A Service Trust is generally used to separate the medical practice income from the doctors’ personal service income. There are generally two major benefits of using a Service Trust:
- Service Trust is able to legally charge a service fee to the medical practitioners as long as the fee % it is within the ATO guideline. A service charge by the trust is unlikely to be treated as a personal service income, especially when the medical practice has other contractor practitioners in addition to the practitioner owner him/herself working for the business. Therefore, any profit that remains in the service trust can be distributed to the family members or other entities associated with the medical practice owner.
- Generally speaking, all the rental, employees and associated business costs will be run through the service trust. Therefore, any potential risk from employees or suppliers will likely be retained within the service trust without affecting the owner’s personal assets (provided that the Trustee of the service trust is a limited liability entity).