.  Using another practice’s agreement is like using a dirty needle. You do not know where it has been, or its intended use. In my opinion, it could be a dangerous approach.

 

 For the unwary, employment contracts can become a complex document with many pitfalls. A simple word or number can cause a systemic problem like quoting the incorrect pay rate. Starting with the right professional advice is critical. 

Ask: when was the last time your contracts and systems were externally professionally reviewed by a lawyer or accountant?

  1. Assuming your amazing professional advisers are on top of it…

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For some, paying for professional advisers may be a grudge purchase, unless you are in the face of a complaint or prosecution. If you want to sleep better, the opposite is true. 

Assuming your advisers are on top of it and should have said something, is unfortunately not a defence. Their defence will be: if you do not ask they will not tell you, especially if you are fee-sensitive or expected to know. 

Another challenge is that it is hard to find the right adviser.  A traditional “small Mum & Dad” or big law/accounting firm may not save you. Just ask the lawyers and accountants who advised Woolworths and the ABC. A big challenge is making sure your advisers are experienced enough and work together to proactively address your concerns. We have worked exclusively in this field for nearly 30 years across Australia. So you at least know one place to start.

It is a vicious cycle. It is a necessary investment (cost) for doing business. Practices need to budget correctly for it. Understanding the benefits should outweigh the cost.

  1. Relying on outsourcing and great-looking payroll software is not enough!

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The IT industry coined the phrase “rubbish in and rubbish out”. Outsourcing to a payroll company may be cold comfort when you read the fine print. If you give them the wrong information, they usually disclaim any legal responsibility for incorrect information you give them. Their glossy brochures, websites and cool software will not save you from a breach. 

 

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If it has not been set up properly, your digital footprint will certainly make things a little more awkward to unwind. 

A common mistake is: nobody has ever checked to see if your Fair Work compliant employment contracts have been correctly mapped into your payroll software system by your accountant. Do not be surprised the wrong figures automatically keep coming up, regardless of whether your bank account reconciles or not. 

That is not the point of the exercise. For Tenant Doctors (commonly referred to as Independent Contractors) we implement the Doctors Pay Calculator, because the right answer goes beyond a reconciliation, spreadsheet or a database in the cloud.

Context and valid content i.e. contracts matters.

 

  1. No. 1 Mistake: “We are OK: We pay way above the Award rate!”

If I had a dollar for every time a practice owner or manager said to me “We are OK: We pay way above the Award rate!” or “my staff are on salary so we don’t need to worry about that,” I would have retired by now. 

Unfortunately for many practices, this belief that paying above award rates or salaries means they don’t need to worry about certain aspects of award entitlements is wrong. The fact they rely on other practices who say the same thing does not make it true.

Additionally, they do not have a set-off clause in an employee’s employment contract that may be in breach of the applicable award and/or may not be able to rely on the higher rate should an employee challenge their entitlements.

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A set-off clause allows above-award payments to be set off against award entitlements (such as overtime, penalty rates, etc.). However, if the salary paid to an employee does not cover the applicable modern award entitlements, then the employer could potentially be liable for an underpayment.

 Award misclassification, unpaid training and paying an “all-in-rate” for overtime and allowances is the number one reason practices –  including the big corporates and law firms – were given a shock.

This is where the devil is in the details. I say if you can’t prove it, be prepared to lose it.

Many practices believe if they pay above the Award rates they are fine. After all, every other practice they speak to does. This does not make what you do right. The best well-intended advice will not save you. The devil is literally in the written details of your contracts. From what I have witnessed from the practices that I have represented, many DIY employment contracts should be relegated to your rubbish bin.

It is not a simple case of paying somebody $2 an hour above the Award rate and/or writing it into your contract and you are off the hook. Thinking you pay an “all-in rate” and mean no harm and not having this in writing is worse. 

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Practices have to do their homework to prove their case.  It is achievable but is poorly understood. It takes a lot more than just a good lawyer, accountant or practice manager. Practice owners should personally check systems, processes (including workflows) and contracts and seek qualified experienced advice now.

 Regularly working unreasonable overtime is against the law > 38 hours a week

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Often, practice managers would brag they “do not get paid enough and work over 60 hours a week!”

Excessive unmonitored overtime on a regular basis generates high staff turnover, preventable life-threatening healthcare errors, and possibly a hefty underpayment of wages and prosecution. 

Practices need valid written all-in rate individual flexibility agreements that observe the Award conditions listed such as specific allowances, penalties and overtime rates. Furthermore, they should ensure each person regardless of the contract is not to work “unreasonable overtime” hours (i.e. >38 hours on a regular basis). It does not matter whether you are a receptionist, nurse, practice manager or director who is an employee. This alarmingly ‘grey area’ is beginning to get a lot of attention including fines of up to $660,000 for corporations per breach.

Many practices are not aware that regularly working more than 38 hours a week is not in accordance with the Fair Work Act unless it is mutually agreed, reasonable overtime. An inability (due to staff shortages) to take time off can only compound this pandemic problem.

Is it worth the risk of being automatically referred to Fair Work for further investigation?

The ever-changing needs of the pandemic such as vaccine boosters and opening up borders are not going to go away for at least another few years. This problem will not go away until the pandemic does in every country. 

It is time to acknowledge your staff have been overstretched, and it is time to “structurally” do something about it. 

  

It is time to put an end to overtime! 

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Paying more money is not the solution. Treat the problem and do not use money to treat the symptoms. It will not go away and will get worse in time. This is how you lose great staff. Start by setting the right expectation. 

Don’t be surprised your competitor is paying higher wages and making the same mistake. Get off the FOMO treadmill and focus on how you should run your practice first. 

Surprisingly, poor practice governance and financial literacy is the problem. If you do not understand what I mean then you know where to start. Very few get this right which is why multiple things start to go wrong. Lying does not help cover your tracks. Sometimes it takes 10 small lies to cover up the first one. 

  

It is more than just billing like a rockstar and getting the bragging rights to hammering the cost of a ballpoint pen to 30 cents. That is not managing. Anybody can cut regulatory corners and breed a toxic workplace and state their overheads are 30% of gross fees. The piecemeal whack-a-mole approach is a pathway to insanity. 

It is time to take a helicopter view instead of a bottom-up approach.

Eating and sleeping well should be the ultimate goal. Your practice is your most valuable investment. It is not an overhead. Valuing the intangible systems as well as the tangible is critical. Running a successful practice is about the software and not just the hardware inside. Focus on outputs and not just the inputs. How efficiently and effectively are you operating?  

 

  

For a practice under the pump, there is a better cure than working more overtime. But you will have to spend money to make money.

It is urgent that practices carefully respond to this emerging ATO issue. The last thing you want to do is unnecessarily break the trust your staff have in you and/or go bust on a robo ATO/Fairwork audit.

  

You do have a choice. Risk being less profitable and automatically take on more staff. Or alternatively, work smarter and not harder: do better with fewer resources.

 

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Stay connected, communicate and collaborate with your staff for a solution.

Start by asking yourself the following questions:

  

  1. Are your staff happy? Do you need honest and discrete feedback? Use Officevibe to test your staff morale. Staff mark you out of 10, and as you can see, I use it in our firm and so does Xero;

Source: Office Vibe – Health and Life actual staff score as at 10th June 2021

24/7 compare yourself to the industry

Source: Office Vibe – Health and Life actual staff score as at 10th June 2021

  1. Check your employment agreements and systems: Make sure your contracts are correct and prepared with a legal professional with the support of your accountant. Correctly incorporate overtime payments and allowances into your contracts. Ensure you complete your End of Year Payroll runs with this checklist;

  2. Before calling your lawyer, call your accountant: Ask if employing additional staff is viable? Ask what will make my practice viable? Do not reinvent the wheel: understand what is possible. Review new ways to run your practice and then your numbers. Seek a medical and health experienced and qualified accounting second opinion. Then contact a lawyer to review your employment agreements;

  3. Work smarter and not harder: Consider effective and efficient new revenue and time-saving processes and technologies check our blog and/or;

  4. Free up key staff: outsource to experienced and qualified people the tasks that are  important but non-core activities such as bookkeeping, monthly benchmarking reporting and accounting, sterilisation etc or;

  5.  Leave a legacy and not a liability: If you personally do not want to make the changes, carefully consider succession planning. Prepare to sell down part or all of your practice to the next generation who can help you do all of the above. 

Please seek professional advice before acting on any of this information, it should be used for general information only as a conversation starter. Feel free to get in touch with me if you have any concerns. 

I would like to thank  Lukasz Wyszynski from Hamilton Bailey Lawyers for his opinion on certain points in this article.

Some Useful links

End of Year 

2021 End of Year Payroll Checklist 

 

Fair Work links

 

Maximum and Weekly Hour Fact Sheet

Hours for work breaks and rosters

Employment and payroll records

Records for payments made to employees

When Overtime applies 

Employer superannuation checklist

Records for payments to contractors and suppliers

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)

 

After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note: I am not a lawyer please seek appropriate legal and accounting advice. This information is for general use and discussion only.

Want a higher “Red Book friendly” pathology rent?: How you go about it matters!

 

Want a higher “Red Book friendly” pathology rent?: How you go about it matters!

 

 

Albert Einstein once quipped 

“You don’t have to know everything. You just have to know where to find it.”

 

Not a day goes by when a general practice owner contacts me about how much they should charge for a pathology rent. For a number of practices, pathology rent represents a significant part of a practices’ sustainability. The real problem is there are no readily available and comparable national pathology rent benchmarks you can easily point to.

 

Since the 2020 Department of Health announcement of 700 investigations with the threat of criminal prosecutions Damocles sword continues to hang over every owner that has a pathology collection centre lease. With over 13,000 practices in Australia your chances of getting caught may appear to be low, employee, doctor, competitor (including a rival pathology lab) by contacting the Department of Health. (Here is the latest case.)

 

In order to win new business, we have seen an ex-employee of a winning pathology dibber dob in a big practice for the losing pathology laboratory they now work for. Cartel behaviour is not allowed under the Australian Consumer Competition (ACCC) rules. Serious penalties apply. Everyone needs to be careful. Examples include bid-rigging for example withdrawing from bidding when either a practice or a pathology laboratory usually would. This could be seen as a form of market sharing. Starting with an open tender process with the same clear terms and conditions offered to all is a useful starting point e.g. no options to renew.

 

One can only speculate is the Department of Health is looking for a couple of national public hangings.

If you do things properly by the Red Book you should have little to be concerned about.

 

Many practices know since 2006 I have nationally been negotiating and benchmarking pathology rents for practices. I have had some role in securing legislative awareness for a free market for pathology rents since  2008.  These range from a small solo general practice to the really big ones you read about on the Australian Stock Exchange. 

 

Facing million-dollar fines and possible criminal prosecution, I have been approached by numerous practices to provide independent pathology rent valuation. Prior to hiring a uniquely experienced lawyer, it is most likely the smartest move if you are concerned about the valuation.

 

Depending on your practice there are legitimately safe legal and ethical ways to justify your rental market value. The rent amount can be higher than the traditional rents charged to the local butcher, baker and candlestick maker. If your local pathology laboratory suggests that you are doing something wrong, it is for a good reason I am sure. 

 

This is about what is the correct commercial market value pathology rent for your practice

 

 

There are three key steps to take:

 

Step 1 Start with qualified and experienced advisers

 

Starting with useful independent advice is always a good idea. There are very few people who have national expertise in this area. Your local everyday real estate agent, accountant or lawyer is not going to know the latest players in the national pathology rental market that comply with the latest pathology Red Book rules.

 

Step 2 Be clear how you independently verified the new rent or any renewal

 

Often we see these deals done over dinner. After a few drinks, it accidentally spills out to a competing lab who you are talking to and how much they are paying. This is an absolute no-no. Expect the investigators to ask how you arrived at these numbers. Do not leave yourself in an awkward situation. Most importantly pay for dinner!

 

Critical to any defence is how did you establish the rent value and the leasing terms and conditions. I would avoid restaurants and pubs altogether. Keep it professional. Do not fall for the nudge wink response from them that “you don’t need an adviser talk”. A rumour I have heard is that if there is a problem the medical practice owners and directors are exposed to a full prosecution, however, the problem is quarantined for the ultimate owners/directors of the laboratory. If it is true it does sound a tad unfair the pathology labs have been able to strike a better deal with the Government. I am happy to stand corrected on this point.

 

Step 3 Document your lease so it is “Red Book” Compliant

 

Over the years I have seen many pathology lease agreements over a bottle of wine, look like they have been written on the back of a napkin to save on legal costs. You have to wonder if any lawyers were involved.

 

We have seen high profile law firms who have missed out on addressing the Red Book concerns in the lease. A good example is allowing the uneconomic clause to remain within the agreement, which permits the early termination of a lease by the pathology labs. Such arrangements explicitly put pressure on in-house referrals. The fear of missing out by the practice seems to be the primary driver of agreeing to the tenant’s terms. Potential problems seem to go beyond just the legal agreement.

 

How did you document your agreement is critical. You do need an independent and experienced lawyer and accountant to look over it. The business rationale is critical. This is not a good time to cut corners. The process more than pays for itself.

Ignorance of the law is no excuse.

 

What are pathology rent investigators asking practices? 

We have seen the large gamut of questions by the Department of Health investigator put to practices. It starts with a few. Depending on how you answer you get a lot more.

 

Many questions may unwittingly entrap a practice. It is not uncommon for practice owners and their practice managers not to clearly know and understand their business model and commercial arrangements. The pressure to be perceived as cooperative to the Department’s demands may cause the practice to sometimes hastily respond. This can be used as evidence against the practice. Now is the time to be more careful and considered your responses.

 

It is hard to unsay an email or a phone call. This system appears to operate similar to a Medicare investigation except this is a more serious criminal matter. Some lawyers are too quick to volunteer their clients’ responses. This can only breed more avoidable litigation.

 

Responding to all of the questions (many of which appear to go beyond the scope of enquiry) may accidentally trigger further statutory Fair Work, ATO, Superannuation Guarantee, payroll tax and WorkCover audits with corresponding penalties.

 

From our experience relating to clients being investigated to date, common areas of evidence (documents) include but are not limited to:

 

  1. Any past, current or future arrangements, negotiations or leases in writing e.g. email correspondence

  2. Any initial external written bids or rent review rival bids 

  3. Any written and verbal communication on how the value was established independent of the landlord and tenant, e.g. using Health and Life bidding, valuation or other independent valuation services

  4. Valuations of the premises 

  5. Current arrangements with doctors e.g. employment contracts and contracts for services

  6. Administration and banking arrangements e.g. contractors

  7. Sub leasing arrangements with other parties e.g. co-located leasing arrangements e.g. allied health, specialists and pharmacy or a pizza bar

  8. Details of rental increases

  9. Floor area, parking and signage rights and practice infrastructure and staff support etc

  10. Signed service agreements and provider contracts

  11. Financial statements and tax returns that support the landlord v tenant arrangement or the business structure used to engage the diagnostic service 

  12. An explanation of the nature of any contracts with doctors e.g. discounting of service fees

  13. Director and staff statutory  compliance declarations

Circuit breaker: Do you have to provide all the information?

 

We have found an independent valuation may be a useful circuit breaker. This would avoid sending too much information. It may help the practice avoid any further unfair scrutiny or misunderstanding. The Red Book does provide the option of preparing a valuation report to justify the rent charged to the pathology labs. The valuation report would prove essential upon a practice being investigated by the Department.  The hard part is finding somebody prepared to put their name to the valuation with the appropriate legal oversight.

 

For a general practice, specifically, we had recently received this Barristers legal opinion.

 

He states: 

 

The valuation should be obtained before the sublease is offered to the sublessee at the higher rent amount in anticipation of a Departmental investigation. 

 

For the avoidance of any doubt, I am of the opinion that it would be extremely difficult (if not impossible) to justify charging the anticipated rent amount without a supporting independent valuation. 

 

In the absence of such a valuation, there would be an irresistible inference that the amount being charged results from an agreement between the parties for the sublessor to request pathology services from the sublessee.’ 

 

Source: Hamilton Bailey Lawyers   

 Find out if you have an excessive pathology rent problem? 

 

 Before hiring legal advisers, a useful starting point is to enquire what the average commercial rents are in your local region, which is a relatively straightforward exercise.

 For an approximate guess, locate your property on a commercial real estate platform. Compare the total rent per sqm with other commercial businesses located next to your practice with your pathology rent per square metre.

 For example, if the local butcher is paying rent totalling $120,000 p.a. exclusive of outgoings plus GST for a 600 sqm premises the rent is $200 (i.e. Rent $120,000/600 sqm) sqm p.a.

 You need to do the same calculation for the area you are designating in your practice for a pathology collection centre.

 If the pathology rent exceeds the commercial rent you are seeking or your existing lease; then it is time to engage some professional help to tidy things up.

 To be clear a verbal telephone call or an email will not cut it.

 A written valuation is required. 

 The valuation report is not the same as the traditional property valuation process, as it should place into context your total business model, structures, agreements and systems amongst other considerations. 

 

Update your current Pathology Lease to be Red Book Compliant

We can also refer you to experienced lawyers. For an obligation-free confidential chat, Health and Life can provide more accurate independent national pathology rental market valuations.

 

We have been approached by solicitors to provide independent pathology valuations due to our unique 15-year dataset of pathology bids and comparable market rates in Australia. Health and Life has been independently tendering pathology, medical, pharmacy and other allied health services since 2006. Traditional property valuers do not have access to this unique database, and it is not publicly available.

 

For over a decade, we have successfully argued for our clients’ legally and ethically higher market rates, in excess of traditional local property valuations. [in 2008 on behalf of all practices in Australia.]DELETE THIS.

 

For more information

 Source: Red Book available from the Department of Health. 

Australian GP Alliance’s comments on this investigation and its implications: New Excessive Pathology Rent Red Book Alert! 

 

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)

 

After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

 

A patient’s view: only five minutes to decide if I get COVID vaccinated?

The government is coercing patients and GPs into an unhealthy relationship by forcing GPs to reduce the time of a consult and gagging medical professionals from discussing their genuine concerns.

By David Dahm

This article was first published by the Medical Republic on 1st April 2021 this was before the ABC news report below on 3rd April 2021.

Like most people, I am careful when it comes to putting recently tested foreign things into my body.

I want to be free to ask questions. 

But, as things stand, we patients only have an average of five minutes with our GP discussing the situation before we get the jab. 

This is not enough time for me and I’m pretty well educated on the topic. 

Does the government really believe it is enough time for most patients, especially given the rising hesitancy around COVID vaccination?

Unfortunately, the federal government is not keen on any of us asking too many questions, experts included. 

Given that Germany has just suspended under-60s from receiving the AZ vaccine due to blood clotting and this week Canada has suspended the use of the vaccine for patients under 55 can anyone really be surprised that some patients are nervous about the information they are getting from the government?

Many other governments have been in the headlines for questioning or suspending the vaccine in the past few months.

Quite conceivably everything is OK. But that isn’t the point here. The point is the situation is confusing for patients and when you have a government that is quite clearly economically coercing GPs to go fast, and coercing medical professionals who want to question anything about the AZ vaccine to keep quiet or risk being de-registered as a doctor.

I am concerned as a patient. Why the rush given we have time to assess the situation and allow GPs the space to do the job properly? 

The patient anxiety issues, the safety issues and the GP stress issues are taking a clear second place to political expediency. 

Unlike traditionally multi-decade tested flu vaccines, the AZ vaccine is months old. GPs who might want to offer longer consultations are prevented from doing so as a result of the poor remuneration being offered per vaccination, and an inability to add any co-payment to make a longer consult where they think it might be in the better interests of their patient.

Freedom to choose

You would think the government would want to avoid unnecessary medical errors and allow patients time to consult their doctor for suitability.

Given how the situation is evolving I would be happy to pay for a longer consultation and even pay for the more expensive Pfizer alternative. 

Of course, this is not a luxury that most patients will have. I am in a very privileged position to be able to question what is going on, understand some of the important parameters, and of course, afford to be able to ask for extra time and a different vaccine. That’s if the choice were allowed, which it isn’t.  

Most patients will be put in a position between fear of missing out and fear of having it while the media are reporting on an almost daily basis that foreign governments are questioning the vaccine. 

It’s not a question of whether these reports or these foreign governments are right. It’s a question of integrity in the patient/doctor relationship during this process and perhaps more importantly, in the longer term.


One way to get around the issue if you are a patient is to ask your GP for a long annual healthcare assessment. Just do not mention it relates to the vaccination to protect your doctor. You can raise it at the time of the consultation.

Every day we are learning something new about these new vaccines. All the more reason to tread carefully, especially if there is no urgency to vaccinate. 

Patients should be enabled to ask the right questions

This article is about the patient more than the GP. But both are hugely important in this process.

Patients should not be assuming anything. We have all had it drummed into our heads that we live in unprecedented times. 

All I ask as a patient is for an opportunity to freely discuss my specific circumstances with my doctor and have the time to do that without my doctor being put under significant commercial pressure to “get me done” within a certain time frame.

Personally, I feel that I might be at high risk. 

I am under 55 (barely) but due to too much flying in my younger days, I did have a deep vein thrombosis. Thankfully I have had no problems since that time. I also have allergies that trigger asthma. These are the two major adverse reaction issues being discussed by researchers. It has led to the suspension and banning of the AZ vaccine in some countries. But I’m meant to get through this complexity and worry all with my GP in about five minutes on average?

These kinds of reputable news headlines provide me with no comfort.

               Source: Guardian 30th March 2021

Patient peace of mind

To give me peace of mind, I am not afraid to ask my trusted GP for the time to explain everything properly and get to all of my worries and questions. Nor should all patients. 

This seems entirely logical in the Australian context given we do not have the issues of the UK, Europe and the US. We have time. Why aren’t we taking it? If we were in the situation of the UK, then fine, the risk equation changes for the country and for all patients. That would demand the speed and thrift that is being demanded overseas. But we aren’t in that situation.

Patients should naturally be wary now that the federal government has prohibited doctors, nurses and allied health through AHPRA from saying anything negative about the vaccine process or individual vaccines. They risk being deregistered. Individual reputable experts at very reputable institutions have been sent warnings to cease and desist or face deregistration. 

But most patients aren’t aware of this behind the scenes pressure on the profession.

It is a concern when medical experts and governments around the world cannot agree. Then we are asked to follow the government and its highly paid medical officers without the real opportunity to question the process within the context of our own individual concerns.

AHPRA’s position statement says: 

“It is important that practitioners inform their patient or client of their conscientious objection where relevant to the patient or client’s treatment or care. In informing their patient or client of a conscientious objection to COVID-19 vaccination, practitioners must be careful not to discourage their patient or client from seeking vaccination. Practitioners authorised to prescribe and/or administer the vaccine but who have a conscientious objection must ensure appropriate referral options are provided for vaccination” 

The Therapeutic Goods Act also restricts what doctors can tell the public about the vaccinations and the Therapeutic Goods Administration has restricted how they advertise


Is a five-minute consultation enough time to find out if I will be safe?

For a job that can take up to 30 minutes per patient, GPs are only being paid for five minutes to do a suitability consult, regardless of a patient’s health conditions. 

For most healthy people five minutes may be sufficient time. It is not however a one size fits all process. 

I am receiving many concerning reports GP practices all around Australia are stating it can take up to 20 to 30 minutes to get an accurate patient history especially if the patient does not have a regular doctor. Filling out online forms may be not thorough enough. People and systems make mistakes, especially where the elderly are concerned. 

I am concerned that GP practices will be forced to cut corners or simply withdraw services. 

To add further pressure doctors and practices are being threatened with Medicare rorting audits if they encourage or charge for pre vaccinations so they can provide you with appropriate care. 

As the GP led phase 1b of the vaccination rolls out, 500 GPs will be receiving a warning letter about their telehealth billing earlier in the pandemic. Is that just bad timing, or is the PSR timing it perfectly?

GPs, practices and doctors are being set up to fail when it comes to providing patients with proper care, including giving them the right time to make them feel comfortable about the process, and potentially, in terms of safety.

The Sydney Morning Herald reports that GPs should not be charging for a vaccine-related consult. 

The Australian Doctor reports on the 26th of March 2021



If you want more time to discuss your concerns, the Government is effectively through financial means prohibiting patients from paying their GP for a pre-vaccination consultation whether it is free i.e. bulk billed by Medicare or not. As a patient, you really do not have a choice. 

This interferes with the doctor/patient relationship.

A key underlying issue for the government was exposed as far back as 1980 in a High Court ruling in the General Practitioners Society v Commonwealth (1980) which found that “there is no explicit head of power under which the Federal Parliament can regulate private medical practice, in the sense of the physician-patient relationship … Medicare does not have a constitutional right to deliberate in that area as a government agency”.

If a doctor does charge, they will be threatened with an investigation, and TMR readers know doctors cannot expect a fair process from the government.

From an ideological point of view, it is understandable why a COVID vaccine consult needs to be free. Fees may prevent patients from rolling up. 

From a practical point of view, you want to remove as much vaccination hesitancy as you can. Therefore it is important to encourage doctors and patients to seek each other out and have an uninhibited discussion where necessary.

To prohibit or discourage any pre-vaccination COVID related pre-appointment takes this ideological measure a step too far. It is counterproductive and unsafe.

Out of fear a GP may not say anything. As history has shown the risks of being unfairly accused of rorting the Medicare system and facing deregistration is on the table.

GPs feeling pressured to cut corners or withdrawing their services because it is not safe to practice is the last thing we need.

Queue pressure

Understandably, as a patient, you may feel pressured because while you hold up a line of people ready to get vaccinated you know your doctor and or vaccinator may be restricted in giving you clear answers. 

Other patients might be certain, and you will be annoying them. 

Your GP and their practice will be under financial pressure to get your processed quickly, but any long hold up for someone who wants to understand their situation thoroughly will put pressure all around in a vaccination clinic situation. 

It’s not fair on anyone.

The vax-election rush

The October deadline to have all Australians vaccinated for COVID is a political deadline not a patient safety and sanity deadline. 

The urgency to get vaccinated does not yet exist. Our emergency departments are not overcrowded with cases. We should use this time wisely.

Medicare is often used by the government as a financial weapon to silence and curb clinical behaviour.

To this end, I do not appreciate the Prime Minister running a “vax-election” campaign so we can meet his October 2021 deadline. 

I am concerned that the government has, via regulation and economics, coerced our doctors not to openly and meaningfully discuss the vaccination issues with patients who need a longer consultation than just five minutes.

Losing your freedom of choice is unfair. 

We are in the midst of setting another dangerous precedent that governments can do what they like and not be accountable for their actions. This makes for an unhealthier healthcare system moving forward.


Ultimately a face to face consult where a doctor can eyeball their patient is the most effective way to calm one’s fears. 

A possible solution as a patient

If patients understood their rights they could drive a solution here. 

They have the right to schedule a long general healthcare consultation with their GP. 

In such a consultation they can raise all their fears and needs regarding vaccination without the pressure that is being put upon them and their GP by the mandated vaccination process. 


I no more like going to the doctor than visiting my dentist. It is not something I am proud of but like many, I will always have a fear of coming out with a bigger problem than what I first went in. That’s me though. A patient.

 There are no commonly agreed global healthcare standards in the world we need this now.

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org).

I am a patient and provider advocate.

After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice before acting on this information. This information is for general information and discussion only. Visit our blog for more information.

Don’t use the “C” Contractor Word! – Part Two

This is Part Two of the article “Don’t use the “C” (Contractors) Word”. I cover practical examples and key court cases that best illustrateGL check common mistakes many practices make. 

This is Part Two of a two-part series. Part Two of this topic covers practical court case examples of what I commonly see practices get wrong. If you missed Part One, click here.

With this in mind, if you are not interested in reading the devil in the detail try my latest free, national 70 point practice self-audit Employee v Contractor v Tenant Provider tool. This is here to help you score yourself on how safe you are and what to do next. 

Key Independent Contractor Court and investigation cases

The bottom line is to determine what are the main characteristics of your arrangements. Do your arrangements lean more towards an independent contractor or an employee? If your intention is to be an independent contractor then it is important to put this in writing in an agreement and walk the talk. 

The following cases illustrate this point and may further indicate where you need to tighten up any loose areas. 

  1. Payroll Tax

For practices who are not employing or subcontracting doctors and are using the Tennant Doctor provider model discussed should ensure the following:

1.1 Do not sell items such as consumables that becomes your primary purpose of business

In the Super Optical payroll tax case they had lost their appeal and the practice remained liable for payroll tax. Unfortunately, the taxpayer lost. We understand there are now general practice payroll tax audits being conducted in Western Australia, New South Wales and Victoria as we write. 

1.2 Do not assign income 

On a positive note, Dr Simon Halliday, a medical practice owner who had endorsed our approach had won most of his case in the Homefront Nursing Pty Ltd v Chief Commissioner of State Revenue July 2019 decision. It was alleged his doctors were contractors and not employees for payroll tax purposes. Their billing arrangements were a key to their success. It was established each doctor “had not assigned” their income to the practice. For payroll tax purposes, there were no relevant contracts taken to be wages.

It was noted they did have to pay payroll tax on a guaranteed minimum top-up hourly rate work.

1.3 Make sure your website does not state “Our Doctors” 

The following wording triggered a $1.2m 5-year payroll tax investigation. 

On the General Practice website it stated: 

‘In the ‘Our Doctors’ section of the website, it is stated that “the Practice has a highly skilled team of doctors able to assist with the management of all general medical concerns.” 

“Our general practice is accredited with the Australian General Practice Limited”

Your website should not imply it is providing general practice services. This is akin to Westfield the landlord not representing that it sells Woolworths fruit and vegetables for them. 

It is essential to check the tone of your website’s text so that it sounds like practitioners are not employed. They need to be seen and treated as co-located tenants, just like a Westfield store. 

To use another analogy it should be no different to an independent accountant and lawyer operating on the same building floor. They should not be seen as the same service under one trading banner or name when holding out their services to the public.  

 2. Fair Work Deemed Independent Contractor an Employee 

The Uraidla Physio 2017 independent contractor case best illustrates all the key areas in law that could be used against a practice to deem their contractors as employees for Fair Work, income tax, super, PAYG and payroll tax purposes. 

This case reveals many mistakes we see in practice. Below, I have substantially quoted highlights from the case. It clearly explains the key characteristics a Court would look for to deem your independent contractors as employees. The same criteria could easily apply in any income tax or payroll tax jurisdiction. 

A physiotherapist who lodged an unfair dismissal application with the Fair Work Commission (FWC) was found that he was an employee and not an independent contractor. 

Throughout the course of his relationship with Uraidla Physio, Mr Mitchell also provided services through his own physiotherapy business, as well as at another established practice. At the commencement of his relationship with Uraidla Physio, Mr Mitchell was asked by Ms Schultz whether he would prefer to be an ’employee’ in which case he would receive a set hourly rate, or a ‘contractor’ being paid a percentage of his billings. Mr Mitchell opted to work as a contractor. 

After Ms Schultz wrote to Mr Mitchell in December 2016 advising him that his services were no longer required, Mr Mitchell contended that at the time of his dismissal he was actually an employee for the purposes of the Fair Work Act 2009 (FWA). 

Employee or contractor? 

There was no written contract in relation to his engagement, the only conditions discussed with Uraidla Physio were in relation to hours of work and the method used to calculate his payment; 

Uraidla Physio exercised both discretion and control over the nature of work that he performed;  

He believed that he was working in the business of Uraidla Physio rather than conducting his own business alongside that of the Respondent;  

Uraidla Physio exerted control over the hours that he worked and he had an ongoing expectation that these hours would continue;  

Uraidla Physio bore the risk in relation to the work that he performed;  

He wasn’t able to nominate another physiotherapist to perform his hours of work;  Uraidla Physio provided all the stationery, software and equipment he needed; 

and there was a general arrangement that he was paid fortnightly, as he provided invoices sporadically at best.

The personal nature of the services provided would not tend to create goodwill for Mr Mitchell’s business.

The ruling and general law on employees v contractors 

The question to ask when determining whether a worker is an employee or contractor is ultimately whether the worker is a servant of another in that other’s business, or whether the worker carries on a business of his or her own account. 

The answer to this question comes from an examination of the relationship as a whole, in this case by reference to the factors noted above. 

It was found the arrangements were not formalised. The FWC noted that some of the types of transactions (such as the reliance upon invoicing and payments with consideration given to GST) that typify an independent contractual relationship were conspicuously absent in this case. 

When viewing the relationship as a whole, the FWC was satisfied that Mr Mitchell was an employee within the meaning of the FWA. 

  1. Substance over form matters

The terms and terminology of the contract are always important. However, the parties cannot alter the true nature of their relationship by putting a different label on it. 

In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: the parties cannot deem the relationship between themselves to be something it is not. Similarly, the subsequent conduct of the parties may demonstrate that the relationship has a character contrary to the terms of the contract.

On the other hand, where there is a high level of control over the way in which work is performed and the worker is presented to the world at large as a representative of the business then this weighs significantly in favour of the worker being an employee.

  1. Whether the worker performs work for others (or has a genuine and practical entitlement to do so).

The right to the exclusive services of the person engaged is characteristic of the employment relationship. On the other hand, working for others (or the genuine and practical entitlement to do so) suggests an independent contractor. The key areas to focus on are:

  • Whether the work can be delegated or subcontracted.
  • Whether the work involves a profession, trade or distinct calling on the part of the person engaged.
  • Whether the worker creates goodwill or saleable assets in the course of his or her work.
  • Whether the worker spends a significant portion of their remuneration on business expenses.

If a practitioner is free to work anywhere, is a member of the profession, can set their own fees and pay a substantial  fee in running a business they provide directly to the public at large, it is more likely that they are not an employee and an independent contractor. It is important to distinguish that independent practitioners (contractors) are in fact contracting the practice to provide support services. 

To the contrary, it would mean they were offering their professional services to the practice to on-sell to patients like a subcontractor. It is important to be clear about your working relationship. 

  1. A separate place of work and the advertising of the service

The location of the work should be considered in the context of the nature of the services provided. Mr Mitchell provided services using the room rented by Uraidla Physio and the room operated under the banner of that practice.

Written records, accounts, business cards and exchanges with patients took place using the letterhead and banner of Uraidla Physio. Accordingly, the services were provided under the umbrella of the relevant trading name of Uraidla Physio and were generally advertised and delivered in that context. This is more consistent with an employment relationship.

  1. The entitlement to delegate or sub-contract work

If the worker is contractually entitled to delegate the work to others (without reference to the putative employer) then this is a strong indicator that the worker is an independent contractor. This is because a contract of service (as distinct from a contract for services) is personal in nature: it is a contract for the supply of the services of the worker personally.

Given the absence of any real formality in the relationship, this entitlement is difficult to ascertain. It is, however, apparent that the arrangement was a personal one and it would be a reasonable inference that Mr Mitchell could not delegate or sub-contract the work at Uraidla Physio.

The need for the work to be undertaken by Mr Mitchell personally is an indicator more consistent with that of an employment relationship.

  1. The public presentation of the workers (uniforms and other badging)

The service was provided under the banner of Uraidla Physio. There was no uniform and the patients were seen by a professional physiotherapist and accounts were issued under the letterhead and accounting system of Uraidla Physio whilst referencing (where relevant) Mr Mitchell and his provider number. On balance, this consideration is more consistent with an employment relationship. 

To be treated more like an independent contractor, a practitioner should have their own letterhead and invoice with their own ABN and a disclaimer stating the treating practitioner is responsible for all conduct.

  1. The provision of invoices/periodic payment of “wages”

At some stage during the relationship, invoices were sought from Mr Mitchell by Uraidla Physio. The requirement for invoices, if such represents a bona fide business transaction expected by the parties, is more indicative of an independent contractual relationship. However, invoices were not provided by Mr Mitchell and ultimately were not required as the payments continued to be made based upon the billings issued for work performed by Mr Mitchell. The provision of invoices was not therefore a fundamental element of the arrangement and it could, and did, readily operate without such. In the absence of invoices, the proper treatment of any GST is unclear and the evidence tends to support the notion that neither party took GST into account as part of their transactions.

This is why I recommend the Doctors Pay Calculator to resolve this concern. 

Paying on a cash receipts basis than on billings is critical

There was, in general terms a fortnightly payment to Mr Mitchell, however, this was generated based upon the performance of actual services and billings issued arising from his work in that period. This is not generally consistent with the notion of a wage, however, I note that subject to any minimum award conditions to the contrary, there would be no reason that an employee could not be paid on such a basis. The fact that these payments were based upon billings, and not upon payments actually received by Uraidla Physio, is more consistent with the work being performed for the practice rather than Mr Mitchell.

  1. The creation of goodwill and other saleable assets

I have found that after the termination, Mr Mitchell could continue to provide services to at least one or more of the clients that he saw whilst at Uraidla Physio. Indeed, Ms Schultz facilitated such and this is a factor indicative of the personal nature of the services and that the work had some personal ongoing value for Mr Mitchell. This is an indicator more consistent with the notion that Mr Mitchell was working for himself, at least to some degree.

However, the fact that the services also took place under the umbrella of Uraidla Physio, and involved bookings being made by and with that practice, is a factor that tends to militate against the capacity for Mr Mitchell to generate any form of goodwill, in the sense that it could be valued or sold to another person or business. This aspect is more consistent with an employment relationship

  1. The proportion of remuneration on business expenses

There is no direct evidence about the proportion of remuneration that Mr Mitchell spent on business expenses. This would also be somewhat problematic given that Mr Mitchell was clearly conducting a business with respect to the other practices in which he was involved as the proprietor. In relation to the work performed with Uraidla Physio, other than the small investment made in bringing some minor equipment with him, he did not need to expend money to undertake any real administration of his business affairs as he was using the system provided by the respondent and being paid as a result of the billings generated through that system.

The non-payment of superannuation for most of the contract, and more importantly, the absence of any expectation that this would be done under the arrangements agreed by the parties, is also more consistent with the notion of an independent contractual relationship.

When it comes to independent contractor contracts – you cannot put lipstick on a pig

The courts have made it clear you cannot simply write a contract and your problems will go away. This is analogous to putting lipstick on a pig of a problem. You have to review your entire ecosystem from business models to structures, administration and accounting systems, marketing and staff training.

This should also be considered in light of the decision of the Federal Court in Roy Morgan Research Pty Ltd v Commissioner of Taxation. The Full Court endorsed the approach as “a matter which must yield in its significance to the nature of the whole relationship”. 

In Cai v Do Rozario, the Full Bench also confirmed the following:

● The object of the exercise is to paint a picture of the relationship from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.
● The ultimate question remains whether the worker is the servant of another in that other’s business, or whether the worker carries on a trade or business on his or her own behalf: that is, whether, viewed as a practical matter, the putative worker could objectively be said to be conducting a business of his or her own of which the work in question forms part?
● If the result is still uncertain then the determination should also be guided by “matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability” including the “notions” referred to in paragraphs [41] and [42] of Hollis v Vabu

Conclusion

Determine what the main characteristics of your arrangements are. Do your arrangements lean more towards an independent contractor or an employee? Now is a good time to fix it once and for all. It is possible to have an independent contractor arrangement more aptly described as tenant doctors ™. 

For more information on contractors visit our blog.

About me: David Dahm BA (Acc.), CA.,FCPA,CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service

After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice before acting on this information. This information is for general information and discussion only.

Don’t use the “C” Contractor Word! – Part One

This article was first published by the Medical Republic on the 6th of April 2021.

 

When a practice manager, doctor, or doctor owner says “our doctors are contractors” without realising it you may be opening a whole can of worms for your practice. Even your website that states “Our Doctors” could trigger an audit!

In this article, we cover the top 5 common errors and why it is more likely than not you will get caught. How you respond is the key. This is Part One of a two-part series. Part Two of this topic covers practical court case examples of what I commonly see practice get wrong.

With this in mind, if you are not interested in reading the devil in the detail try my latest free, national 15 to 20 minute practice self-audit Employee v Contractor v Tenant Provider tool. This is here to help you score yourself on how safe you are and what to do next. 

Employee and Contractor arrangements are a highly contested area of law and tax in Australia. Both have serious legal and tax consequences. Many practices prefer non-employee arrangements due to medico-legal, Fair Work and employee on cost and recruitment and retention.  I like to use a more apt description called Tenant Doctor ™  or Tenant Provider ™ arrangements.

All levels of Government are becoming desperate for money to pay for the pandemic. 

Setting up and running a practice is expensive. The devil is in the detail. Understandably, some tasks may have taken a lower priority. Unfortunately, compliance is not a choice, it is a necessity. The practices that do it well reduce uncertainty and are up to 200% more profitable than the average practice.

For medical and healthcare practices, there are two main reasons why you may get caught up in a stressful and expensive Employee v Contractor, Medicare, Fair Work, Payroll Tax, ATO or Superannuation audit.

It may be due to a practice dispute over pay or when you are buying or selling your practice. Alternatively, your arrangement may be picked up by an ATO or statutory systemic digital audit possibly from different angles. 

Every day we read more stories about practices where doctors or healthcare contractors are being unexpectedly investigated and/or deemed as employees with employee entitlements with PAYG, Super, payroll tax or GST obligations. We have seen contractor arrangements subject to the recent Department of Health’s pathology excessive rent investigations and Medicare Shared Debt rules. 

A “gentleman’s handshake” is no longer good enough when it comes to avoiding disputes and meeting your compliance requirements. It is not a choice.

No matter how big the company or clever your lawyers and accountants are, the tax and Fair Work authorities have been aggressively pursuing small and large businesses. Fancy letterhead and titles will not save you.

As a case in point below are some of the biggest cases and organisations in Australia reported in the media for underpaying their staff. Even the lawyers who are advising them are getting it wrong.  They include some of Australia’s biggest medical, law and accounting firms.

Underpayment of Wages cases since 2019 

  1. Top-tier law firm clocks up $290k underpayments bill – Australian Financial Review (17th July 2020)  
  2. ABC underpaid staff $12m 
  3. SBS running list of Australian businesses that have underpaid staff in 2019
  4. GP corporate admits it underpaid staff by $15 million
  5. (Healius)Idameneo back-pays workers over $15 million
  6. SBS running list of Australian businesses that have underpaid staff in 2019SBS running list of Australian businesses that have underpaid staff in 2019

Sleep better…you can do something about it.

If you cannot explain your structures and your numbers without your accountant and lawyer in the room, you may have a problem. The role of your adviser is to help you to simply and holistically understand and explain your arrangements. Initially, you should not need them in the room to answer a simple question. This one tip can significantly help avoid drawing more attention to yourself. 

The bigger problem is when your adviser cannot simply and holistically explain your arrangements to you, or you do not ask. This is not uncommon. Very rarely when I talk to practice owners can they or their advisers properly explain why they have their arrangements beyond a tax reason. This is a big warning sign.

It is understandable (and it may not be fair) that both State and Federal government agencies are going after the easy targets. Medical practices make for a good public hanging of our most morally abiding and trusted citizens. 

It can send a gut-wrenching fear that you could be next! If you feel this is you, if you feel nervous every time you get your own mail, understand this is a choice.  You can do something about it.

Feeling entrapped by authorities and pressured to answer the phone or email quickly is not a good idea. The opposite is true if you do not know how to respond correctly, this can only encourage more questions.

It is hard to unsay things, once you have let the cat out of the bag. 

Investigators will talk to everyone from your doctors, staff, your accountant and ask to see your contracts and website. They want to see if everybody’s understanding is on the same page. It is not a happy time for anyone. It is worse than accreditation because you get to foot the entire bill.

Start now (trust me, it is never a good time) and be clear on your own arrangements. Do not wait for an audit. 

What are regulators really looking for?!

Today, the ATO and their friends are looking at the overall “character” of your practice arrangements. To many advisers’ surprise, they take a holistic view. No single contract, system or well-intended advice in isolation is a panacea to your concerns.

The missing pieces of the jigsaw puzzle must be complete. A simple example is a practice being investigated due to a contract dispute. They are facing a million-dollar payroll tax bill. The official reason given is their website said “Our Doctors” and they are an “AGPAL accredited general practice”. This means nearly every practice in Australia may have the same problem!

In Australia, I have reviewed over 1,200 practices over three decades.  I am yet to see a practice get it right. I am yet to give $500 for my have you got your practice arrangements right.

With this in mind, our latest free, national  15 to 20 minute practice self-audit Employee v Contractor v Tenant Provider tool is here to help you score yourself on how safe you are and what to do next. 

We hope you will find this as a useful way of protecting your practice. 

This comprehensive checklist is based on many decades of experience in disputes, working with lawyers, the ATO on court cases and new laws. 

It will walk you through the key areas of your practice that you may need to tidy up. They range from your website, accounting and administrative records, software systems, through to your legal agreements. 

It will provide an automated rating and summary of key issues to help you start the conversation with your team and your advisers. 

Do not be afraid, you may find all you have to do is make a few small cost-effective tweaks such as fix your website and stationery. 

In the end, it is cheaper than an expensive government audit or an embarrassing dispute with a disgruntled provider. Providers can also use and share this tool to help the practice location they work at.

The five biggest common practice errors!

The five biggest errors we see practices make are:

  1. Not having an up-to-date signed agreement you may be accused of fraud. Lawyers have advised me that without a signed agreement such as a tenant doctor arrangement where you are collecting money on their behalf it may be a criminal offence to deduct money from a doctor’s billings without consent. Due to COVID-19, if you are thinking about increasing the practice percentage for a jab, make sure you have this in writing!

  1. Employee-like contract terms. Off-the-shelf templates are only a good idea if  your lawyer and accountant is fully aware of your structure and arrangements. Often we see self incriminating contractor agreement terms that state: 

  • Restraint of trade clauses
  • Restrictions to delegate work
  • Money not held in trust
  • Practices insisting that complaints are handled by the practice
  • Guaranteed minimum hourly (top-up) rate e.g. $50 per hour or 50% of gross billings whichever is higher.     

These types of terms or language may deem your contractor as an employee. 

  1. Website referring to “Our doctors” or “Our Team” and/or “our accredited general practice” listing providers who are not employees or subcontractors. If they are tenant doctors/providers they should be listed and treated like tenants in a Westfield shopping centre. 

  1. Using the same single Xero, MYOB or accounting ledger and bank account to record medical fees and paying administrative staff. Not using systems like the Doctors Pay Calculator to clearly separate (practice service entity) landlord and (doctor/provider) tenant activities. 

  1. Piecemeal professional advice. Advisers only give advice in their area of expertise. Sometimes they fail to advise or be aware of the shortcomings of their advice. A big mistake is not having their advice in writing. Start with a holistic approach that covers all areas such as your business structure, income tax, payroll tax, Fair Work, commercial or medico-legal issues. It is not uncommon to find your local or specialist medical accountant is not aware of many of these areas and are simply outside their depth.

Do nothing is not an option – start asking the right questions

To maintain the status quo is no longer an option. For real progress, you must seek it out. Start asking for a helicopter view. When you do not ask, the ‘we did not tell you defence’ is common. It puts you in a difficult position. The checklist helps you start asking the right questions which are more important than the right answer. 

Finding the right adviser

Relying on well-intended free advice is a suboptimal solution

Nobody likes paying for legal or accounting advice. Let’s face it, paying for advice is a grudge purchase is like going to the dentist. 

What makes this worse is it is intangible; you cannot see the immediate benefit. This makes it harder (next to impossible) to justify. 

People are happier to pay for a cure than to prevent a problem. Sounds familiar? Even if it is free, is a 20-minute chat that can save your livelihood worth anything to you? For many, it is simply not a priority when every day you are saving a person’s life. It never seems to be a good time. For others, it is in the ‘too hard’ basket.

For the more profitable high performing practices we see, they make it an annual strategic objective to review. It is affordable and doable. It increases practice certainty for them. Many fail to realise this.

Needless to say, being an honest and ethical fool is not a defence.

Like vaccine hesitancy, you need to get over it. Ultimately, it is your responsibility and not your accountant or lawyer. Advisers do have a role and have bills to pay. Unfortunately, there is no Medicare equivalent for advisers. The good news is that good quality advice does exist and it is affordable. 

Social media

Facebook network groups are a popular way to get free advice. But in the long run, they may do more harm than good. They lack context unless you like pouring all your confidential information and secrets on the net. You cannot rely on the advice you have received if it is not professionally experienced or qualified. Like BBQ advice, you may end up getting burned. 

Off-the-shelf templates

Off-the-shelf legally prepared agreements are a better start. However, they may suffer a similar fate. Many are implemented on a piecemeal basis. I have seen with a recent client it can make your situation systematically worse especially if everyone has signed off on a dodgy agreement.

Does my accountant and lawyer have the right experience?

Any accounting and law firm can simply state they “specialise” in medical practices. 

In the end, all care but no responsibility disclaimers do not cut it. You really should test out their gloss credentials. There is a simple way. They should demonstrate they do more than a lot of doctor tax returns and not just sell you insurance and loan products that you may not need. 

An experienced qualified registered accountant and legal adviser should be at least 10 years full time in your area of work. The fact the local accountant does the tax work for Elon Musk is a warning sign not a pitch. 

We only specialise in medical and healthcare for a reason. Healthcare has become too complex. Being a jack of trades and a master of none is not a healthy approach. Advisers should be able to quickly identify and solve your problem.

To find out how medically specialised they are, find out if they are in the medical or health media and for how long? Ask them do they know what a SIP or a PIP, SWPE or outpatient clinic is? If they can’t answer this, then seek a  second opinion with someone who can. Some of us have been AGPAL accreditation surveyors for many years. We even know what a bowie dick test is. They do exist if you look.

Verbal professional advice

Receiving professional verbal advice is only as good as the paper it is written on so think again about how you engage on this issue. Like the courts, start with a holistic approach. Most importantly make sure you receive and act on up to date advice at least every two years. The newspapers of business medical journals like The Medical Republic and Australian Doctor are a useful starting point. 

Procrastination and denial

Setting a time and a budget aside to seek appropriate and timely advice now will make your accountants and legal advisers’ invoice look cheap, should you get hit with an expensive dispute. As a minimum, contact them by email for some advice. 

No, you do not need a Rolls Royce to deliver pizza’s but it really depends on how much you value your practice. It is important to eat well and sleep well. Play the long game. Most practices find the certainty will provide a silver lining. You will become more profitable and sustainable by doing the right thing the right way.

Will I get caught?!

If you get caught is a choice. Rightfully, some senior doctors would say to me “David, we have never had a problem in 30 years so I am not too concerned”. Historically the chances of getting caught have been low.

However, the new digital data matching and sharing era across government departments is a new game-changer. For the Government, it is now cheaper and easier. 

We are too ethical to be doing the wrong thing! 

Often ego and ignorance can be the real enemy.

It would be most unwise to rely on being a medical practice because you save lives at the front line. Rightly or wrongly, it may give you very little if any special immunity from prosecution. Playing the devil’s advocate (and I come from a medical family) I can only imagine what someone in the Government may be thinking. 

The average punter may think, doctors are highly intelligent, resourceful and ethical people. They already get enough special treatment. They must be making a mint on the vaccine rollout and hiding it with their clever accountant! They should know better. Right?! This will be a vote winner! 

I know this may be hard to swallow. For some, despite the COVID vaccine rollout, you may have to walk and chew gum on this issue.

If you are at this point you may be thinking it is a good time to sell out or sell down your practice while you are ahead. If so, read my article How much is my practice worth? 

Tax agent profiling

Another new trend from the Tax Office is profiling tax agents and their clients. If your low priced malleable tax agent has been accused of systematically not doing a client’s books correctly by giving you deductions that the competition will not, this may potentially expose you if you fit that profile. 

Robo audits are real!

Together with new tax rules, the ATO can paint a picture of your affairs from many different data sources. 

Plan for a please-explain, especially when your tax return income does not match up to your lifestyle expenses. These may include your house (they know how to use Google Maps and realestate.com) or your when you go to buy a luxury car or when your Maserati appears on Facebook. 

Data sharing across State and Federal agencies has now arrived. Examples include the new global and local Government Digital Business Plan. The new and controversial mandatory E-invoicing laws will affect how you issue tax invoices to your providers and patients. The ATO data sharing (using the myGovID and RAM relationship authority), Single Touch Payroll and Company Director Identification – Director Identification Number (DIN) requirements are linking up all your related entities together. This will help identify excessive remuneration or profit-sharing to lower tax-paying family members or entities such as “bucket companies”.

With a potentially debilitating domino effect, it will not take much to trigger an investigation.

We all live in an unprecedented permanent digital audit trail. No longer can you afford to re-invent the past. It is time to tighten the screws on any loose arrangements. 

Are you likely to face a practice dispute?

Unhappy people may dob you in!

I recommend monitoring your staff morale every day. We use an inexpensive tool called Officevibe. It only takes one disgruntled doctor to trigger a bigger problem. We have seen a provider get investigated. Their accountant had triggered an expensive million dollar payroll tax investigation with the practice going back 5 years.

Practice disputes could trigger a cascade of problems. This can be over fair pay or buying or selling a practice

Gaslighting: Charging providers a higher service or management fee due to COVID-19

In general practice, the low balling of the General Practice Medicare COVID-19 Immunisation Rebate has thrown the cat amongst the pigeons for owners, providers and their staff. Based on the current COVID19 Medicare rebate it will be difficult for a doctor to get full informed consent. The only way for the Government to get this up is to exploit the goodwill of doctors and practice owners.

Practices need to combat the medico-legal risk of cutting corners, burning out staff or going broke. 

The money may become a virulent breeding ground to trigger a major contractual dispute within the practice and amongst providers. 

To remain viable, practices are being forced to charge higher service fees up to 50% of gross billings to their GP providers. The Federal Health Minister’s threats not to charge vaccinated related fees for the vaccine are concerning.

Many practices who are billing on behalf of their providers may not be aware, to lawfully deduct this or any amount they will need an agreement in writing or run the risk of being criminally accused of systemic theft. 

This will add more pressure on practices to do things properly.

How can you immunise your practice from further investigations?

Firstly do not use the “Contractor” word when trying to describe how you engage your doctors and providers. Most practices have what can be described as a Landlord and Tenant relationship. They and sometimes their advisers unwittingly do not realise it. The characterisation of your relationship is critical in dodging an unnecessary audit. 

Like a red rag to a bull, the Contractor word only raises more questions than it answers. We prefer our clients to use the word Tenant Doctor ™ or Tenant Provider ™ and not even the words Independent Contractor. 

Language is important. Using commonly used words in front of an investigator or staff tends to imply something else that you may not have intended. This could have serious unintended consequences. This is especially true from a legal and taxation point of view.

Try and conduct your affairs as if you will get audited. It may be due to a contractor pay dispute they or their accountant may report you or when you are trying to sell part or all of your practice. 

Alternatively, there are the new mandatory tax or fair work rules that are automating audits at an unprecedented rate, that may flag an instant and expensive multi-agency robo debt like desk audit(s).

From a legal and tax compliance perspective…

For those who may feel I may be scaremongering, the following cases and tax initiatives go further to explain what the Government law enforcers are looking for. You decide for yourself.

There is a clear convergence and harmonisation of employment, contractors laws and investigations. Our biggest and most powerful law firms in the country, even they are getting it surprisingly wrong. Here is proof the devil is in the detail. 

  1. Make sure you have the correct structures and systems that back up your contracts the correct business model

Medical and allied health industry businesses often fall within one of two types of business models:

  1. An employee or contractor model. In this structure, a practice entity carries on the medical services business and contracts with its patients. The practice entity then separately engages either employees or contractors (or both) to provide the services the practice entity needs to serve its patients.
  2. A service entity model. In this structure, practitioners carry on their own business and contract with patients directly. The practitioners pay a fee to a services entity for the provision of administration and other support services, and often the right to occupy the premises to carry on their business.

The two models have very different PAYG withholding, superannuation and payroll tax consequences. 

I have been working with the barristers and QC’s on a number of recently high profiled cases that affect medical and healthcare practices. The legal opinion is clear. Your entire practice ecosystem needs to be compliant. As the Super Optical payroll tax case has shown, charging consumables and guaranteed minimums with rosters from the wrong entity can attract attention. 

Substance over form matters. A holistic top down approach and not a just a bottom up piecemeal approach makes a difference. A well written service agreement is not good enough. You have to prove you are doing what your service agreement says is what you are doing. Avoid taking short cuts.

It is a delicate ecosystem of legal, tax and commercial your practice needs to navigate through. No problem exists mutually exclusive of another. These issues are subtle and more complex than they first appear. 

When you cannot explain your arrangements without your  accountant or lawyer in the room, you instantly make yourself an easy target.

Healthcare practices with fragmented structures, systems and poor documentation are easier to prosecute.

Practices need to make sure of four things: 

1. Clear business model (is it a true service trust arrangement). 

2. Legal documentation and compliance 

3. Financial accounting and administrative systems 

4. What do your staff and doctors understand their arrangements to be. 

It is common to see practice invoicing does not match banking, accounting and legal documentation. This immediately  increases any income tax, GST, superannuation and payroll tax risk. 

The auditors look for substance over form. To the contrary they may unnecessarily compromise a practice in an audit.

In these examples since the early 1990’s, used by small to large corporate practices, the most popular arrangement is more appropriately described as a tenant doctor ™ arrangement . 

The practice acts as a landlord and the doctor a tenant. They have a service agreement akin to a rental contract for support services e.g. premises, nurse, rent and practice systems.

The practice agrees to charge a doctor GST based on a percentage of the doctors gross billings for the week or month. 

For tenant doctors, many practice accountants are not aware of the need to set up a seperate billing trust or medical fee clearing account arrangements. The main reason this is not usually part of processing your practice’s annual financial statements and tax returns. Furthermore if you do not ask, they will not tell. Then again you may reasonably ask how are you supposed to know if they do not.

 Too many unnecessarily complicated and time consuming daily journal entries and reconciliations.

A common example is when complicated monthly or journal entries to remove tenant doctor income or payments from the practice ledger. 

My key concern is why does a practice have so many complicated monthly journal entries in the practice entity to do the weekly or monthly pay?!

Many practices unwittingly often do these journal entries to reverse out these transactions each month or year to make them look like tenant doctors. This is certainly not a good look. 

This would be analogous to Westfield collecting and banking Woolworths money on their own books or ledger? 

I used to audit shopping centres and trust accounts like real estate, solicitors and accountants use. This is certainly not how it works in the real world. 

To be commercial, there needs to be a clear separation between provider and practice income activities including a separate trust bank account. Recognising it is the practitioners money and not the practices is a good starting point.

Be wary of new service fee calculation software that automatically compounds your problems

Before implementing a new automate spreadsheet in the cloud make sure your accountant approves in writing. No matter how attractive automation may look the old adage rubbish in and rubbish out holds true. 

Finding a more efficient way to process your doctors pays is a good idea. However you need to be careful. Remember Software companies are not your accountants. They do not sign off on your tax returns. Many accountants are not aware of this area. Worse if you are fee sensitive it is overlooked because it is not part of your routine tax return compliance.

For a new client, I recently reviewed a new automated practice service fee calculating software program. It systemically and erroneously recorded all doctor income and payments into one chart of accounts. To compound the  problem their new fully integrated software automated journal entries had made it very complicated. It was next to impossible to reconcile for the time poor practice manager.

Implementing a doctors pay solution requires a little more careful professional legal and accounting thought than a piece of software.  If you want to avoid an end of year bill shock ask your accountant first.

Using one bank account and ledger to track and pay a doctor

This is another common example. Despite a radiology practice arguing they had a tenant doctor arrangement in the Winday payroll tax case they were found to be liable for payroll tax. 

This happens when a service entity incorrectly reports on their financial statements and tax returns how they record doctors medical fees. 

Mistakenly they record all of the fees they collect on behalf of their medical practitioners in the service entity’s  profit and loss statement under the heading “Medical Fee or Patient Fees”. Furthermore they continue to report all of the payments remitted to the medical practitioners as a “Contractor” expense in the same entity ledger and bank account. 

Recent legal cases including the Uraidla Physio contractor case have clearly established it is not enough to have a well-written contract. It is important to show your practice can walk the talk and not be taken out of context. A good example is the use and implementation of the Doctors Pay Calculator to overcome the above systemic problems. Now is a good time to review your agreements, policies, procedures and systems. 

  1. High Profiled Fair Work Under Payment of Wages Investigations 

Unprecedented high profiled under-payment of wages and admissions by Australia’s top law firms and their clients such as the ABC, Woolworths and Bunnings is proving even the big guys and their clients are finding it difficult to get it right. Since 1st July we have seen unprecedented data sharing technology and coincidentally we have seen successful systemic successful lawsuits by the State and Federal Government for the underpayment of wages.

Even the lawyers who are advising them are getting it wrong.  They include some of Australia’s biggest medical, law and accounting firms. 

Underpayment of Wages cases since 2019 

  1. Top-tier law firm clocks up $290k underpayments bill – Australian Financial Review (17th July 2020)  
  2. ABC underpaid staff $12m 
  3. SBS running list of Australian businesses that have underpaid staff in 2019
  4. GP corporate admits it underpaid staff by $15 million
  5. (Healius)Idameneo back-pays workers over $15 million
  6. SBS running list of Australian businesses that have underpaid staff in 2019SBS running list of Australian businesses that have underpaid staff in 2019

     3. The Australian Taxation Office (ATO) 

Commencing 1st July 2021 I have written extensively on the new ATO profit allocation rules that affect doctors and healthcare practices with a personal services business or who have a service trust or entity that income split to family members or entities that pay a lower marginal rate of tax. 

Recent successful employee v contractor court cases and investigations reveal the devil is in the detail. It takes more than just a well written legal agreement. You need to be across all of it and not just parts of your practice arrangements. 

It would be naive to assume that a single well written and expensive practice legal agreement from a reputable law firm will be the silver bullet that saves you. Recent Australian court cases reveal the contrary is true. 

For Part Two of this article practical examples and case law of common mistakes practices make click here.

About me: David Dahm BA (Acc.), CA.,FCPA,CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service

After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice before acting on this information. This information is for general information and discussion only.

How much is my practice worth?

This article has been published in the Medical Republic 9/3/2021 – Find article here

I have been asked this question more times than I have had hot dinners.  This has increased in recent times given GP practice acquisition race is on again and eye watering prices are being paid! !

If you own a General Practice and you have been reading the recent national newspaper headlines, you would have noticed  the amazing prices paid for general practices. You would think you had just hit the jackpot. It may have triggered an inkling of curiosity to know more and ask how much is my practice really worth?

For practice owners, this article may help you contextualise a practical ‘call to action’ and save you significant time and money. 

The first step is to treat your practice like an investment and not a job or a liability. Everyday what you do will determine your final destiny and its final value. 

When I meet a new client, the first thing I say “it is my job is to fire you”. You need to work on and not in your practice. It should be a choice. Practices that rely less on their owner’s for income are worth more due to their intellectual property and have balance sheet value.  Those that rely on their owners have profit and loss (EBIDTA) value. They are worth less because when they go so does the practice.

There is never a simple answer to valuing your practice. It all depends on how you treat it and where you sit on the above two extremes.

There are a lot of myths circling around the nation on this topic. I will attempt to confirm and dispel these myths. In the end you should be able to  judge  what you think your practice is really worth or at least know how to work it out or find out. 

If you do not have time to read this, do not complain if you feel you keep working harder for less reward. This is about setting your priorities right. You can afford to become a better doctor for your patients and the community you serve. You can be fairly rewarded for working smarter and not harder. 

In the late 1990’s, the well-run and bigger flagship practices in your local area commanded high prices. This encouraged many more practices to join the bandwagon. As a result, as more practices entered the market the corporate offers fell off the cliff from an EBITDA of 6 to 8 times to 1 to 2 times. Then in the last 12 months, we have seen prices for general practice skyrocket beyond 10 times at the height of COVID19. 

Many practices are going for a bargain whereas others are going for an eye watering sum. In responding to the COVID19 vaccine roll out, aging practice owners are facing a serious dilemma. Do I renovate the house (practice) to meet the requirements?  With new COVID immunisation laws, is simply doing nothing an option? Should I sell the house at renovators delight prices as the feeling of “it is getting all too hard and I am tired of this #$%#” feeling settles in? 

Am I throwing in good money and time after bad? 

Recent articles such as New GP vaccination items don’t add up and Patients should be free to choose even if the vaccine is not free can spook even the most courageous of practice owners to invest more money and time in these uncertain times. You need to have a long game plan.

Right now many practice owners are expected to dig deep into their retirement funds so they can lead the COVID19 fight. At the same time many are rightfully asking – to what end? 

The real truth is that certain parts of General Practice are enjoying a mini boom. Patients are now more health conscious. It is a new environment. We need to get used to living through a perennial flu season for at least the next couple of years. Some have been able to take advantage of this but many are reluctant to do so.

Practices that can sustainably manage COVID19, technology, competition, staffing demands and new laws are simply worth more!  

During my long career, I have often heard doctors talk down practice ownership to other doctors. It is sold as an unsolvable financial and mental burden.   

For the optimist, with much uncertainty comes many new opportunities. Fortune does favour the bold. 

Practices that can eat ‘change management’ for breakfast and remain sustainable are very attractive to buyers. 

Practice owners who take the time out to think carefully. 

How you and your practice ends up is a choice (after you have got the banks off your back). No one is immune to cognitive dissonance. 

Just remember that after the day you retire, many patients would have moved on and may have even forgotten your name. You are not as indispensable as you think. If you accidentally seriously hurt your patient they want to see your face on the 6 o’clock news. Instantly it becomes irrelevant how many years of dedicated service you have provided them or their family.

Ultimately, your loved ones will either thank you or hate you for it. They will have a long time in retirement to nag you for all those times you were saving your patients lives at the expense of family dinners, holidays and financial security. Owning and running a practice comes with a level of responsibility and cost that often cannot be quantified. It is a worthy challenge.

What is my practice worth? 

It would be easy to give you a simple number or formula to work out how much your practice is worth.

The media would report high profile healthcare transactions with numbers thrown left, right and centre, yet many people simply have little understanding or context of what it ACTUALLY represents.  Private, unlisted transactions are unregulated and media reports are often based on hearsay or ‘street talk’ without any context. Needless to say all of this makes for a great talking point at the family BBQ or local doctors meeting with a charismatic entrepreneur! 

In reality, this is often a difficult question for practice owners to contemplate. Complex structures, poor financial literacy and a lack of comparable public information makes it hard to assess. Just anecdotal variable sales evidence. 

Today’s fast moving environment is far more sophisticated and complex. The new digital footprint age makes it near impossible to recreate a more favourable past or transaction. Whether it is the tax office or a disgruntled buyer, it is much easier for your past to instantly catch up with you for better or worse. There is a lot to be said in engaging honestly with potential buyers. Your professional reputation and legacy is often on the line.

Adding to this complexity is when your own financial adviser cannot simply explain your numbers back to you.

Accordingly, it is important to understand and explore the context of ‘practice value’ before we can ask our advisors the right questions. 

Just another vanity metric?

Growing up, each year my late father would invite a real estate agent to inspect the family home and tell him how much it was worth. Concerned that we were about to sell our beloved family home, I asked him why he kept doing this with no intention of selling? It seemed like an embarrassing waste of time with the real estate agent. 

For financial security reasons, he felt safe knowing what the family home was worth. Born in India, in 1947 at the age of 17, his family lost everything due to the partition of Bengal. With only their suitcase, they had to leave their homes, furniture and my grandfather’s legal practice behind. 

Every time you check out the local online real estate section, subconsciously you may be guilty of the same thing my father used to do with real estate agents. I am certain that many of you can relate to my story. Such needs are no different if you own a practice.

Beyond greed, we all have our genuine personal reasons for seeking to regularly take stock of our financial security. You should not feel guilty or be put off from making inquiries. Like a regular annual health check up, it is a prudent approach. Your practice should be treated like an investment and not an overhead, read my interview Your practice as an investment Medical Journal of Australia.

Practice values vary widely

Prices do vary widely for a variety of reasons. Unlike buying or renting a house, it is not possible to make a meaningful comparison of your practice on the internet.

For a buyer, a value is based on what a bank is prepared to lend or for an investor what they are prepared to invest. Some practices you simply could not give them away. Others are offered a rare and breathtaking amount of money. Overnight, your general practice may be worth double to 10 times more than you think simply by ensuring your practice is presented in a way that follows generally accepted principles (whether that be accounting, governance, clinical etc.) 

COVID19 has added more complexity beyond your solid track record. Your future potential and needs to make strategic street sense. Not everyone is bullish, many are nervous of a local outbreak and its impact.

Healius and Medibank last year forked out hundreds of millions to purchase general practices throughout Australia. They proved there is a healthy appetite for certain types of general practices that are a strategic fit to their operations.  

The headlines have certainly moved a plethora of new and existing practice owners to reconsider how  or when they should exit. This will fuel an unprecedented demand and invigoration of new re/investment and competition into the GP marketplace. It is my hope that this can be met by a future generation of doctors.

The pragmatic world is surrounded by well intended but savvy bankers, lawyers, accountants and advisers. They may have an influence on the final price paid for your practice.

Advisers and bankers are less concerned by how the selling practice owner feels. It remains a practical assessment of risk and numbers for them. Advisers are often transactional, but you have to live with your decision and commitment. They do not want to risk being sued for not asking the tough questions. So what can you do? Be confident and ready to answer. Potential purchasers and future practice owners can be easily put off by the smallest of details e.g. unsigned employment or provider agreements and unclear financial statements.

In the hope a corporate or any potential owner will simply write you a big cheque, think again. It is a process and not just an event. Your practice has to always be ready for sale. 

You never know when you have had enough, when you need to strategically secure a new doctor or when you suddenly fall sick or ill and can no longer work. 

How to value your practice?

Warning if you are not into detail it may be a good idea to refer this to somebody who is. It is really not that complicated so it is worth a further read.

Back to the coffee mug. 

Times have changed, when it comes to putting the price on your general practice. Due to the increasing regulatory and technological sophistication It goes beyond the book value plus goodwill. More sophisticated and accurate tools are being used by buyers, advisers and banks.

The above formula on the cup with exception to the Bushfires and the Coronavirus has been a long held traditional business valuation tool used by business valuers and our legal system.

The future maintainable earnings approach is the most popular method to value any business using a multiple of earnings. This is euphemistically referred to as the EBITDA approach in the industry.  EBITDA stands for future Earnings Before Interest, Depreciation and Amortisation (EBITDA). This number comes from your net profit in your profit and loss statement. It is then adjusted for future years based on average expected earnings usually over a 3 to 5 year period. 

The value is then calculated based on your EBITDA x multiple (no. of years).

By multiplying the EBITDA over a number of specified years for this particular investment ( the practice) a singular value for the practice can be established. The multiple or multiplier is used to express the number of years and investment will pay back in full.  Using a multiple of say 1, this means 1 year, it can be as many years as the buyer expects to generate a full return on its investment. For general practice the number is between 1 to 5. I normally see 3 to 4 for general practice.

(Disclaimer:This is a ‘quick and dirty’ overview. Please seek professional advice before acting on this information. It should provide you with a starting point for discussion).

A crude back of the envelope example if you project an annual investment rate pre-tax return of 30% (3.3 multiple or 3.3 years) to 10% (10 multiple or 10 years) based on your estimated future maintainable profits say EBITDA $100 p.a. then the value of your practice may be $330 to $3,000 on sale (i.e. $100/30% or $100/10% respectively). The lower price is due to more risks being involved in the acquisition. 

This methodology is a commonly used GP practice corporate valuation tool often quoted in the national financial newspapers.

A big warning if a practice has a profit sharing agreement. Joining as an owner if you are subject to that agreement’s profit sharing arrangement. For example if you can only share in the costs of the practice entity and you keep 100% your billings outside this entity, then the value of the entity is only worth as much as your share entitles you to in the profit sharing formula. If the financial statements are not showing a net profit or a constant loss,  then it may be worth very little. You would not be expected to pay much for an ongoing liability. In this case joining the entity may be a permanent liability. It would be hard to  sell, unless a radical change to the profit sharing arrangements was pre-agreed to prior to the purchase. In the early 1990’s this type of associateship expense sharing arrangement was in place. This led to an significant undervaluation of general practice. 

Smart medical corporates, bought many practices on the cheap for this reason. Many owners did not understand what they really had or what it was valued at. They were wooed by the flashy letterheads, dinners and charismatic billion dollar doctor founders. Many did not want to pay for independent legal and accounting advice, not realising they sold their practices on the cheap like pathology rents.  Corporates put these business models and numbers into a more logical and understandable model for others to buy into for a premium.

By the late 1990’s when the corporatisation of Australian General Practice had begun I would see 8 times multiples for flagship practices. Dominated by the major players, these multiples dropped in the early 2010’s to 1 to 3 times. 

Last year this number skyrocketed with some new players on the block. Purchases beyond 10 times your estimated future practice earnings. 

Who you are planning to sell to and timing is everything.

So what is the true market value of my practice?

For some cynics you could be forgiven for thinking all this talk about  EBITDA and multiples is frankly a load of rubbish. You would be right and wrong for one simple reason. 

The true market value of anything is based on a simple principle.

“Business valuers in Australia typically define market value as:

the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length.”

Source: Meaning of Market Value, ATO 17th February 2021

To find out the true value of your practice you have to be a willing seller and require no less than two genuine competing buyers. The final price is what the winning buyer agrees on. 

The EBITDA approach assists in determining what price a person is prepared to pay for certainty. Being aware that this methodology is commonly being used helps you understand how to better price your practice to a willing buyer beyond a gut feeling.

A number of key  factors affect the value of your practice

Understanding these key factors can help you improve the value of your practice. It starts with the right attitude. Treat your practice  like an investment and not a liability. 

Wealthier people are healthier! This includes the financial health of your practice

Look after yourself first, so you can help others.

Flight stewards always say in an airplane emergency you should put your oxygen mask on first or you will not be able to help the person next to you. The same applies when it comes to owning and running your practice and your personal investments. The real message is that self-care is important and often overlooked.

Poverty breeds ill health and ill health breeds poverty. 

Many studies prove the wealthier you are, the healthier you are to help others. GP practice owners are expected to donate their time to service the unviable new MBS COVID19 item numbers. Unless you are financially strong and prepared to donate financial resources, you may not legally be able to meet this expectation. Insolvent trading is a criminal offence in this country under the Corporation Act 2001. It is not a discretionary choice, so think carefully beyond your moral and ethical duties. Can you afford to commit to programs that may not be financially viable? How will this impact the value of your practice or your retirement nest egg? Does it even really matter?

Your practice is not something you can take ‘upstairs’ with you. It should be treated and looked after like an active investment. It is like looking after a child. It can make you or break you depending on how they are nurtured. 

For many practice owners, looking after this ‘active investment’ is meant to make up for not having “employee superannuation” and “long service leave” when you retire. It is your biggest and most significant life investment you have made.

The old school 

My late father was a Do It Yourself (DIY) practice owner. He sold his medical practice for nothing. In fact, he never tried. He passed away in 2006, ten days after he retired. He was old school. Ignoring good advice offered, he left the farm (practice) empty-handed. He had a do nothing or minimalist approach when it came to running his practice. 

He was never a great believer in spending money on lawyers, accountants or advisers. With the best of intentions, he was a DIY doctor. Selling never crossed his mind. There is nothing wrong with that.

Selling down some or all of your practice is a choice. It is this decision that is the primary reason for seeking out how much it is worth. 

Like my father, if you have no intention in selling, then finding out its value may be of little consequence. The only exception is if you are heavy in debt and the bank is asking or you are simply curious what it could be worth.

I have a client whose 10 GP owners had a $12 million turnover. At the time they said  it was worth nothing. To test them I offered $1 for it. After simply explaining what it was worth and why, they immediately rejected my offer. With a better understanding of why they treat their practice like an investment and it has experienced remarkable success. 

Your practice could be worth more than the value of outstanding liabilities, written down plant, equipment book value plus 15% of the turnover as goodwill if you can simply understand and present your financial books correctly and in a logical manner. 

You owe this to yourself and your loved ones to read on.

The two main reasons practices owners sell below their price expectation

  1. The Practice Owner(s) are not financially literate. 

Owners do not understand and regularly monitor their key numbers, the bottom line and how they work or fit into a practice owner investment portfolio. They make the fatal mistake of leaving it to their accountant (some less ‘medically experienced’ financial advisers struggle to simply explain their numbers to their client). The blind unknowingly ends up leading the blind;

  1. Succession planning is an (reluctant) ‘afterthought’. Not a ‘planned-thought’. This is the most common mistake overlooked when setting up a practice. 

Unfortunately for most people, your accountant and lawyers are used only for tax returns and not succession planning purposes. Often, the way a practice is structured can instantly dilute the value of the business. These initial cost savings you may have asked for, usually do more harm than good in the long run. 

It is not unusual to see a practice owned by a tax driven family or a unit trust. This can create significant but avoidable difficulty and cost at the time of sale. Especially when the numbers and business models do not make sense. I have seen many sales lost due to a lack of openness, transparency and ownership transferability.

From day one, practices MUST be built on commercial grounds that embrace what you want, so you can successfully stay open, monitor and eventually be easily saleable whether you are ready or not. 

Your business structure and models should be investment friendly, tax friendly, family friendly, and succession planning and asset protection friendly. This is achievable!

Ensuring you understand (without having to always ask your lawyer or accountant) that you have the right structures, practice agreements, systems and people in place is a useful start. It is not hard. It is a big mistake to bury your head in the sand and then complain later. 

Ultimately, it is your responsibility. You cannot blame anyone else. If you want to, then you should probably resign as an owner for legal reasons. Being an honest fool is not a legal defence, especially when it comes to not acting with a duty of care. Negligence can be a criminal offence.

A good GP holistically educates their patient on their health, similarly your advisers should be there to educate you on your wealth. If you still do not understand your numbers you may have a serious problem/opportunity. New ‘cloud’ technology platforms and services have made understanding your numbers and business much easier to achieve in a manner that is cost-effective and easily accessible. 

Valuing your practice is like valuing a child who should stand on their own feet

A high valuation is driven by a number of key “feet standing factors”.

For practice owners, significant blood, sweat and tears are involved in setting up and running a successful practice. Wanting a child to grow up fast can be an emotionally and financially draining exercise. In the end, the process may either hurt or impress you. Ultimately it is something you want to feel proud of and feel a sense of satisfaction too.

To be of value, your practice must demonstrate that it can continue to make a profit without you. It is the ultimate recognition. It is your way to leave your mark and legacy when you are able to pass it to the next generation in at least a ‘going concern’ position. The price should be fair and should reward you for the fruits of your labour and allow those that succeed you to continue your vision. Some of my single site clients have been operating continuously for over 60 years with the intention and vision of continuing indefinitely.

The right practice focus is key

Ultimately, a medical practice owner’s clinical workload should be a choice by design and should be enjoyed. It should set a good example to encourage aspirational owners to buy into and encourage the next generation of young doctors to pursue a pathway in primary care

Practices where owners earn while they sleep are highly sought after and valued. The GP owners should not be living hand to mouth.

They should not be solely relying on seeing that one additional patient just to meet their overheads.  A Ball and chain approach drowning in red tape is not attractive. 

Practice owners should encourage and mentor other providers to help out, not fight for patients. There is plenty of demand around. Practices with more than one owner and providers are worth more. The banks and investors love the shared security of multiple GP owners who put their own houses and livelihoods on the line should one fall ill or die. A lower flight risk of practitioners and patients increases the value of the practice.

In my experience, it is easy to spot the smart ones. These owners make time to research and work ON their practice and not just IN the practice. One day a week to be precise. They have a strong and committed management team. They see being penny wise but pound foolish is not where the smart money is. They understand, there is no point the patient survives but the practice dies. Everyone loses at that point.

They use their time wisely. They are not busy just chasing high-volume consults and saving patient lives. They know that it is not sustainable in the long run without risking burnout, a Medicare audit or one serious medico legal problem that could wipe them out! 

Smart owners are hungry to see and act on the bigger picture. They are in control and want to shape their own future, with a smart internal and external team. They play the long ‘infinite’ game, leverage their time and strategically invest in doing things the right way the first time.

By working smarter and not harder, they can focus on the practice’s future and not just their own. Ultimately, it is about responsibly handing over the baton for the next generation to take over in a safe, sustainable and financial responsible manner. 

What should I be doing now?

Should I be doing anything now as a practice owner? The answer is ABSOLUTELY!.

Always be ‘ready to sale’ should you ever have to. Selling your practice for a fair value is a long term (3 to 5 year) process. It is not just an event. If your practice is in dying, you will not realise its full value.  Nobody wants to buy tickets to the Titanic. Everyone wants to watch a movie with a happy ending. 

Ask the right questions, then ask for the right answers in writing! 

When it comes to business arrangements and talking to your accountant/lawyer, push your advisers a little harder for some holistic and not just piecemeal advice.

Unfortunately, in my experience, I often hear from advisors “you did not ask me, so I did not tell you or you were on a budget so we did not address that”. This may feel frustrating and overly unhelpful. You thought that was part of their job. This is made even harder as you do not know what you don’t know. Donald Rumsfeld famously spoke of the “known unknowns” and “unknown unknowns”.

Be clear about what you need and want

In my experience, I have seen a desperate practice owner give away their practice to a GP on a family holiday trip. The new GP owner did regret taking on!  

Some need to get rid of their practice to pay off debts, others sell because they want to retire or strategically secure a new doctor. 

At short notice, you should be able to quickly take out and show future doctor owners a solid practice owners agreement along with financial statements that speak for themselves. The documentation should align with your business model and structure. Most owner agreements and structures are fragmented, poorly drafted and inconsistent, so if you are organised, you are already ahead of your competitors. Most purchase offers are time sensitive so you need to be organised

The practice agreement is like preparing your living will. It should set out the buy in process, decision making procedures, profit sharing and exit arrangements. It should address those tricky issues upfront. It is easier to make an agreement when you are friends and it is impossible if you become enemies.

I often tell my clients that going into business with someone is comparable to marriage. Remember after marriage, the second most important decision you make in life is who you go into business with. Both are expensive in a divorce!  These days the process is much easier with templates combined with experienced and qualified advisors. It should pay for itself. 

In my experience, it is impossible to negotiate a good deal on the 11th hour especially when you have to change your structures as a result of horrendous tax and legal consequences. It takes time to coordinate your team and advisers. 

The process will pay for itself even if you are not planning on selling. You will immediately add more value and create a more sustainable and attractive practice.

Key factors that affect the value of your practice

There is a large difference in the price of a general practice. 

If you are still reading this, we are about to enter into some hopefully easy to understand high level key internal and external factors that drive the value of your practice up or down. 

Before jumping into those magical valuation formulas, it is important to understand the context and basic principles that drive the value of your practice up or down. Practice value is quantified by these formulas. 

The higher the risk and higher the return and less value your practice is worth

Often doctors feel ripped off when they are made to pay for goodwill (which is hardly fair) and are more prepared to pay for the tangible assets. The reality is any practice that enjoys a reputation where both their patients and their providers keep returning to their location, then the practice is most likely worth more than the second had equipment being bought in the sale. If you can guarantee patients will be in the waiting room on a Monday morning, this is a real intangible value that is bankable.

A fundamental principle in investing and determining the value of your practice or any investment is risk. If the buyer perceives a higher risk the buyer expects a higher return and will offer a lower price for your practice to compensate for any unforeseen financial loss. The hardest bit is to know what risks do and do not exist. The more open and transparent the seller is the lower is the risk.

Practices that are able to simply explain their future value to a potential buyer can expect a higher value for their practice. Like buying a house off the plan, there is little or no money on offer if you have no plan. 

People are prepared to pay a higher price for certainty

Hoping somebody will buy you is not a strategy. Wishful thinking will most likely leave you bitterly disappointed. It is not really a choice unless you want to leave a liability and not a legacy behind. Practice owner’s will have to walk and chew gum on this issue.

It is your choice to decide on what strategy to use in order to drive up fair value for your practice. From “do nothing expect nothing” approach to “do everything the right way” approach. There is potentially no limit to what your practice could be worth. The recent eye watering Healius and Medibank prices paid for general practices are a case in point.

Practices with financially scaleable intellectual property are hard to find. They are worth a lot more than a traditional practice that does not have a clear vision or strategy, less systemised and engaged with all their stakeholders. Your job is to explain this point of difference clearly to a potential buyer.

The greatest risk to buyers is the retention of doctors and the impact of a change of ownership. The aimis to reduce this uncertainty and secure a higher value for your practice.

Know your potential buyer

Is it a corporate, a doctor, a practice manager or non-medical investor? 

The capacity and appetite to pay more for your practice will depend on the purchaser’s background. Know what they want first. Surprisingly, doctors are more likely to pay a higher price for other reasons such as control/influence.

For example, corporates generally like larger group practices greater than 8 doctors with room to grow. In my experience and according to corporate financial reports, the optimum size is 12 FTE GP’s per site. Value is increased for multi-disciplinary practices with on-site pharmacy and allied health. 

For smaller practices sometimes it is easier and better to look under your nose and simply mentor and sell to your enthusiastic registrar who will rope in their friends. You only need one to set off a chain reaction. Make sure they are a strategic fit and can add value, avoid offering ownership just because they are a high biller. A low billing trusted doctor who teaches and has regular contact with registrars is strategically worth more than a higher biller.

This is why I love teaching practices. You can offer a future and not just a percentage. It is cheaper and the easiest way to recruit and retain quality doctors. Recruitment companies can be useful but come at a cost. Focus solely on recruiting the right culture of owners that share your vision. 

Be clear and upfront from day one, put it in writing and you can attract a higher premium on a partial or full sell down of your practice.

Future profitability matters!  

Your practice value is based on the future expected profit (earnings) adjusted for unexpected costs. Start with your accountant’s annual profit and loss statement. Where it says net profit, it should be positive and ideally it should increase  in accordance with your one pager strategic plan. Certain costs like excessive wages rents paid to related parties like the wife or property trust needs to be adjusted to market value. This may improve your practice value. A low profitability is not always a bad thing.  If it can be seen this may lead to higher profitability such as an IT upgrade such as implementing the Doctors Pay Calculator as a new way to recruit and retain doctors.  

Future risk matters!

Other hidden costs include but are not limited to pending long service leave, liabilities (e.g. debts and reinvestment required) and litigation risks. My personal favourites are the underpayment of staff wages, payroll and tax office “employee v contractor” risk and pathology rent compliance due to out of date or non-existent documentation. No matter how big or small you are they are poorly understood and implemented correctly in Australia. This is a buying opportunity and not a problem.

Buyers will factor in a $10,000 or up to $1m or more upfront discount depending on how serious your problems are, until it is not worth it. So expect any offer to decrease based on any problems you were aware of or did not attend to prior to a sale.

Ultimately, the basic formula usually stays the same but the number can dramatically change depending on certain material factors as suggested above. 

Your valuation numbers are adjusted down or up for a given level of future risk. This is based on an overall risk rating or multiple of earnings for items that cannot be particularised. I call it the gut feeling multiple. I will illustrate this point later.

The bottom line?

In order to secure an accurate value it is important to look at these material factors first as different buyers will use a different multiple to vett any discount offer to mitigate any downside risk.

These are the critical intangibles considering that will enable a practice to secure a premium on sale. Whether it is a sell down or sell out it is a critical provider recruitment and retention strategy

When is the best time to buy or sell?

Finally when is the best time to sell?

If you are a buyer 

You know what you are doing and have a good business model you can implement rapidly. The best buys are in debt and divorce.  As a minimum make sure you are a good strategic fit beyond money. Can you grow the pie? 

If you are a seller 

You are ready to sell and let go of total control. Either the new owners are a great strategic fit or you are about going into full retirement mode. 

A big tip for registrars is to buy from a doctor who trash talks owning any practice.  You will get a bargain if you can make them a good offer. Remember they need you in order to sell to the next generation, you are their link. 

Conclusion

Due to increasing complexity, there are increasing natural barriers to entry. The demand for quality established practices is high. Due to regulatory and technology reasons,  practices are becoming more complicated.  Assessing tangible factors such as the building, plant and equipment with intangible factors such as systems and goodwill is increasingly becoming more difficult. 

Intangible factors play a greater role than they used to in an increasingly digitised GP world. This is why we see such a large disparity in practice values.

Smart buyers need a good set of financial statements, well documented systems that clearly substantiates your business model. Increasingly this is critical when convincing a potential owner, corporate or a bank manager to pay a fair premium for all your hard work.

If you choose to do it properly, you can become a price maker. You can set your own price. If you choose not to, you become a price taker. Expect buyers to low ball a price by picking out holes in your practice.

When it comes to valuing your practice, understand your business model and structure. Simply explain it. Then you will be in a better position to sell your practice for what it is really worth.

Best of luck to all of you.

Please seek professional experienced and qualified advice and do not act on this information alone.

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)

After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

ATO raises the bar on income splitting and related entities

This article has been published in the Medical Republic on 9/3/2021 – Find article here

 

Doctors and practices that use medical practice companies and trusts to bill their patients predominantly for labour services to reduce their tax are likely to be impacted by a new ATO ruling that starts later this year.

Commencing 1st July 2021, the latest Australian Taxation Office (ATO) Allocation of professional firm profits – ATO compliance approach ruling sets a higher and more complex bar for doctors and their medical practices for income splitting to family members or related entities that pay a lower amount of tax.

Doctors and practices that use medical practice companies and trusts to bill their patients predominantly for labour services to reduce their tax are affected by this ruling.

Budget for an increase in your accounting and legal fees. This is certainly a wake-up call. Ultimately, the new robot data matching using STP and E-invoicing by the ATO is making it easier to automatically audit practices.

Being an honest fool is not a legal defence so blaming it on your accountant is off the table, especially if you don’t ask the right questions in writing.


To protect yourself you personally should be able to clearly explain the commercial reason (not just a “tax reason”) for setting up your structures and show the relevant business models and documentation.

If your accountant cannot explain the commercial reason behind your structure, it may be time to change your accountant or at least get a second opinion from an experienced lawyer or accountant who solely specialises in this area.

Unfortunately, many doctors naively trust their accountants to set them up in the right structure without really understanding why or how it works. My first rule of thumb is if you do not understand something, ask more questions or do not do it. 

Ultimately, you will be responsible for any problems, and it may be too late, too hard or too expensive to blame your friendly accountant.


Source: AFR ARO complaints a bit rich

The devil is in the detail. This is not a Do-It-Yourself job. Tidy things up while you can. Do not leave any stone unturned that may lead to more awkward questions being asked by the tax office.

What must practises and doctors do now?:

  1. Review the purpose of your medical practice companies, family trusts and service trusts structures and agreements. Clearly establish their underlying purpose beyond tax savings;
  2. Be prepared to prove your arrangements are not solely tax-driven. Prove they are commercially driving your medical practice or your service entity;
  3. Profit-sharing arrangements – formalise and get them signed before the end of the tax year; and
  4. Make sure your business systems reflect points 1 and 2 above. Pay attention to the details.

I will elaborate later.

On the positive side, you can legally and ethically enter into arrangements

On the contrary over many decades, the ATO has lost many high profile court cases that have allowed for a genuine commercial reason for these various structures to exist. See ATO Service entity arrangements.

Today, the ATO wants to refine and increase their scrutiny of what they consider to be a high-risk arrangement. 

For many practices, the new ruling may mean a simple tweaking of existing arrangements, and for others, something more may be involved.

The good news is that if you do not cut corners and do it properly, some of these arrangements may do more good than harm. The use of service entities e.g. a service trust is still a legitimate way to succession plan and pay the right amount of tax. 

The benefits still outweigh the costs when a service trust is set up and administered correctly. 

Why now?


Due to the pandemic, the looming national and state budget deficit make professionals such as Do-It-Yourself type high earning doctors, easy low hanging fruit targets.

Whether deliberate or not, a set of high-risk factors as detailed in the latest ruling are in play. Specifically, they are targeting non-commercial arrangements and tax structures that are solely there to save on tax.

The new ruling continues to reaffirm a long-held Australian Taxation Office (ATO) concern that professionals like doctors who primarily earn their income from their personal labour are using various tax vehicles to unfairly reduce their tax bills.

This renewed attack is designed to target medical and other healthcare and non-healthcare professionals.

For decades I have publicly and privately been involved nationally in these types of reviews. The ATO and various State Tax Offices are certainly getting better at fine-tuning their audit activities, see ATO complaints a bit rich

This is not an issue to be ignored. It should be addressed immediately.

Dodgy practice arrangements?!

How have some doctors reduced their tax bill?


For some time, the ATO has maintained that any income earned by professionals predominantly due to their own labour should be declared 100% in their own name. The courts have found this is neither fair nor realistic.

Practice Companies and Trusts

It is quite common to see sole practitioners operate through a family trust or company. This is then used to channel income to lower taxpayers, such as a family member. This can range from the entity employing your spouse at a higher than market value rate or distributing profits to a lower taxpayer. This could be a child over 18 attending University. If this is not available, some use a practice company that does not pay out dividends and allow the profits to be taxed at a maximum rate of 30% in the dollar. 

I certainly do not recommend any of these strategies. At times, I hear advisers tell doctors to use a company to avoid payroll tax. Needless to say, a more thorough holistic and less piecemeal approach is needed.

Service Entities e.g. Service Trust or Company

For the reasons given above, if a doctor owns their practice the only real legitimate way to income split is to use a service entity. 

Practitioners have incidentally been able to reduce their tax bill by up to $20,000 to $30,000 p.a. 

Some key questions to ask yourself about your taxation arrangements


As a doctor or practice owner: 

  • Am I paying a family member an excessive amount of remuneration e.g. for bookkeeping or managing your practice? Am I using market rates?  
  • Am I transferring money to another entity or person to simply reduce my tax bill? Do I know why and how? Are they more than just journal entries the accountant does, is it real? 
  • Am I using a practice company, trust or service entity like a service trust or company (aka ending with “Pty Ltd” after my practice name) to divert income to lower tax-paying family members or entities like a company that pays a maximum tax rate of 30%?

Without a sound response to these questions together with this new self-assessment ruling, you may risk facing an expensive audit and a hefty tax bill with penalties. 

Remember, saying “my accountant told me will not be a defence” and being an honest fool is also not a defence.

The next step – ask your advisers the right questions and don’t just look for the right answers

Ask your advisers in writing whether the  Allocation of professional firm profits – ATO compliance approach ruling affects you, how it affects you, and what you should do next. 

Where do doctors, practice’s and some advisers start to go wrong?


It takes more than getting the right legal agreement or arrangements from a high-profiled, glossy brochure law or accounting firm. 

Quite a number are concerningly taxation driven as this is a primary concern for many practitioners. 

Many arrangements do not begin to address important issues the new ruling seeks to address, namely:

  • Commerciality i.e.investment rates of return on their business arrangements;
  • Succession planning;
  • Legitimate income splitting arrangements; and
  • Asset protection. 

This is where many doctors and practices start to go wrong. Matters tend to snowball when a piecemeal and not a holistic approach has been taken. 

On the contrary,  the practice is at risk beyond tax issues. Often, this includes unnecessary medico-legal exposure.

Structures tend to look more like a patchwork of well-intended ideas with little attention paid to the many devils in the detail. 

It is not a matter of if you get caught, but when.

Especially with the ATO new data matching and sharing capabilities and mandatory laws such as Single Touch Payroll and E-Invoicing. Robo-audits are becoming a reality. 

Due to new technology and specialist experienced medical firms, this is no longer the case, 

How to Defend Yourself from a Tax Audit

Firstly, just keep it commercial. This is the predominant test in the new ruling. The primary defence in the Income Tax Act is Part 4a. 

If the predominant reason you entered into the arrangements was commercial, you jump a number of big hurdles. Without this reason, you leave yourselves exposed to an expensive audit. 

If you are employing related parties such as a family member (e.g. a spouse who is a practice manager), it is important to benchmark their salary to a practice managers salary or lose a legitimate tax deduction.

If you are using a service entity, set a commercial service fee to run a viable business. My clients use monthly national practice benchmarks and the Doctors (Service Fee) Pay Calculator to reduce scrutiny. It is a bit late to start addressing these issues if the tax office is knocking on your door. 

It is important to prove and provide an independent, arms-length audit trail for the Tax Office. 

Change your attitude – budget and plan for it.  

Do the right thing the right way. Due to complexity, you have to invest money to get it right. It will provide benefits for a lifetime. It is a relatively cheap, once-off investment that requires minimal maintenance.

This is not a Do-It-Yourself exercise. Seek qualified, experienced medical/healthcare specialist help. Glossy brochures and vanity titles will not save you from a stressful and expensive tax audit. 

This should be on the top of your list.  Ask how many years and what their specific experience with practices is beyond a tax return. 

Get their advice in writing or you will have very little to rely on. Anybody can give free phone advice, but it will not save you if you are hit with an audit.

Start asking the right questions and don’t just seek the right answers.


The ATO is looking for substance over form. 

Starting from the top, these are the key areas to watch out for. These could be questions for your accountant and legal adviser.

Can you prove your arrangements are in place and are working? What business structure, documentation, systems and procedures do you have in place. Can key staff and advisers provide a simple explanation to validate your arrangements?

Types of business structure

Ask why you have the structure(s) in place and what is their primary purpose?

Sole Trader: Sole Trader/ Practice Company/Trust 

A common mistake is a sole trader practitioner owned by a family discretionary trust or a practice company with a pty ltd at the end of its name. The ATO takes a dim view of this. This ruling serves as another reminder.

If you are a sole trader practitioner operating out of a Practice Company or Trust with a corporate beneficiary (aka “Bucket company”), ask why are you not operating as a sole trader? You may save on a lot of unnecessary accounting fees and headaches.

An explanation must go beyond reducing one’s tax. I normally recommend new clients to remove such arrangements.

Service Entity: Landlord Service Trust or Company  and Tenant (sole trader) 


Many practices use a service entity arrangement. Commonly, this entity is a trust but it can be a company.

A big focus is on why your entity exists? What are their roles, i.e. is it more than tax avoidance? Service entities are another key focus of the new ATO Profits Allocation ruling. 

For many medical practices with a service entity, the service entity owns all the site goodwill of the practice, intellectual property, plant and equipment, and employs non-medical staff. It takes on a traditional landlord and tenant relationship with its doctors/providers. As a landlord, the practice charges a service/management fee (like rent for a serviced office). For example, 35% of gross billings to a self-employed doctor to use the practice. 

This is a legitimate way to income split. For more information, see ATO service Entity Arrangements and Doctors Contracts Explainer video

The key issue missed here is what is the purpose of the entity beyond the traditional “asset protection” argument. The ATO new ruling which may come as a surprise clearly states they will not accept this as a primary defence anymore.

In other words, they are questioning the entire legitimacy of your structure. What other value does it bring?

Using the correct type of entity structures and relevant practice agreements builds a strong case for arguing succession planning does exist. 

This should override any concerns from this latest ruling. This is a commonly overlooked opportunity. It is great for your practice regardless of the ruling if you have recruitment and retention problems.

Template agreements and arrangements exist that can make this easier for practices to execute.

Service trusts and family trusts together with a bucket company for succession and estate planning continue to have a legitimate role. The planets all need to line up correctly for this to work. Careful and thoughtful consideration is required.  All arrangements between entities from minuted pre-fixed profit distributions, trustee minutes and bank transfers should be properly documented and signed off for. 

Any taxation benefit should be incidental and not the primary reason for the arrangement. The benefits do continue to outweigh the costs beyond tax. Do not let this ruling weaken but use it to strengthen your current arrangements.

Practice agreements


Another common mistake is non-existent, out of date, or unsigned practice agreements. Well executed agreements provide excellent evidence in the event of an audit. 

Spouse Contract:

Where is your spouse’s employment contract? Do they really do what the contract says they do? What is the commercial market rate for their services? 

If you can produce this information at a moment’s notice this always provides an impressive first-mover advantage. Another one is practice service agreements and ownership agreements (which include profit-sharing arrangements).

Doctors/Provider: Contractor/Service or Employee Agreements:

Do you have up to date and signed service agreements with your providers that name your key business structures?

If you are not able to clearly answer this question, other more awkward questions may pop up, including but not limited to:

Do you really engage contractors and subcontractors or employees? Why is there no consistency in your arrangements? I.e. If all doctors are contractors, why do you employ registrars in your service entity? 

Practice Ownership Agreements (which include profit-sharing arrangements):

Do you have an agreement that pre-agrees how profits are shared? Does it fairly reward risk and return consistently amongst owners? I use a set template formula that is investment and succession planning friendly. This may reduce the ire of the Tax Office concern. 

Profit-Sharing and Income Splitting


Payments to Relatives

Are your payments to your spouse or relatives not considered excessive from your practice company or trust? What do you normally pay a practice manager? Many of these arrangements can be struck down and deem any tax deduction not deductible

As mentioned earlier, if you are employing related parties such as a family member e.g. a spouse who is a practice manager, it is important to benchmark their salary to a practice manager’s salary or lose a legitimate tax deduction.

Profits are artificially increased in the service entity for the sole purpose of reducing tax

Are the service fees charged by your service entity commercial? Why are some service fees higher than others? Why is a guaranteed minimum or hourly rate offered to a doctor?

Some naughty practices artificially increase their service or management fees via the service entity. This can give them an immediate tax benefit. However, it is risky without appropriate justification. 

The current ATO service entity ruling allows GP’s to use a service fee of up to 45% of gross fees they bill to a patient in the service trust. This can be legitimately used to income split. 

The key issue here is some practices are using a higher service fee than the ATO recommends. This can be legitimate.

For example, owners may use a 60% rate instead of the ATO guidelines rate of 40% for metro GP practices and 45% for rural GP practices. See ATO Service Entity Arrangements

On the contrary, some practices use a lower rate of 35% which may cause a solvency problem.

Provided these arrangements are commercial, this income can be legitimately channelled to lower taxpayer entities for commercial purposes such as succession planning.

A case in point as detailed below, I have successfully argued both publicly and privately that practices can charge up to 60% of GP patient billings as a service fee. This may be a surprise to many traditional accountants. 

Good commercial reasons such as the freezing of Medicare rebates and comparable live monthly national benchmarks provide a formidable argument. 



Source: Service Fee Burden BRW article 

I was involved in this 2007 national tax ruling. We did successfully argue when asked by the Federal AMA that a percentage approach be used for medical practices. We had won that argument because we could prove listed companies were using this same approach. We have secured in recent times a private tax ruling for a 60% service fee for a general practice. Anything is possible if you can prove your argument. 

Tip: A commercial service fee is one where the practice will not become insolvent i.e. you can pay your debts as and when they fall due. The bottom line is to charge a commercially realistic management or service fee to owners and non-owners that is commercially consistent with the level of service and risk involved.

 Many practices do not have commercially clear and signed profit-sharing agreements

Between the owners, are there pre-agreed signed profit-sharing agreements? Or is this causally determined at the end of each year to keep one’s tax bills down?

Can you justify why you direct income to a family member, corporate beneficiary (“bucket company”) from your practice or family trust? Should this income really be declared in the doctors or providers name at a higher rate of tax?

These can be difficult questions to answer. However, some careful thought needs to be taken now while you have the time.

Systems and Administration


Other factors that may strike down the legitimacy of any arrangement is when a practice does not walk the talk. It is hard for the Tax Office to accept that your doctors are not independent sole traders when you and your staff refer to them and their stationary makes them look like employees or subcontractors. 

Incorrect website and stationary listing of doctors and providers

The most common example includes having all doctors listed under “Our Doctors” or “Our Staff” when they are supposed to be independent sole traders or tenant doctors co-located on your site?

Another example is using the service entity ABN and letterhead to bill patients and not the individual providers for vaccinations and professional services?

Paid out of the wrong bank accounts

Why are doctors paid out of the same bank account as medical receptionists when you have declared the doctors are independent contractors or tenant doctors?

If you have a service trust, why is the same Xero or MYOB ledger and bank account used to pay doctors and staff? Why are they not separate?

Regular complicated/confusing journal entries

Why does your Xero or MYOB ledger have many automated and confusing journal entries that appear to reverse out or negate the actual arrangements in place, such as doctor payments? 

Why can you not easily reconcile or explain them? Why do their income and banking not reconcile to your practice management system, such as Medical Director, Genie or Best Practice? 

Conclusion

It is not if you get caught, it is when! 

These are some of the many uncomfortable questions you need to be prepared for. When you get one bit wrong, as a former auditor, I used to get a little more excited and start asking more tricky questions. In this new digital environment, with the ATO’s new STP and E-invoicing looming, it is getting harder to unsay or reinvent the past. Data collection and cross-agency sharing is creating a ticking time bomb for practices who keep this on the back burner. 

BBQ (unwritten and unqualified) advice from friends, family or fools or what another practice is doing will not save you from the awkward questions.

 

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)


After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 


You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

Cashing in on COVID19

This article is referenced in the Medical Republic’s article Making the COVID vaccination pay 23/2/2021

 

Make it safe: a sustainable and socially responsible solution.

A five point checklist for patients and providers on why you can trust your local GP. 

Our Prime Minister has had a hilarious start with an Aussie bird when announcing Australia’s vaccination arms race!

 

Source: ABC News, 21st February 2021

David Dahm our CEO and Founder was recently interviewed for this article in the Medical Republic called Making COVID Vaccination Pay.

 

While Australia begins its ambitious mass COVID-19 program, a recent ANU study confirms one in five Australians are unwilling to receive a jab. The Federal Government wants all eligible GP’s to not just contact their regular patients who may want the vaccination.

We need to start a “Go and see your regular GP” COVID campaign. If a patient does not have one encourage them to nominate a regular GP practice. Offering a patient continuity of care should make them feel safer. 

A few weeks ago I wrote an article called New GP vaccination items don’t add up on 23rd January 2021.


I have spent much of my time working on a viable, safe model. I even offered $500 nationally to my network for anyone who could make the Government offer work without cutting corners. Patient safety is paramount.

I have had no takers to date. To reduce practice losses, the most promising model is hiring the local football oval, inviting local GP’s to send their patients to these GP cooperative mass COVAX clinics. Throw in a sausage sizzle and I think we are cooking with gas. Great work, Dr Mukesh Haikerwal and friends.

1. A personal context


I am not an anti-vaxxer. I am not a doctor. I am also not naive to appreciate when something new comes up in medicine, never be the first unless you have to. Where possible without my consent, I do not take kindly to needles or anything else placed in my body. I believe in freedom of choice, which also includes the freedom to move. 

While vaccination is not mandatory, at some point you may feel this is no longer the case for you. Your employer may require it, or a government or country may not allow you to travel without an immunisation certificate. The Government has form restricting government handouts with it’s no jab no pay program in 2015.

I am a patient and provider advocate. I have a family member overseas in the UK affected by the virus. I am feeling forced to take a vaccine I am not sure of. I share similar concerns about the vaccine and adverse reactions like many people around the world. I feel I must talk to a GP who has completed vaccine training on the drug I am about to receive.

How can I be sure the new COVID vaccination is safe for me and the people who I care for?

Australia is about to roll out the AstraZeneca vaccine

The last thing we need is another preventable medical or healthcare error. The third biggest killer of human life. 

We know there are no globally commonly agreed on healthcare standards. This can only breed further confusion and fear in people’s minds. Let’s face it we are living in a state of confusion in a sea of conflicting expert opinions.

Today, you have no choice but to actively engage on this issue.

To jab or not to jab, that is the question! 

It will not go away until you do your bit, or should you?

Can you really trust healthcare workers? 

If they are open and transparent, tick all the boxes and remain viable, then the answer is yes. Does it have to be a doctor? The Government advice is no. If you are not a patient that may have complications, the local pharmacist should be fine. 

My problem is, how am I meant to know what I don’t know when it comes to this new vaccine? Will an approved random pharmacist or mass immunisation clinic have a better idea? To be safe, a better alternative is to talk to your regular GP first. 

Things can easily go wrong due to rapid rollout. We are all still learning on the go. 

Be aware. The Government standards of care are higher for your local GP than your local pharmacists.

What can you do now?

2. For patients

If you are at risk such as the elderly, now would be a good time to update your will and financial affairs. Here are some things you can do.


  • Wait to see your leaders roll up their sleeves

The ultimate pub test and the first step is when the Prime Minister and all high profiled Premiers and Ministers and their health officials roll up their sleeves for the national media. 

  • Book an appointment with your regular doctor or get one now.

If you have any hint of concern, the best advice is to book a long appointment with your doctor and make sure you receive a thorough check-up. If they cannot provide the vaccination, then by all means consider your next best available option such as your local pharmacist under close supervision.

Experiencing permanent lung damage is not a lot of fun! It only takes one moment if you experience an adverse drug reaction. While many may not be life-threatening, it is interesting to note Pfizer vaccine has a 70%+ systemic reaction rate however it appears to be more effective. Give this article to your doctor to check the latest.

If you do not have one, now is the time to find and settle on a regular GP and practice. Continuity is king. Most airline crashes occur because of multiple problems. Rarely is it due to a single problem. Visiting multiple practices is asking for trouble. Fragmented patient histories mean it may be inevitable something will be missed. 

Do not worry if your regular practice/GP will not participate in the national mass vaccine rollout, many are likely to initially miss out. You should use them to centralise all your healthcare information, as this is not possible with your local hospital or pharmacist.

Make sure you know when you are eligible. Use this checker. Personally prepare properly before the jab. Then book a return visit to ensure all documentation and any other matters are covered.

  • Get in early. Plan for multiple visits to your GP over several months and years

I am planning a pre-immunisation visit as I need to update my records, two immunisation shots and a post review. Throughout the year, I expect to be called back for additional booster visits. This will now become a regular part of my life. This could take up to 6 years until there are no more cases.

  • 5 minute immunisation clinics are they safe?

Despite being in good health, I do not feel safe to just visit a traditional pharmacy-led immunisation clinic. I would like to be safely monitored for this new drug. This is not a traditional vaccine clinic. Doctors are dealing with a new virus and vaccine. There may be many unknowns. Daily there are many shifting goalposts. The key is to carefully monitor your care with your regular GP, especially if you feel you may be at risk. 

  • Low patient COVID-19 Medicare vaccination rebates may mean lower than expected quality of care

The Government has low balled the patient rebate. Do not blame the clinic if you feel you are being rushed. It may feel like a hit-run job. The Government is pushing for high throughput clinics. They are not encouraging or discouraging a pre-consult.

I feel safer if I am visiting healthcare workers who are familiar with me and my family history.

Do not take unnecessary chances. Ensure you have no doubts about how your body may react to a vaccine. Book a full check-up before receiving the vaccine. Allow the practice to fully document and or update your clinical history. Take the time to ask good questions specific to your health needs. Get it in writing if you have to. Do not rely on well-intended generic public health messages. Seek specific advice. Tailor your first session with your GP for the long haul and plan accordingly. Remember, it could be up to 6 years. Play the long game. Use this opportunity for a full check-up if you have not had one recently.

Avoid the queues, avoid the rush, do the preparation work now. It is a quieter time in general practice. You do not want to rush your doctor or practice staff.

3. For practices 


  • Plan and implement a COVID pre and post clinic now

Our Kicking COVID-19 101 Practice Survival Guide may be of assistance.

Map workflows from advertising, website notices, registering patients, consents, taking down patient history, telemedicine and face to face consults, documentation and external government reporting and timely follow up all year round and providing ongoing patient information and monitoring adverse events. 

Make sure you update any employment, service or contractor agreements and administration systems. 

  • Check your pricing and practice viability against safety requirements

Mass immunisation clinics practices are being forced to bulk bill i.e. make it for free to patients. 

Many doctors are happy to do their ethical duty and be in a position due to nearing retirement to provide their services for free. For others who own or work at the practice they may have personal family commitments like a home loan, they may not be in a position to be as generous. Providing quality means making sure they are running a viable, safe service. 

Doctors may need to be charging a higher 50% service or management fee of gross billings or take a pay cut. I understand the Government is reviewing the current Medicare rebates on offer. This will be required to cover nearly double additional administration, nursing and documentation overheads compared to a traditional vaccination clinic. Ideally, nurses or allied health should bear the brunt of this workload under the keen supervision of a doctor for more complex cases.

  • Consider optimal arrangements

Run clinics dedicated so it will not impact current services. After-hour clinics look a little more attractive to run. Offer concerned patients before and after their immunisations a longer consultation on other healthcare matters (preferably not on the same day, although this is allowed). These consults can be privately billed to address more complicated patients.

    4 . Encourage patients to book in now if they feel they are at risk

The TGA will be providing promotional COVID19 brochures. Remember there are some rules to observe. 
 
Clinics offering COVID-19 vaccines face hefty fines for any legal breaches” and “Individuals can be given on-the-spot fines fines of up to $25,520 for non-compliant advertising, rising to $12,600 for organisations”.
For approved advertising and social media templates for your practice click here
 
What is not allowed
“A COVID-19 vaccine is the best way to protect you and your family from falling seriously ill!”
“You can now get your COVID-19 vaccination at the Downtown Medical Centre. Available Monday to Friday from 9am-9pm. Just walk in and enjoy a free cappuccino while you wait.”
Video of patient receiving a vaccine and saying: ‘Wow that didn’t hurt at all!’
What is allowed
“You can now get vaccinated against COVID-19 at the Downtown Medical Centre. Available Monday to Friday from 9am – 9pm. Call 9999 9999 for an appointment.”

Source: Dos and Don’ts of Promoting the COVID19 Jab, 23.2.2021

It does not matter if you will be running a mass immunisation clinic. Test your workflows and when you are confident begin to recall and set up reminders to your regular patients and attract new patients on what services you can offer in relation to their general and COVID vaccination care.

Where possible automate the patient registration service using mobile and website forms and SMS text where clinically relevant. Ensure the waiting room, on-hold messages and advertising clearly explain the benefits to patients who do not have a regular doctor why they should enrol with your practice. The main point being the continuity of care should anything go wrong. Many patients do not appreciate how important this is. See the section below on ideas on how to encourage patient engagement called “Why you can trust your regular GP”.

This may be the only viable option for general practice to offer a mass immunisation service. Do not expect every clinic to be in a position to administer the vaccine. Many will not participate or miss out or have some alternative arrangement at the local footy park. Check with your practice what their plans are.

If you do not have time to convince patients on what they need to think about, simply share this article with them to nudge them your way.

    5. Ongoing Monitoring

Continue to monitor patients and your new systems to ensure they are working.

Why can you trust your regular GP?


The global context

The deadliest strain countdown is on. We started with Wuhan, then the UK, South Africa and now Brazil! Monthly new strains are being added and even named after your local suburb

This unprecedented global biological invasion has landed in everyone’s backyard. It’s a real BBQ stopper. When it comes to health, it certainly has everyone’s attention.

Moving forward, doing nothing does not seem to be an option. 

Whether you are planning a flight interstate because your job relies on it or you are feeling at risk, you may feel forced to vaccinate. Vaccination will be about your freedom to move. Do not think the Government will make it any easier. This is no longer about you it is about the greater good. This is not a bad thing.

Ideally, every government would love to see 100% of their population vaccinated in the next 9 to 12 months. This would certainly be an achievement.

The Government’s bleak alternative is to face managing nationwide lockdowns, blowouts in budget deficits while they nurse their zombie economy back to health. This could take decades. Destroying business and consumer confidence will lead to higher unemployment and this will magnify post-pandemic preventable illness such as depression, regular cancer and heart screening clinics and non-urgent quality of life care. 

The thought is overwhelming, to be living in constant fear. We cannot be on serial lockdown ready mode, face masking, hand washing, elbow greeting for the rest of our lives. 

Regardless of how careful you are, the real enemy of the State is that one person who decides not to do the right thing. They instantly spoil it for the rest.  

What is hurting all of us is you playing Russian roulette with a mutating highly infectious virus. We are living in an unhealthy state of paranoia.

The good news is it appears the vaccines are making a positive dent. Israel is leading the way, but it may be harder to replicate in larger populations, although all countries with an active immunisation program are showing a notable decrease compared to the peak of the pandemic.

We can only thank the generosity of countries like India for offering free vaccines to third world countries. 

Understandably a new post-war arms race has begun. This time it is for your own arm!  Every Government around the world is rolling out a mass grab and jab program in your local neighbourhood. Many Prime Ministers and Presidents have said this is the biggest logistical effort since World War II. No country and no person are immune to this pandemic.

Nobody really knows the long-term effects of these vaccinations other than some side effects. How effective is vaccination? The information continues to improve each day. 

The only set back appears to be more announcements of a new and more deadly strain by country or suburb of origin every few months. In June last year, I had lost count at the 84th strain.

This is a long-term game. It may take up to 6 years to eliminate. Be prepared for annual or regular flu-like shots called interim booster shots to attack new strains.

A national context

Can we really trust our Prime Minister and their Medical Advisers? 

Your local politician up to the Prime Minister has next to no idea what is your exact health status. They have no idea how the vaccination is going to affect you. Will you lose time off work, suddenly become permanently ill? There are many things to discuss with your GP to know if you are at risk or not.

Be on guard with any general advice being provided by them and the health authorities. At times they may conflict with basic issues like the wearing of masks to more complex issues such as vaccine suitability.

Seek out specific advice relevant to your needs.

As mentioned earlier, the last thing we need is another preventable medical or healthcare error. The third biggest killer of human life. 

We know there are no globally commonly agreed on healthcare standards. This can only breed further confusion and fear in people’s minds. We are living in a state of confusion in a sea of conflicting expert opinions.

Recently in Australia, the damning Federal Senate Inquiry into the Therapeutic Goods Act (TGA) poor handling of the dodgy transvaginal mesh implants should be a national scandal. It serves as a clear warning to all. 


Despite the makers setting long-running $8billion dollar lawsuits, our under-resourced TGA remained impotent when it came to protecting the public. 

They had left this responsibility to suppliers. They lacked independent post-market testing and effective compliance. 

Today the same agency is in charge of the vetting of the vaccination and personal protective equipment. The last thing we want to hear is another Government scandal and cover-up about a dodgy healthcare company. Unsurprisingly, the Government has gone to extreme lengths to assure the public you will be safe.

Government credibility starting from the PM downplays a crucial role in matters of public health.

Do not be surprised you have signed off on a skydiving waiver of all care, but no responsibility when you take the plunge. 

If a problem arises, many poorly resourced patients may have limited recourse or energy to fight a global multi-national billion-dollar company. Hopefully, the Government has learned from its past, nobody wins from a systemic failure. 

Unlike other countries, Australia has not led with the mass immunisation of its community. We have had the luxury to learn from overseas. We should have some confidence in what we know from the countries that have gone before us. 

While on a good wicket the Government is keen for the fastest (“less than perfect”) roll out in the world starting next week to conclude by October 2021.

It remains to be seen if these numbers are sufficient for another outbreak/lockdown to occur, especially as Australia is rolling out the less effective Astrazeneca vaccination. 

Avoid rhetoric and herd mentality, remain vigilant. Stick to the facts. It can feel like a game of roulette, Anything can change at a moment’s notice. Your local GP can put the odds in your favour.

No amount of money will replace the harmful effects of COVID-19. Regardless of whether you are vaccinated or not, you only have one life, so look after it. 

About me: David Dahm

After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor, I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

The Medical Republic webinar: Practices Pass Up JobKeeper by Mistake; Bullied on Rental Income

As many as 70% of GP practices may have so far passed up government support of anywhere between $30,000 and over $100,000 because practice owners and practice accountants are failing to comprehend how their practice structures actually qualify them for the new JobKeeper scheme. 

At the same time, major pathology labs are continuing to behave poorly by demanding rental relief of many practices of up to 50%, aligning their threats with government announcements, and implying their demands are legal, when they aren’t. 
Both trends combined with the existing issues around COVID-19 income drops – a result of the introduction of telehealth without any preparation, and government-induced patient reluctance to attend surgeries – are putting unnecessary and unprecedented pressure on the country’s GPs. 
Thank you The Medical Republic for seeking out our thoughts what is affecting the viability of your local general practice where it may harm community care. 
For more information click here.

5 tips to work productively remotely

In the current climate, many businesses are needing to make changes to accommodate staff working remotely. If you are able to work from home the ensuing changes to your work habits can be challenging to negotiate, however there are things you can do to ensure that you maintain productivity and motivation while you’re not in the office environment.

Here are five tips to help you effectively set up an office and work from home for what is looking like an extended period of time.

Create a clear working space

While it’s tempting to use your couch or bed as your ‘office’, set up your workstation at a table instead. Not only does this help you stay productive and focused on working rather than chilling, it also establishes clearer boundaries as to where work starts and ends. This can also signal to any family members also home that this space is where you go to work.

Whether you have the luxury of a spare room or just a small nook, ensure the space is clutter-free and well lit. Everything you need should be kept in this area so you don’t have to go searching for it.

Consider the ergonomics of your space

Just as working from your couch or bed isn’t great for productivity, it’s bad for your posture. This can lead to back pain, headaches and neck tension. You also want your wrists and hands to be supported.

Think about what your office space looks like and try to recreate this as much as possible. Use a pile of books or magazines to ensure that the top your laptop or monitor is at (or just below) your eye level. You can add a pillow as a backrest to your chair and a rolled up towel for lumbar support.

Create to-do lists and manage expectations

Studies have found remote workers tend to be more productive yet feel greater stress than those working from a traditional office.i, ii It can be tempting to up your output to prove to your manager or colleagues that you’re working hard while at home.

If you have a manager, check what the expectations are for the day or week, and be open about your ability to achieve these. As your manager can’t see if you’re struggling, it’s important to communicate. Team check-ins or group chats can help to stay across how everyone is progressing. If you manage a team, set up channels such as these to support your team.

To-do lists (whether through Trello, a similar online system or simply written on a notebook) can help you stay on track and focused.

Keep to set working hours as much as possible

Working from home tends to be more flexible. Without a commute, you can start work earlier in the morning and wrap up sooner. Depending on your role and whether you work in a team, you may need to keep the same hours as your co-workers.

If you set your own hours, avoid the trap of working all hours of the day. In the State of Remote Work 2020 Report, 18% of respondents said they felt unable to ‘unplug’.iii Having a desk away from your relaxation spaces can better delineate your ‘office’ and ‘home’, while your to-do list can help you allocate tasks to the next day when you need to switch off.

Look after yourself and your mental health

While remote work can improve workers’ mental health in certain situations, feelings of isolation are also common, especially if you’re unused to working alone. Staying connected to your colleagues, friends and family is important.

Make sure you take time away from your screen and give yourself lunch and tea breaks. Weather permitting, sit outside for your break, or call a friend or family member. As you’re less likely to get incidental exercise, go for a walk or run after you clock off or before you start, and stretch throughout the day (set a timer on your phone to keep to this) to relieve any tension.

Moving from a work environment to working from home is one significant change many are needing to make, as we work together in minimising the impact of the Coronavirus. Be gentle with yourself as you make the necessary adjustments to your routine, social life and work habits.

https://academic.oup.com/qje/article-abstract/130/1/165/2337855

ii https://theconversation.com/its-not-just-the-isolation-working-from-home-has-surprising-downsides-107140

iii https://lp.buffer.com/state-of-remote-work-2020

The Medical Republic webinar: Turning the tide of the F2F patient exodus

Patients are “voting with their feet” by avoiding waiting rooms during COVID-19, but GPs don’t have to wait passively for patient confidence to gradually return, says business adviser David Dahm. 

Instead, GPs can take back control of the situation and change the way they operate so  patients feel safer making face-to-face appointments again, Mr Dahm told attendees at a live webinar hosted by The Medical Republic late last month.

“GPs can’t just simply wait in the consulting room and think they’re going to always have the place fully booked. Our business is not just going to come to us just because we’ve been here for a long time. We now have to go and chase that business,” he said.

The GP clinics that were adapting quickly were likely to be the financial winners during COVID-19, he said.

In his presentation, Mr Dahm used Brisbane City Doctors as a case study of a clinic that was rolling out several low-cost interventions to reassure patients the practice was a safe environment.

For starters, the clinic website has a pop-up box telling patients with symptoms of runny nose, sore throat, cough, fever, shortness of breath or diarrhoea that they: “MUST BOOK AN ONLINE TELEHEALTH APPOINTMENT”.

When a patient arrived at the clinic, they would see receptionists in masks, hand sanitiser on the counter and clear signage requesting patients wash their hands on arrival and before approaching reception.

The clinic had cling-wrap over the eftpos machine, presumably so the cover could be changed regularly to reduce the spread of infection.

Like many clinics, there was copious signage telling patients to ‘STOP’, go home and call the doctor if they had travelled overseas recently, had contact with a coronavirus case or had cold or flu symptoms.

“The fact that they are using really strong icons there – the ‘STOP’ signs – that is really, really effective,” said Jillian Bowen, a digital marketing strategist and educator who was also a panellist for the webinar.

“People tend to scan so anytime you can use some sort of a prominent, highly identifiable icon, that’s a great place to start.”

Another innovation was the use of restaurant buzzers so that patients didn’t have to linger in the waiting room.

“I don’t think everyone needs to rush out by a restaurant buzzer system,” Ms Bowen said.

“I think you can achieve pretty much the same thing with mobile phones and a quick SMS or something like that, but I love the way they’re thinking. The level of reassurance is fantastic.”

Another clinic used as a case study in the webinar was Maxim Street Family Medical Practice in West Ryde in NSW.

This clinic’s reception area had Perspex shields to protect receptionists and the patients from infection and the car pack had been converted into a drive-through clinic, with social distancing enforced.

Another clinic, NSW’s Dubbo Family Practice, had its waiting room chairs spaced 1.5m apart and a rope cordoning off the reception area.

To watch the full webinar recording on demand click here.

How to Globally Terminate COVID-19 and Preventable Healthcare Errors We are excited to globally launch our…..

How to Globally Terminate COVID-19 and Preventable Healthcare Errors (click here)

We look forward to your support by joining us on Facebook

To learn more why we need a not for profit International Healthcare Standards and Ethics Board (IHSEB) to avoid mixing politics, business with health visit our website ihseb.org.au

Do you really want to show your support and lead a global change? Why not join our community, become a patron and share the solution and be part of the solution with many like-minded people like you. 

In the meantime…

Everyone, please keep visiting your GP and stay safe!

#COVID19Safelyinnovateordie

AMA (WA) webinar: Money, medicine and protecting yourself

We are proud to be invited by the AMA (WA) to present to young doctors and Practice Owners. 

The Australian Medical Association (WA) is pleased to host a webinar that looks at money matters specific to doctors in training. While junior doctors focus on building their clinical skills and research repertoire, and walking the tightrope that is work-life balance, financial management and planning often takes a backseat. Yet all you need is some professional guidance and direction to get your finances on the right track.

Presented by Mr Dahm and Mr Tsoulakis

Money, medicine and protecting yourself for the article and webinar click here.

The future of your medical practice for the article and webinar click here.

National JobKeeper Webinar

Proudly hosted by The Medical Republic about JobKeeper

Medical and Healthcare Practices – your JobKeeper questions answered! For more information click here.

On Thursday the 14th of May, 7:30 pm AEST, we will be hosted by the Medical Republic to speak about how your Practice might qualify for JobKeeper and recent important changes to how the ATO views typical practice structures in the context of JobKeeper, and the basics on qualification for the payments. GP Practices and doctors could be missing out on more than $100,000 in government support through JobKeeper payments. You could be eligible even if you think you are not. 

Let us know in advance and register for our Live Webinar here. Get in quick, already 60 seats taken.

Register for the free General Practice 101 Survival Guide and Checklist and Playbook Guide  

as featured in the Medical Republic article 9 APRIL 2020 Six vital steps to take if your practice is in COVID-19 distress.

The Medical Republic webinar: Practice success is all about the attitude

The COVID-19 pandemic has placed practice business models under a magnifying glass, and many have been found wanting.

Fewer consults, increases in nurse and reception triage, medical stock wastage, lack of PPE, and issues with transitioning to telehealth have caused serious problems for many practices. Some may not recover.


The pressure to adapt in such a short time has resulted in increasingly fractured relationships between practice staff.


Practice adviser David Dahm argues the practices that will flourish in a post COVID-19 world are the ones with strong internal relationships and focused leadership – the ones that are willing to adapt to survive.

The Medical Republic publisher Jeremy Knibbs writes: “Mr Dahm predicts something like 5-10% of smaller GP practices will likely disappear as a result of COVID-19, but many of those that do survive will need to take stock and reassess their operating models to take into account of an ecosystem, especially around technology created competition, that will have changed forever post COVID-19”.


Join Mr Dahm for a live webinar addressing these issues. He will equip you with the skills you need to successfully lead your team into a healthy post pandemic era, and answer your questions live.
Topics covered in this webinar:

  • How to create a post-JobKeeper plan
  • How to build trust in your team and delegate tasks
  • Ways you can restructure your practice and try new business models
  • Techniques for communicating effectively with patients and staff
  • How to revise patient expectations and workflows
  • How to transition to digital and automated systems
  • Webinar through Zoom

Presentation and live Q&A with business adviser David Dahm.

For the article and webinar click here.

The Economic Stimulus Package: Instant asset write-off threshold increase explained

A key part of the government’s economic response to the coronavirus is to support business investment and cashflow by increasing the instant asset write off threshold and eligibility rules.

So what is the instant asset write-off (IAW) and how can it help your business?

Claiming an immediate deduction

Put simply, the IAW provisions allow your business to claim an immediate tax deduction for the full cost of a business asset you buy. Normal depreciation requires you to deduct the cost against your business profits over several tax years.

Under the new rules, you can claim a tax deduction in the same financial year you purchase new or second-hand plant and equipment costing under $150,000.

The IAW is not a cash refund. You don’t get the amount you spend back from the ATO, but instead get the advantage of bringing forward a tax deduction you would normally receive over several tax years.

A simple example is a plumber who buys a new $16,000 trailer for his company. Using the IAW he can claim an immediate tax deduction of $16,000, which in turn reduces his business profit so he pays less tax.

Rules for the IAW

To claim the IAW, the total cost of the asset must be under the relevant threshold. This includes the cost of having the asset installed and ready for use.

Each asset must be under the threshold, but there’s no limit to the total amount your business can claim.

If your business is registered for GST, the IAW threshold excludes GST. Otherwise, the threshold includes GST.

From 12 March 2020, businesses with an aggregate turnover of up to $500 million are eligible for the IAW, up from $50 million previously.

Eligible assets for the IAW

What you can purchase ranges from furniture through to computers and IT equipment, that may be required to enable staff to work remotely.

Industry specific kit such as new tools for tradies, or POS devices and security systems for a retail store also meet the rules.

Although the IAW is generous, assets such as horticultural plants and in house software are ineligible.

Watch out for the traps

To claim the deduction, your new asset must be fully installed and ready for use before the end of the financial year in which you lodge your claim.

If you are a sole trader, you also need to apportion any private use. For example, if you purchase a new car and use it for business purposes 70 per cent of the time, you can only claim 70 per cent of the cost.

You are not permitted to reduce the asset’s price with a trade-in or personal use apportionment to get under the current $150,000 threshold. For example, if your new equipment costs $210,000 and business use is 70 per cent (leaving a claimable amount of $147,000), you can’t claim the IAW as the original cost is still over the threshold.

If your business is structured as a partnership, it’s important to remember the partnership owns the asset – not the individual partners – so there’s no double-dipping. If a partner buys the asset in their own name and doesn’t qualify as a small business taxpayer personally, they can’t claim the write-off.

Using simple depreciation

If your business buys an asset valued over the IAW threshold, you can’t claim the immediate deduction. You can, however, allocate it to your general small business pool and use the simplified depreciation rules.

The general depreciation rules apply if you are ineligible or choose not to use the simplified rules, or if the ATO classes your business as medium-sized.

Using a general small business pool allows you to combine the business portion of higher cost assets and claim a 15 per cent deduction in the financial year you start using them, then 30 per cent each year after that.

Accelerated depreciation initiative

As part of the government’s coronavirus response, medium businesses with a turnover of less than $500 million can use accelerated depreciation rules to deduct 50 per cent of the cost of an eligible asset on installation. Normal depreciation rules apply to the balance of the asset’s cost.

In these unprecedented times, we are to assist you. Please don’t hesitate to give us a call if you have any questions about the instant asset write off or any aspect of the broader stimulus package.

New tax shortcut for employees working from home

With many people now working from home because of COVID-19, some of the expenses your employer normally covers – such as electricity, heating and cooling – are coming out of your pocket instead.

Some employers provide a daily allowance to help with these additional costs, but if not it’s important to claim your extra expenses at tax time.

To simplify things, the ATO has announced shortcut rules if you find yourself working from your kitchen table or sofa for the first time.

New shortcut rules

Under these temporary measures, if you are working from home due to COVID-19 you can claim a simplified tax deduction of 80 cents per work hour for your running expenses.

Your running expenses include things like lighting; heating and cooling; cleaning; and office supplies like printer paper and stationery. The shortcut rate also covers the cost of your internet, phone and computer equipment.

The decline in value (or depreciation) of the furniture and fittings you use in your home office is covered too.

Items such as tea, coffee and toilet paper, can’t be claimed. Neither can expenses such as rent, mortgage interest, property insurance, rates and land tax.

Substantiating your claim

Before you get too excited, you are only entitled to a deduction for expenses related to earning income. You must have actually spent the money and not been reimbursed.

Fortunately, the shortcut method only requires you to keep a record of the number of hours you worked from home as evidence of your claim. This can be in the form of a time sheet, or an Outlook calendar or diary entry.

If you are audited by the ATO, it’s likely you’ll also be asked for supporting evidence from your employer.

The shortcut arrangements are in place for running expenses incurred from 1 March to 30 June 2020. The ATO intends to review the arrangement for the next financial year as the COVID-19 situation progresses.

Eligibility for the shortcut rules

The simplified rules are only available to employees working from home. If you are a sole trader or run a small business from home, you must use the normal business deduction rules. The shortcut rules allow multiple people living in the same house to claim the new 80 cents rate, so both members of a couple can claim a deduction at tax time. You’re not required to have a dedicated work area, which is a requirement under the normal rules.

If you normally work from home a few days a week, you need to keep two sets of records – one covering the period from 1 July 2019 to 29 February 2020 and a second one covering the period from 1 March to 30 June 2020 if you decide to use the shortcut method.

Current rules for working from home

Although the simplicity of the shortcut method is attractive for claiming your running costs, you can choose to use the pre-existing rules if you prefer.

Currently there are two ways to calculate your running expenses: claiming a fixed rate of 52 cents per work hour, or calculating your actual expenses.

Under the fixed rate method, you claim 52 cents an hour for your running expenses. You then work out separately your costs for phone and internet usage, computer consumables and stationery, and the depreciation on your computer. To claim, you need to keep records of actual hours worked, or a four week diary to show your usual working pattern.

Dedicated home offices

If you have a dedicated work area at home, you can choose to calculate your actual running expenses. These costs (plus depreciation on your equipment, furniture and furnishings over $300) need to be apportioned into personal and work related amounts.

For your phone and internet expenses, you can claim up to $50 with limited documentation, or calculate your actual expenses and apportion them.

Before opting for the new shortcut, it’s worth having a chat, as the best method depends on your individual situation. Although there is less administration with the shortcut, it may not provide you with the biggest tax deduction.

Call us to discuss how working from home will affect your tax preparations this financial year.

Australian Accounting Awards 2020 National Finalist Deanna Niarhos

Deanna Niarhos from Health and Life named national finalist in the Australian Accounting Awards for Rising Star of the Year.  


Deanna Niarhos, accountant at Health and Life was named as a national finalist in the Rising Star category in the recent 2020 Australian Accounting Awards.

We congratulate her for this prestigious recognition for her work at Health and Life and in particular her work in leading and producing the Kicking COVID-19 Playbook 101 Survival Guide for General, Medical and Healthcare practices.

Deanna commented that she was, “humbled to be recognised and proud to be named as a finalist in the Australian Accounting Awards 2020.”

“Health and Life’s recognition for our excellent contribution to the healthcare industry reinforces the strength of our service and dedication to connecting with the community and engaging with clients,” she added. 

Accountants Daily’s Australian Accounting Awards showcases the industry’s most prestigious accolades recognising excellence across the entire accounting industry. The awards pinpoint professional development and innovation, showcasing both the individuals and firms which are leading the way in the industry.

Award recipients represent a true cross-section of the accounting industry, recognising the contributions of the profession’s most senior ranks through to its rising stars.

The finalists which were announced over several weeks beginning the 11th of May 2020, features over 260 high-achieving accounting professionals across 33 submission-based categories.

“It’s been an extremely challenging time for the profession and I want to thank each and every one of you who have been burning the midnight oil to deliver the best outcomes for your clients,” said Accountants Daily editor Jotham Lian.

“To the finalists of this year’s awards, a sincere congratulations for consistently bringing your best to the table over the last 12 months. The work you do is vital.”

 A big congratulations to Deanna from the Health and Life team. We love your work!

Coronavirus leaves medical practices on the verge of collapse

We have a free sustainable COVID-19 plan for your practice

ABC 7:30 Report national TV interview

ABC 7:30 Report article interview

Coronavirus leaves medical practices on the verge of collapse.
As reported by the Royal Australian College of General Practice in June 2020, 12% of practices do not feel they are viable, and 37% are not sure!


Are patients afraid to attend your practice?


Are practices closing down?





As featured in The Medical Republic, click here for more information
Six vital steps to take if your practice is in COVID-19 distress



If you have a good plan, it is not all bad news.

It is not all bad news many practices are doing better than last year. This is how.How are you and the team doing?

We understand that practices are busy responding to COVID-19. We hope this guide may help you work more efficiently and effectively.

This step by step 101 survival guide playbook will help the team stay focused. 

This will take another six months and has permanently changed how general practice will operate in the future.

Since February, we have been extremely busy helping GP practices in the East Coast starting in Epping with a COVID-19 Response.

At the time, this has stretched our resources. The upside is we have now produced a free peer-reviewed self-assessment checklist and a practical troubleshooting guide for your practice.

The key is to calm any concern with a plan on how the practice can deal with immediate PPE issues, to short and long term viability and part transitioning to telehealth to ensure patient continuity.

Based on our 28 years of national experience and your input over the years, we have addressed the problem. This practical guide is for owners, staff and patients to reduce any immediate concerns.

The checklist is being updated daily due to rule changes. You can access and bookmark a live link to your browser.

Check your finances now.

The end of the financial year has arrived. Now is the time to check how did you go? We are pleased to report the majority of our clients have faired well; many are even performing better than the previous financial year. So the message is –  it is not all doom and gloom. 

Many have used the survival guide to help respond to the pandemic. The key to success has been having the right attitude and setting the right priorities without re-inventing the wheel when time is your enemy. 

There is no need to be overwhelmed. Lead by starting to working on your practice and not just in it. September 2020, when Job Keeper and Seeker end, will be the next challenge point for everyone.

Need free assistance? 

You can DIY, or we can provide Practice Assistance at your request. To deal with any important or urgent issues, we will provide a high priority complimentary orientation session if you have any questions for the first ten practices that contact us.

This will be the new normal for general practice, the next big move is to the cloud starting with Telehealth services.

Where to start?

Please click on the invitation registration link below to get the practice started. See our national webinars on demand article to access past and future webinars based on the playbook.

Click here to register for access our quick practice checklist and the guide. Feel free to share. We welcome your feedback on our Facebook feedback page. Thank you for any ideas. 

We are receiving a lot of national media interest, so keep an eye out for updates and follow our social media feeds.

Stay safe.