Dentistry is capital heavy for a health profession. A single surgery fit-out, chair, imaging and sterilisation equipment can cost as much as a small house, and buying a practice usually means borrowing against goodwill. Add associate dentists on percentage arrangements, hygienists, lab fees and a mix of GST-free and taxable services, and the numbers need more care than most practices give them.
The same patterns run through allied health: physiotherapy, podiatry, optometry, psychology, chiropractic and similar practices that engage practitioners on service fee or contractor arrangements. Here is what we focus on.
What financial problems do dental and allied health practices have?
- Buying a practice on the vendor's numbers. The price is set on profit that includes the vendor's unpaid hours, a below-market lease or patients who will leave with them.
- Equipment decisions driven by tax. A chair bought in June to save tax and financed over seven years can strain cash for years.
- Associate agreements that look like employment. The percentage is fine; the control, rostering and practice branding say otherwise, and revenue offices notice.
- Payroll tax on contractors. Dental and allied health practices sit outside the GP relief that several states introduced.
- Production without profit. Chairs are busy, but lab fees, consumables and associate costs absorb the margin.
What do we do for dentists and allied health practices?
- Practice purchase support: due diligence on the numbers, price allocation, structure for the buyer, finance and the tax on the deal.
- Bookkeeping and reconciliation of practice management software, health fund and card payments in Xero.
- Associate and practitioner payments calculated under each agreement, with statements.
- Payroll tax and service fee review for every practitioner arrangement.
- Equipment, depreciation and finance planning.
- Tax returns and planning for the practice and each owner's family group.
Which numbers should a dental practice track?
| KPI | What it measures | Why it matters |
|---|---|---|
| Production per chair hour | Fees produced ÷ chair hours available | The best single measure of how well the surgery is used |
| Collections ratio | Fees collected ÷ fees produced | Gaps, bad debts and payment plan problems |
| Associate cost as % of their production | What you pay each associate for what they produce | Whether the arrangement leaves margin for the practice |
| Lab fees and consumables as % of production | Direct costs of treatment | Supplier pricing and treatment mix |
| Hygiene production and recall rate | Patients returning for regular care | Recurring revenue and the base of practice value |
| New patients per month | Patient growth | Marketing effectiveness and practice value |
| Chair utilisation | Booked hours ÷ available hours | Whether another chair or associate is justified |
What tax and compliance issues are specific to dentists?
Buying a dental practice
The price you pay is split across goodwill, equipment, consumables stock and sometimes the premises. That split matters to both sides.
Example (hypothetical): a buyer pays $1,200,000 for a three-chair practice.
| Asset | Allocation | Tax treatment for the buyer |
|---|---|---|
| Goodwill | $850,000 | A CGT asset. Not deductible or depreciable. Forms the cost base on a future sale |
| Equipment and fit-out | $320,000 | Depreciable over effective life; items under the $20,000 threshold may be written off immediately by a small business |
| Consumables stock | $30,000 | Trading stock, deducted as it's used |
A higher equipment allocation gives the buyer more deductions but can create a taxable balancing adjustment for the seller, so it's negotiated, and it must reflect market value. The sale is often GST-free as a going concern if the conditions are met. Whether stamp duty applies depends on the state and what's included. Employee entitlements that transfer with staff should reduce the price. Our buying a business service and business purchase due diligence agent work through the red flags, and an accountant reviews every finding with you.
Equipment finance and depreciation
| Finance type | Who owns the equipment | Tax and GST in brief |
|---|---|---|
| Chattel mortgage | You, from day one | You claim depreciation and interest; a GST-registered practice can claim the GST credit on the full price in the BAS for the purchase period |
| Finance lease | The financier | Lease payments are generally deductible; GST is paid and claimed on each payment |
| Hire purchase | You, once the final payment is made | Treated much like a purchase with a loan for income tax |
| Cash | You | Depreciation only; no interest cost, but cash is tied up |
For 2026–27, small businesses with aggregated turnover under $10 million can generally write off assets costing less than $20,000 each, and the small business pool can be written off if its balance is under $20,000 (ATO instant asset write-off). Our instant asset write-off guide explains the timing rules. Our depreciation agent builds the schedule and your accountant reviews it.
Service fees, associates and PSI
Most associates are paid a percentage of collections, with the practice keeping the rest as a service fee for the surgery, staff, materials and equipment. The documents and the facts need to match: who sets fees, who owns the patient records, who controls the diary, who pays lab fees. Associate income paid to a company or trust also needs a check against the personal services income rules. Our guide to employee vs contractor explains the employment side.
Payroll tax on contractor dentists
State revenue offices treat payments to contractor practitioners as potentially taxable wages under the relevant contract provisions once a practice's group wages exceed the threshold, unless an exemption applies. Revenue NSW's guidance for the medical industry expressly includes dental clinics (Revenue NSW). The GP-focused relief schemes don't help dentists:
- Queensland: relief is directed at contractor GPs. Dental practices should check the Queensland Revenue Office's current position, and the end date of any past amnesty, before relying on it.
- South Australia: retrospective relief for contracted dentists and specialists covers periods only to 30 June 2024, and only for practices registered by then; there's no relief after that date (RevenueSA).
- NSW and Victoria: relief is directed at GP services; dental practices should assume the standard rules apply.
If you're near or over the threshold, have each arrangement reviewed. Our payroll tax guide explains thresholds and grouping, and our state taxes service handles registrations and reviews.
GST in a dental practice
Dental treatment is generally GST-free; cosmetic treatment and some products are taxable; service fees charged to associates are usually taxable. Practices that make only GST-free supplies can still register for GST to claim credits on equipment and fit-out.
What's the right structure for a dental or allied health practice?
| What | Common structure | Why |
|---|---|---|
| The practice (staff, equipment, patient records, lease) | Company, often owned by a family trust | Liability sits with the company; shares held by the trust |
| Practitioner income | Personally, or an entity where PSI and the ATO's professional firm profit guidelines support it | Keeps the position defensible |
| Two or more owners | Company or unit trust with a shareholders' or unitholders' agreement | Clear rules for buying in, buying out and disputes |
| Premises | Separate trust, or an SMSF holding business real property | Keeps the building away from practice risk |
| Equipment-heavy practices | Sometimes a separate entity owning equipment and leasing it to the practice | Protection, if the leasing is at market rates and documented |
The ATO's guideline on allocating professional firm profits applies to dental practices in the same way as to medical practices. Our medical practices page explains how it scores arrangements, and our business structures service covers setting up new entities.
How do we work with dental and allied health practices?
- Free strategy call about your practice, purchase or agreements.
- Review. Associate and service agreements, payroll tax exposure, GST item codes and the equipment register.
- Setup. Practice management software to Xero, clearing accounts for health funds and card payments, practitioner statements.
- Ongoing bookkeeping, payroll and BAS, each BAS checked before lodgement and signed off by an accountant.
- Monthly production and profit report and annual tax planning before 30 June.
The work runs on Nagaris. AI agents draft; qualified accountants review and sign off, and nothing is sent without a person approving it.
"It's been wonderful working with the BPAG team! They are true experts and have provided incredibly valuable business advisory and tax services, helping my business grow." Mitchell King, Google review
What does it cost?
Most practices with staff and associates sit on Business Insights from $249 per week + GST. Groups and owners planning acquisitions often use Fractional CFO from $499 per week + GST. Purchase due diligence and payroll tax reviews are quoted as a fixed fee. See our pricing page.
If you're an associate with no practice of your own, you may only need a well-prepared annual return and a quick PSI check. We'll tell you.
What should you send us?
- Practice financial statements and tax returns for three years (or the vendor's, if you're buying)
- Production and collections reports by practitioner
- Associate, contractor and service agreements
- Payroll reports and any payroll tax returns or revenue office letters
- Equipment register and finance contracts
- The lease and any personal guarantees
- Your practice management software and Xero access
You can send photos or PDFs from your phone. No portal password.
Frequently asked questions
Is dentistry GST-free?
Dental services are generally GST-free when supplied by a recognised professional and the treatment is generally accepted in the profession as necessary. Treatment done purely for appearance, such as cosmetic whitening, is generally taxable. Products sold separately from treatment can also be taxable. Your practice management software needs item codes set up to match.
As an associate dentist, should I work through a company?
Only if it makes sense after the personal services income rules. Most associate income is a reward for your personal skill, so if you can't self-assess as a personal services business, the income is generally taxed to you whatever entity receives it. A company can still help with liability or if you're building towards owning a practice, but the tax benefit is often smaller than people expect.
Can I claim my dental chair immediately?
Only if it costs less than the instant asset write-off threshold, which for 2026–27 is $20,000 per asset for small businesses with aggregated turnover under $10 million. Most chairs and imaging equipment cost more, so they're depreciated over their effective life, or pooled. Our depreciation agent builds the schedule and your accountant checks it.
How do I value a practice I want to buy?
Valuers usually look at maintainable profit after paying a market wage to the principal, then apply a multiple that reflects risk: patient numbers and recall rates, reliance on the vendor, lease security, location and equipment age. We test the profit figure through due diligence; a specialist practice valuer or broker can give an independent valuation.
Are physiotherapists and psychologists affected by payroll tax on contractors?
They can be. The relevant contract provisions apply to allied health practices in the same way as medical and dental practices once the group's wages exceed the state threshold, subject to the exemptions. The GP relief schemes generally don't extend to allied health. Each practitioner arrangement needs to be reviewed on its facts.
What's the difference between a service fee and rent?
Rent pays for space only. A service fee pays for a package of services, such as a fitted-out surgery, reception, nurses, billing, marketing and equipment. A service fee is usually a percentage of fees collected; rent is usually fixed. The distinction matters for GST, for payroll tax and for whether the arrangement holds up if a revenue office reviews it.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.