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Lump Sum inducement payments to health professionals


22nd March 2017
The ATO is warning healthcare practitioners about the correct tax treatment of lump sum payments made to induce the practitioner to operate from a healthcare centre run by a third party. Depending on the circumstances, the ATO says the payment is probably not a capital gain but more likely to be ordinary income.

The ATO is warning healthcare practitioners about the correct tax treatment of lump sum payments made to induce the practitioner to operate from a healthcare centre run by a third party. Depending on the circumstances, the ATO says the payment is probably not a capital gain but more likely to be ordinary income.

Healthcare practitioners are doctors, dentists, physical therapists, radiologists or pharmacists. The ATO says it is now common for some practitioners to operate from healthcare centres run by third parties and without any stated partnership or employment relationship between the third party and the practitioner.

Medical centre operators may offer lump sum payments to practitioners to start work or continue to work from their centres. The ATO website contains a description of a typical scenario in which the inducement may be offered.

The ATO believes the lump sum payments are not capital receipts but are income and will typically be ordinary income of the practitioner for providing services to their patients from the healthcare centre. It has started targeted activities and examinations of healthcare practitioners who may have incorrectly treated these lump sum payments as capital gains.

Taxpayers who are potentially affected are advised to seek professional advice, ask the ATO for advice or a private ruling or make a voluntary disclosure which may reduce any penalties.

Source: ATO website, 15 March 2017. 

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