Can you afford to live weeks, months without pay?

What happens if my “Medical Centre” goes bankrupt and they take my money to pay for medical payroll and income taxes?

“An ounce of prevention is worth a pound of cure”

Evidenced based law and accounting will protect your practice

Due to unpaid payroll or income tax liabilities, your ‘Medical Centre’ may be at risk of becoming insolvent and you are left out of pocket., because your money is mixed up with the “Medical Centre’s” money and you do not know it. The good news is that if set up correctly, a “Quistclose Trust arrangement can fix the “Medical Centre’s” cash flow and your own concerns. 


There have been many high-profile media reports and instances where this has occurred due to financial difficulties.

The payroll tax pandemic, is due to poor state budgets, increased audit activity, and successful decisions against taxpayers.

The latest case in point is the NSW payroll tax Supreme Court decision: “Integrated Trolley Management (ITM) in voluntary administration after payroll tax ruling 5th March 2024“. 

The case’s facts follow a similar legal precedent to the many medical and healthcare payroll tax audits currently being conducted throughout Australia. ITM failed to pay payroll tax on a “mix of sole traders, partnerships, and  small propriety companies – who were responsible for locating, collecting, and returning trolleys to the respective  (Aldi) stores” . 

Note: It is not implied below that any individual or organisation mentioned in this article has been authorised to withdraw funds from their practitioners, unless otherwise stated in a court of law.

Are you at risk?

Do not expect any practice owner to volunteer, they are under investigation and or they exposed to a payroll tax risk. Many are and many still do not know it or are in denial and have not sought appropriate expert legal and tax advice.  The last thing they want is to see a bunch a doctors head for the door. This is totally unnecessary. 

For those who chose to do nothing or leave it to others are most at risk.

“Some doctors in my clinic weren’t paid for three months, and if they were, it was for two weeks at a time” 


 GP Practice Manager

Source: Tristar Medical Group chain under ‘significant financial stress’, keeps rural doctors waiting for 

                   pay, ABC News August 2019

For more articles about doctors not getting paid read Locum GPs to take legal action against Kalgoorlie health service I-Medical Australia over pay dispute, ABC News 17th October 2023 and Eight GPs owed $165,000 from debt-ridden corporate, Australian Doctor, 9th January 2024

This blog discusses the importance of protecting oneself from not getting paid correctly as a tenant doctor in a medical centre. It highlights the risks of payroll tax audits and provides tips for ensuring compliance with tax laws. 

It also mentions the use of Quistclose Trust “two party (and not a third party) non-banking” arrangements between the service entity and tenant doctor only, as a solution for centralising banking and protecting cash flow, tax compliance, and income. 

I emphasise the need for carefully worded service agreements and correct banking and accounting practices.

 I advise all tenant doctors on how to detect if there is a problem with their service agreement and banking arrangements with a 10 POINT CHECKLIST.


 Doctors should not use burnout or being busy as an excuse to break tax laws or expect patients to foot the bill

If many practitioners were honest, many would admit that they are unsure about whether they have been paid correctly as per their agreement and if they have accurately reported their income on their tax return and reconciled every cent to their bank account. 

A typical belief is that their accountant or “Medical Centre” is taking care of it. Until they experienced an audit, and nobody knew about it.

The tax authorities do not regard lack of time as a valid excuse for non-compliance, despite it being commonly used as one. A Supreme Court judge once made it clear to a prominent GP that ignorance of the law is not an excuse.

Your justifications are less likely to be heard when you realise that you have had more than four decades to correct it or, at the very least, your legal and accounting advisers have had the same period of time and should have advised you from day one. If they haven’t, they may need to check their malpractice insurance.

Practitioners need to ask themselves what would happen if the “Medical Centre” I am working at failed a “contractor” payroll or income tax audit. How would that affect me? 

Why do I need a “Quistclose Trust” arrangement to protect my money and ongoing tax compliance obligations?

Any “Medical Centre” that undergoes a tax audit may begin to feel financial strain. It is probable that those who have sought amnesty will be the first to be impacted. Ask your “Medical Owners” by email, “Have they applied for an amnesty?”

Once a liability notice is issued, this will trigger a compounding set of events, including severe cash flow problems and potentially insolvency. 

Without a  “Quistclose Trust” agreement in place, you risk losing all of your money. Read on, to see if you are at risk, take the 10 point checklist test below. You must pass all ten questions in order to pass.  But before we go there, I have to provide some background context on why you may have a significant problem sitting under your nose.

Are payroll and income tax offices or practitioners likely to accuse your “Medical Centre” or practice  owners of “sham” practitioner contracting? 

What is a “sham”?

In essence, you are making something look like something it is not. In relation to the tax office, a  “Medical Centre'”  may wish their practitioners  to look like “independent contractors,” but the tax office may deem them or you as an employees. You could end up losing your ABN, GST and business tax deductions on your service fees because you are not a genuine business.

Source: Sham contracts aren’t always obvious – here’s how to spot one

If a person calls a duck a rooster, it’s still a duck. 

If 20 people gather by the pond, nod in agreement and call the duck a rooster, it remains a duck

[Modified High Court Aphorism]

This was the High Court analogy about sham contracts; when a service provider is characterised as something they’re not. Contracts are often called into question, with some suggesting that independent contractor agreements are just a facade or a “sham”. 

However, the perception of whether or not they are valid can vary. It is possible that both parties involved wished to avoid entering into an employment contract. The burden of proof falls on income and payroll tax offices that taxpayers to establish that Tenant Doctor patient fees are beneficially owned by the practitioner and not the “Medical Centre” beyond a reasonable doubt. This means no “Medical Centre” clearing accounts are owned under the same ABN as the “Medical Centre”. 

There is no implication that any arrangement is intended to avoid Fair Work entitlements or taxes, as this would go against the public interest and would be invalidated by a court: see:ZG Operations & Anor V Jamsek & Ors [2022] HCA 2: 

The RACGP attempted a payroll tax exemption, except it received a dangerously oversimplified clarification that said if each practitioner had a separate bank account, they may be exempt from payroll tax. Sadly, not all the states have adopted this Ruling. Furthermore, it is a little more complicated than just direct GP or separate banking. 

The bottom line if your describe your “Medical Centre” as a “Medical Centre” you may still have a compliance problem with other regulators such as Fair Work and the Australian Taxation Office (“ATO”).

Why this has happened is due to the Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 (14 March 2023)  the judges’ final comments provided some false hope that the simple solution of GP’s direct banking their patient fees would cure all payroll tax evils.

The practical reality is that it has caused more problems from cash flow to practitioner and tax disputes over payments.

The Naaz 2013 Supreme Court Appeal a “direct GP banking” solution has been adopted by many ‘Medical Centres’., but not carefully thought out or implemented. It is causing many headaches for practitioners and “Medical Centre” owners.

The initial response of practice managers at “Medical Centre” was to have practitioners sign service agreement contracts and establish separate bank accounts.

Starting with cash flow problems, unfortunately, this dangerously oversimplified solution has started to backfire. 

“Trust is a must or you will go bust”

Beyond the headlines, achieving this practical outcome on a daily basis is much more challenging than expected. It is not sustainable. 

This issue affects the quality of care and fees that Tenant Doctor practitioners charge their patients if their practice management support services  are in financial distress. The last thing you medico-legally need is for them to cut corners to make ends meet. 

‘Medical Centres’ are currently facing significant cash flow and bank reconciliation issues with their practitioners, revealing problems in their agreements, bank reconciliation, and accounting and tax reporting systems. 

Many practice managers experience unnecessary workloads, stress, and conflicts because they have not yet discovered a legally sustainable solution moving forward.

The positive news is affordable solutions available for legal and accounting payroll tax. 

For instance, legally and registered tax agent prepared service agreements, payments and reconciliations can be accurately completed and digitally encrypted and paired to your accounting and tax reporting system in approximately 5 minutes, for groups of up to 10 general practitioners (GPs). 

This would eliminate the hours of unnecessary book keeping and the need for additional support staff.

Your practitioners can have peace of mind knowing that they can easily defend a tax audit and will receive accurate and timely payments for accounting and tax compliance. 

Ultimately this helps with recruitment, retention and staff burnout.

For many, after identifying any necessary improvements, it is back to business as usual.

We provide a 10 point checklist for establishing a legally valid “Quistclose Trust” centralised banking arrangement with their service entity. 

Overall, it emphasises the importance of safeguarding finances and ensuring sustainable and easier compliance with tax laws.

Latest Payroll Tax Ruling Change

The latest QLD Payroll Tax Ruling amendment and ACT pronouncements has frighteningly doubled down on “Medical Centres who are using separate bank accounts via solutions offered by “Big Banks” tethered to software vendors and or third party bank accounts or proposed traditional “settled trust” arrangements. 

For this reason, it is important to clarify a more tax compliant and practical approach for centralised banking for both Federal Income and state payroll tax and Fair work compliance purposes. 

Regulatory Matrix

There is a regulatory matrix of over 21 key areas of law your legal and accounting advisers need to consider before they can provide an optimum solution. Interestingly the basal legal principles never seem to change, other than become more refined. 

We stick to the Court principles, this is how to avoid any future problems.

We thank independent law firms Hamilton Bailey and Peak Commercial and Tax for their assistance. 

Quite simply any money owed to you may be lost if the business goes into administration or liquidation if your “Medical Centre” especially if it uses the same ABN that your patients fees are paid into and you are paid from is the Medical Centres ABN. 

The only exception is if your service agreement has a valid “Quistclose Trust Arrangement” arrangement in place. The problem is that many do not.

There is no need for your “Medical Centre” into liquidation

It is a choice to comply. “Medical Centres” and their legal and accounting advisers for decades have been warned.

Generally poor implementation or advice due to ego or ignorance is the main cause for this payroll tax pandemic. 

At the time of writing, unsurprisingly, payroll and income tax offices may have had over 42 years to comply. Only now are they nationwide actively conducting audits.

For those that have been following my blogs and my media comments, there is no real concern if your incorrectly named “Medical Centre” is proactively ensuring compliance under the latest payroll tax rulings resonating from Queensland and endorsed by the Federal Health Minister.  

We support this because the Ruling is based on long-held (since 1978) national case law precedent. Sadly, since the 1992 GP medical corporatisation had blurred the lines which many have unknowingly followed. 

The current Rulings have missed a few important points and case law we seek to address.

You can have well Court tested and tax office ruling endorsed “Administrative” i.e. service entity business with your your Tenant Doctor located at your premises, who exclusively use your support staff  to them  to help run THEIR PRACTICE.

This is normally evidenced by a sound business Tenant Doctor model e.g., percentage of gross patient fees received. Then a signed well-written service agreement that includes a Quistclose clause between the service entity and the practitioner i.e. Tenant Doctor.

Each co-located Tenant Doctor practitioner must prove they have their own individual practice website. This must be regularly promoted at their own cost to the general public. All parties need to adhere all year round to the basic principles of law.

 Administrative Business i.e. service entity or Tenant Doctor arrangement

For medical, legal and accounting professionals, this service entity arrangement was confirmed in the Federal Court case titled  Commissioner Of Taxation V. Phillips (1978) 8 Atr 783 Income tax: deductibility of service fees paid to associated service entities: Phillips arrangements. 

It is interesting to note all State payroll tax rulings fail to mention this landmark service entity tax, but are prepared to name others, such as the Healius GP lump sum payment tax case. This may be the reason Helaius no longer owns general practices. 

This has only added to the confusion amongst seasoned legal, tax, and accounting advisers and their clients. 

Since the 1980s, I used to do the accounting for my late father’s medical practice this way. No matter how big or small you are, including ASX-listed companies, nothing has changed. 

Westfield’s business, legal, and tax structure, model, and relationship with their tenants remain a classic case in point. 

The same principles apply to medical and healthcare practices/practitioners    that want to ethically and legally avoid any shared  medico-legal and taxation problems.

Service Agreements and Separate Banking Arrangements

Individual banking arrangements leave both parties open to fraud, error, cash flow and tax deduction compliance problems (see Temples Wholesale Flower Supplies Pty Ltd v FCT [1991] FCA 162 and Commissioner of Taxation v Cassaniti [2018] FCAFC 212).

The Quistclose arrangement centralises and quarantines the practitioner’s income. This overcomes the practical problem detailed below.

Quistclose Arrangements are a practical, cost effective insolvency, cash flow and tax  compliant solution for Tenant Doctors ™ and their service facility providers.

It established professionals for asset protection and succession planning purposes, can exclusively outsource shared practice management resources such as non-fee for service staff, administrative and accounting systems, premises and common areas.


Legal centralised banking arrangements are scalable, practical and cost effective. 

The Quistclose Trust Account Exception 

The first point to make is that physical money itself is capable of being the object of property rights, but is fungible. That is, one unit is identical to and interchangeable with any other unit. Once it is mixed with other money it cannot be separately identified in the same way, it has been said, that a raindrop cannot be separately identified once it has fallen into the ocean. At that point property in money is lost at common law.1

”Barrister Carrie Seivers, 2023 

Is it possible to have a cost effective centralised bank account? 

The simple legal answer is YES by establishing a Quistclose Trust arrangement. See: Recovering “your” money when entities collapse – when can you successfully claim a Quistclose Trust?, 2013 Barrister Carrie Seivers, 2023 

Furthermore, the helpful Court in the Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 (14 March 2023) believes it is possible too.

Interestingly paragraph 7 in the landmark GP medical payroll tax case Appeal decision the Court had alluded to this point. It was not discussed further because there was no written service agreement or other evidence for him to consider this point. 

“The precise legal nature of what occurred is unclear. Quite possibly, the medical practitioners appointed the applicant as their agent for claiming and receiving the medicare benefit assigned to the medical practitioner by the patient. It might be possible to debate whether the applicant enjoyed full beneficial ownership of the funds in its bank account (which would be important if the applicant were wound up or one of the medical practitioners were made bankrupt), but in the absence of details about the informal arrangements it would be difficult to reach a firm conclusion.

For this reason the establishment of a separate bank account in his decision arose, in the absence of arguable alternatives such as a Quistclose Trust account where the practitioner retains beneficial ownership rights. The full rights and obligations are a written ‘chose in action’ to any money held like a bank on their behalf. This is how the entire banking system currently works. You “own” your own bank account, you have a right to sue for your money. 

Why will many practices have to re-write our existing service agreements?

Agreements without supporting evidence will not succeed in Court.

If your practice still utilises centralised banking and lacks a Quistclose Trust arrangement with appropriate wording in your well-written service agreement, there is a high possibility that it will fail on that crucial aspect and could be deemed a “sham” arrangement.

Do not let informal agreements or arrangements leave you open to an audit or the Court to strike down as speculative like Dr Thomas found out in his failed payroll tax case.

As I have written many times beforeUnderstanding the difference between a “Tenant Doctor” and an “Independent Contractor” for tax compliance is critical”.

We have written many times over the decade what is with the right business model, structure, that should be drafted into a service agreement. How you operate your practice does matter. Knowing why and ensuring it has been holistically explained to you is critical. Sadly, DIY or quick fix piecemeal advice is catching many of you unaware. 

Like investing in solar panels, you do have to invest time or money. It is sustainable or quit owning a “Medical Centre”. 

Common Mistakes well seasoned Lawyers and Accountants Make

Many service agreements are currently in place may fail a payroll tax audit in a heartbeat, because your lawyer and accountant forget to ask you and collate the following evidence, before your agreements were prepared:

Respectfully, here are 10 areas that legal and accounting advisers commonly overlook that you need consider before relying on your service agreement or any advice given:

  1. Did a medical/health expert tax agent and lawyer work collaboratively (beyond one meeting) in preparing the agreement and know why?;

 2. Did they confirm the presence of individual practitioner websites, appointment availability, telephone numbers, and email addresses? It should be ensured that each tenant does not use the same website or email domain name as the service entity; 

  3. external signage, websites, messages on hold, SMS reminders, patient encounter sheets, visitors book, staff uniforms, practitioner letterheads, tax invoices?; 

  4. Did they verify if the bank ledger reconciliations for each source of practitioner income were separated and not mixed with the ledger or banking of “Medical Centres” that have the same Australian Business Number (ABN), PAYG and TFN?;

 5. Beyond a clever software program or spreadsheet: Did they ensure that a properly established “Quistclose arrangement” was in place. Did the agreement reflect your workflow, banking, bookkeeping, and bank reconciliation process? Does the bank account actually reconcile? (this is a common problem). Note billing on a practice billing receipt report system e.g. Medical Director, Best Practice, Genie that reports a patient or company has paid is not Court evidence unless you can prove the deposit and all other relevant income has reached the practitioner’s bank account and reconciles to bank in accordance with your mutually signed service agreement;

  6. Did they verify, rectify and report any unidentified bank reconciliation, mistakes in accounting, BAS, and tax filings;

  7. Did they check the accounting financial statements, tax and BAS returns and ensured the business was not classified and labeled as a “Medical Practice”?; 

  8. Did they check your financial statements to ensure registrars are not employed in the service entity?;

  9. Did they review the job descriptions and employment agreements of the staff? The staff should not be called “Practice Manager” or “Medical Receptionist”. Does your training ensure that staff do not mention your facility as a “Medical Centre” or “Practice” when talking on the phone or at the front desk? Only mention the name of the treating practitioner and their practice. Tenant Doctor practitioners should not be treated or work like an employee; and

  10. Do your service agreements reflect all of the above arrangements accurately?

This is the “evidence”  a judge is looking for that often many solicitors miss. It is the main reason why practices will fail any contractor audit. 

Your solicitor should have asked for this information before drafting your agreements. If they did not you may have a significant problem.  If you are audited you can at least say you were profoundly misled and may consider suing your adviser(s) for negligence.

We have successfully argued this point with a client post the Naaz decision. Our client after a long battle, confidentially settled in 2022. 

If I were the tax office it would be in my interest to settle privately any potentially successful cases. That is the nature of defending a payroll tax liability claim.

Unfortunately many lawyers and practices may have to go back to the drawing board and rewrite their entire service agreements and review their entire operations before signing any more service agreements.

Poorly established “Medical Centre’s” are a significant insolvency risk 

For poorly set up practices the risk of failing an audit is extremely high. It appears according to many recent media reports they have either received poor advice or the advice has been poorly implemented. This means if you work at one of these “Medical Centre’s” and they have either done nothing, applied for an amnesty or acted on poor advice you may have a significant problem. Be prepared to be audited. Make sure you have tax audit insurance.

What is the Quistclose solution?

Patient fee collection and banking can be centralised with a Tenant doctor initiated and controlled Quistclose arrangement, that first pays the Tenant Doctor “trust” and then the service entity. 

It is safer and easier to operate than traditional software service fee app or spreadsheet methods.

The first key is do not call yourself or operate like a “Medical Centre” of “GP Practice” if you are genuinely not one. Many owners find when they had established their structures, it was not made entirely clear to them why they chose a particular complying structure for example if your trust deed states it is a “service trust” Deed then from the outset your intention was never to be a “Medical Centre”. If so, you may find none of these payroll tax and income tax rulings or laws apply to you. 

As many of our clients appreciate, reconciled to their bank statement, BAS and tax returns, such arrangements take approximately 5 mins for up to 10 practitioners to process payments to practitioners and the service entity at the end of each pay period. 

Tenant Doctors how can you easily detect if you have a problem

For many of you, it is highly likely that your practitioner’s money is exposed to a loss in the event of a liquidation or administration, unless a legally valid court tested Quistclose arrangement is spelled out in the agreement and you have the necessary accounting systems required under this arrangement. 

You have never been clearly explained what a Quistclose arrangement is? 

Your service agreement does not clearly state how your “clearing trust bank account” arrangements operate.  You and your service entity need to ensure compliance and the correct intentions and wording is beveled in your service agreement.

A useful 10 point legal Tenant Doctor Separate Banking Checklist

You must satisfy every question below in order to pass the test you have a legally valid Tenant DoctorTM “Quistclose Trust” arrangement that should exempt you from payroll and income tax. 

There are 10 key legal principles (I have quoted relevant extracts with practical explainers on what to do next below) from the highly respected Barrister Carrie Seivers article titled Recovering “your” money when entities collapse – when can you successfully claim a Quistlose Trust?” 

I have attempted to interpret in plain language, what is your next step should you wish to establish a legally valid “Quistclose Trust” with your service entity provider. 

“ It is clear from the authorities that the two key requirements are those at principles (5) and (6) above. As the New South Wales Supreme Court observed last year, in order for a transfer of funds or assets to be characterised as held on a Quistclose trust, the Court will look to whether the parties outwardly manifested a mutual intention that – 

  1. The money was provided for a specific purpose, and
  2. The recipient was to be subject to restrictions on the use of the money for any other purpose. ” 

“The principles governing when a Quistclose trust will be held to have been created may be distilled as follows –”

  1. Has a “Quistclose Trust” arrangement been initiated by the Tenant Doctor and mutually entered into with the service entity?

“The question whether a Quistclose trust has been created will be answered by reference to the intention of the parties and the ‘essence’ of their bargain.8 The intention not to part with the beneficial ownership of the funds must be sufficiently indicated.”

Tenant Doctor Action: 

An important pre-condition is the Tenant Doctor must initiate the process. All funds are to be paid into a legally prepared and valid “Quistclose” arrangement. 

If you are a tenant doctor, before signing your service agreement, being aware of this article and sharing it with your service entity (“Medical Centre” or practice) by email may be a useful way of starting the process of protecting your money. 

Ensure in writing sure your service entity (“Medical Centre”) provider confirms that they understand the reason for this request and what is required. 

Service facility (“Medical Centre”) providers should consult legal and tax advisers who have experience in establishing these types of arrangements.

 2. Have  both parties “consciously” intended the need and purpose of establishing a “Quistclose Trust” arrangement and how it will operate?

“The relevant intention is to be inferred from the language used by the parties in question, having regard to the nature of the transaction and the relevant circumstances of the relationship between them. It is ascertained by reference to the objective intention of the parties,10 outwardly manifested.11

Service Entity Action: 

Ensure a lawyer prepares a service agreement that specifically states the purpose and use of the funds and how each payment will be practically separately accounted for in the bank account, to ensure there is no commingling of funds with other Tenant Doctors? 

A complying service agreement should be eligible to be used as a registrable security under the Personal Property Securities Register. For a cost effective and easier solution visit our website Doctors Pay Calculator.

 3. Can both parties prove in writing their intentions to establish a “Quistclose Trust” arrangement?

“In determining the intention of the parties at the time, the Court can take into account events and documents which postdate the date on which the trust is said to have been created, although little weight may be given to what the parties say was the nature of the transaction at a subsequent point in time”.

         Tenant Doctor and Service Entity Action: 

Emailing your intentions and then ratifying them in an agreement are critical. Consult a medically and healthcare experienced independent lawyer and accountant for more information.  Your and your advisers need to also be on the same page.

 4. Can parties prove there is a need to establish a “Quistclose Trust” arrangement?

“In a commercial setting there must be clear evidence that the parties intended a trust to arise in circumstances where a trust would not normally exist.”

Tenant Doctor and Service Entity Action: 

It is clear that the number of media reports in relation to collapsedMedical Centre’s” and payroll and income tax “existential threats” since 2010 from my blogs and media and beyond provides sufficient evidence there is a valid commercial concern for the need to establish a Quistclose Trust account 

 5. Can you prove in writing, bookkeeping and tax records that patient funds are exclusively ring fenced and cannot be touched by anyone except the Tenant Doctor?

A Quistclose trust does not arise simply because money is paid for a particular purpose. The mere provision of money or property for a purpose is not enough.14 ‘An expectation or general understanding falls short of the necessary mutual intention that funds have been provided on the express condition that they will be earmarked for use exclusively in accordance with an agreed purpose’.15”

       Service Entity Action: 

Service entities cannot use a practitioner’s patient fees collected like a bank overdraft facility. 

It is not good enough to have a separate fee “clearing account” in the right entity. You have to prove in your legally prepared service agreement that the funds have been “earmarked” for “exclusive use” to pay only for service fees and nothing else and nothing else.

 6. Can you prove that the funds are not to be used for any other purpose other than as specified in the Tenant Doctor service agreement?

“The parties must intend that the money not be used at the free disposal of the recipient.16 The transferee must be subject to restrictions on the use of the money for any other purpose.17”

Service Entity Action: 

Not one cent should be drawn without the written permission of the Tenant Doctor that money is drawn for any other purpose other than what the specific terms and condition of the service agreement stipulate which is on trust for the benefit of the Tenant Doctor only.

 7.  Is your separate bank account held in a separate entity with a separate accounting ledger as specified in a signed service agreement? Does each patient fee transaction reconcile to the bank as per the service fee agreement?

“Payment of the money into a separate account may be indicative, but not determinative, of the existence of a Quistclose trust.18 However a lack of evidence of an express requirement to keep money separate is a powerful indicator of an absence of an intention that the money was to be held on trust,19”

Service Entity Action: 

This is why service entities should legally maintain separate bank accounts outside the service entity using a two and not third party arrangement which is detailed in their signed service agreement. 

 8. Does your service agreement provide written proof it was the Tenant Doctor that initiated this process?

“The onus of proof lies on those who assert that a trust was created.20”

 Tenant Doctor Action: 

The tenant doctor must prove with a carefully worded signed service agreement that a “trust” was created.

 9. Can you prove you entered into a service agreement not for the sole purpose to avoid tax for example payroll or income tax laws?

“If there was a trust, but it was created for an illegal purpose (such as the purpose of avoiding tax obligations), then the trust must fail as a matter of public policy.21”

 Tenant Doctor and Service Entity Action: 

To attract and retain customers for succession planning and recruitment and retention purposes for Tenant Doctors it is of mutual interest to both the Tenant Doctor and Service entity to operate in a commercially sustainable, medico-legally safe, insolvency safe, tax compliant manner.

 10. Is the bank account under the name of Tenant Doctor’s Quistclose Bank Account?

Is there evidence, that appropriate “Quistclose” wording in a signed service agreement, proves Tenant Doctor and the other party agreed that the ultimate beneficial interest of the specified bank funds should be held in trust by the trustee entity? 

Does the agreement ensure compliance with Tenant Doctor’s intentions before entering into the agreement?

Can the Trustee provide written confirmation or any other form of evidence that they had this understanding prior to signing the agreement?

“Trust obligations arise where equity operates on the conscience of the holder of the legal interest. A person cannot be a trustee of property if that person is ignorant of the facts alleged to affect their conscience. That is, unless a putative trustee is aware that they are intended to hold the property for the benefit of others, their conscience will not be affected in a relevant way.22”

      Tenant Doctor and Service Entity Action: 

Both the Tenant Doctor and Service Entity need to prove that they are both aware of the nature of the arrangement for it to be effective. Stating my lawyer or accountant told me is not enough. 

They must clearly know in their mind before signing that the reason for the Quistclose Trust arrangement and how it will operate is so the trustee can hold this money in trust for the sole purpose and benefit of the Tenant Doctor.

Where to from here! 

So did you pass the test and answer yes to ALL 10 questions?

If not, practitioner’s should consider beginning the process of safeguarding your money.

Before signing your service agreement an important pre-condition is the practitioner must initiate the process. 

If you think you are a Tenant DoctorTM  rather than a “independent contractor” doctor, refer to the article titled “Don’t use the “C” Contractor Word!”.

This article is important and sharing it with your service entity (or misclassified “Medical Centre”) via email could be a crucial initial step in establishing or confirming a Quistclose Trust two party arrangement.

Service facility providers should consider sharing this article with their practitioners to validate their agreements or else they may face a challenging payroll/income tax audit.

For more information on how to stay compliant visit our blog Understanding the difference between a “Tenant Doctor” and an “Independent Contractor” for tax compliance is critical.

Please consult with separate legal and accounting professionals. You are welcome to share this with your advisors.

Stay hungry,humble, curious and focused

For more insights visit our blog.

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

Chartered Accountant, Chartered Tax Adviser, 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 (

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.

Recommended Posts

No comment yet, add your voice below!

Add a Comment

Your email address will not be published. Required fields are marked *