For most doctors, selling the practice is the largest single transaction of their working life. It is also the one where the difference between good advice and no advice is measured in hundreds of thousands of dollars.
Three things have changed the landscape for Adelaide practice owners. The capital gains tax rules are being rewritten from 1 July 2027. The small business CGT concessions survived that rewrite, and one of them got better. And the ATO has published a view about lump sum payments to healthcare practitioners that quietly undoes the tax planning behind a lot of corporate practice deals.
That last one is where we should start, because it is the trap that costs doctors the most.
First question: is it even a capital gain?
A great many practice “sales” in Australia now follow the same shape. A corporate operator or a larger group takes over the running of the practice. The doctor receives a lump sum. The doctor then keeps working at the same rooms under a services agreement, paying a percentage of receipts to the operator, often with a commitment to minimum hours for a minimum period.
It looks like a sale. The tax treatment may be nothing like one.
The ATO’s published view is that where a healthcare centre operator provides a practitioner with fitted consulting rooms, administration and support in return for a percentage of receipts plus a commitment to work, a lump sum paid to that practitioner to commence or continue practising there is generally ordinary income, not a capital gain. The ATO’s reasoning is that the payment is an inducement to enter into the agreements and is fundamentally connected to the practitioner’s provision of services. It expressly rejects characterising the payment as goodwill or as a restraint, on the basis that no right to provide healthcare is actually transferred, and it notes that practitioners have mistakenly treated these payments as capital gains and then applied the small business CGT concessions to them.
The consequences are not marginal. Ordinary income means no 50% discount, no Division 152 concessions, no contribution to superannuation under the CGT cap. It is the difference between a payment that can be almost entirely sheltered and one taxed at the top marginal rate in a single year.
This does not mean every deal with a corporate is caught, and it does not mean a genuine sale of a genuine business is at risk. It means the characterisation has to be worked through before the contract is signed, not after the money arrives. If you are being offered a lump sum and asked to stay on under a services agreement, that is the moment to get advice.
What you are actually selling
Assuming a genuine sale, the asset at the centre of it is usually goodwill.
The ATO’s long-standing ruling on goodwill draws a distinction that matters enormously to a sole practitioner. Personal skills, reputation and personality are not assignable — you cannot sell them, because they leave when you do. But goodwill is legally distinct from the sources it emanates from, and the practice’s other sources of goodwill — patient habit, location, systems, brand, staff, referral networks, the appointment book — are transferable.
The ruling works through a professional practice example and concludes that the practitioner can transfer the goodwill of the practice, protected by a restrictive covenant. So a doctor can sell goodwill. But the more of the value that genuinely walks out the door with the doctor, the less there is to sell, and the more the price is really something else — which takes you straight back to the characterisation question above.
A separate point for practices structured on a “no goodwill” basis, where practitioners come in and out for nil or nominal consideration: the ATO has an administrative treatment that accepts market value as equal to the amount actually paid or received, including nil, where the governing documents expressly provide for that and the dealings are genuinely at arm’s length and applied consistently. If your practice operates that way, it is worth confirming the documentation supports it.
The small business CGT concessions do the heavy lifting
For most Adelaide practices, the CGT reform matters far less than whether Division 152 applies. All four concessions survived the 2026 legislation, and they are applied before the new minimum tax rate bites.
To get to any of them you need the basic conditions. The two gateway tests are alternatives, not cumulative — you qualify by being a small business entity on the turnover test or by satisfying the $6 million maximum net asset value test. We regularly meet doctors who have written off the concessions because their net assets exceed $6 million, without ever testing turnover. That is an expensive assumption.
Some detail worth knowing:
- The $6 million test counts more than you would think. It includes the practice goodwill, the assets of entities connected with you, and the assets of your affiliates where those assets are used in the business. It excludes your main residence, your superannuation, personal use assets and life insurance policies. The $6 million figure is not indexed, so nominal growth erodes it every year.
- The active asset test requires the asset to have been active for at least half the ownership period, or at least 7.5 years if you have owned it for more than 15 years. The periods do not have to be continuous.
- If you are selling shares in a practice company or units in a trust, additional conditions apply, including a modified active asset test that looks through to the underlying assets and requires at least 80% of them to be active. This is the single most common technical failure in practice share deals. A company sitting on surplus cash, an investment portfolio, or premises let to a third party can fail the 80% test and lose the concessions entirely.
- The 15-year exemption disregards the whole gain where you have owned the asset continuously for 15 years and are 55 or over and selling in connection with your retirement (or permanently incapacitated). Note the age is 55, not 60 and not preservation age.
- The retirement exemption has a $500,000 lifetime limit per individual, also unindexed. If you are under 55, the exempt amount must go into superannuation.
- The small business rollover defers the gain if you acquire a replacement active asset, broadly within two years.
The superannuation step most doctors get wrong
Where the 15-year exemption or the retirement exemption applies, the proceeds can go into superannuation under the CGT cap, which is $1,935,000 for 2026-27 and sits entirely outside the ordinary contribution caps. For a retiring doctor this is one of the most valuable concessions in the tax system.
It also has a procedural trap that is unforgiving. The CGT cap election form must be given to the superannuation fund before or at the time the contribution is made. An election sent afterwards is invalid. The fund must reject it, and the contribution then counts against the non-concessional cap — which, for a doctor with a substantial balance, may be nil.
Sending the form a week late can convert a sheltered contribution into an excess contributions problem. It is a short form, and the sequencing is the whole game. We cover the surrounding contribution rules in our guide to superannuation for Adelaide doctors.
Should you sell before 30 June 2027?
This is the question we are being asked most, and the honest answer is that the deadline matters far less than the headlines suggest — and for one group of practices it points the other way entirely.
The short version of the reform: from 1 July 2027 the 50% CGT discount is replaced with indexation of the cost base for individuals, partnerships and trusts, with a minimum 30% rate for resident individuals. Assets held by individuals and trusts at that date pass through a deemed disposal and reacquisition. For an incorporated practice, the asset that goes through it is the doctor’s shares, not the company’s goodwill.
Three features soften the cliff considerably:
- The gain accrued up to 30 June 2027 is calculated, deferred to the eventual sale, and keeps its 50% discount.
- That deferred component sits outside the new 30% minimum rate.
- Division 152 is applied before the minimum rate is reached. If the concessions eliminate the gain, the minimum rate never applies.
So a doctor selling shortly after 1 July 2027 will find that most of the economic gain is the deferred pre-2027 component, still discounted — provided the 30 June 2027 value can be substantiated. And a doctor who qualifies for the 15-year exemption has the entire gain disregarded either way. The deemed disposal does not reset the 15-year clock or the active asset clock.
The major firms have converged on the same advice, and we agree with it: 30 June 2027 is not a transaction deadline, and commercial readiness should drive the sale date, informed by the tax rules rather than driven by them.
Now the part that is our own analysis rather than a published position, and which we think matters for a fair number of Adelaide practices.
From 1 July 2027, the 50% active asset reduction — and only that one of the four concessions — becomes available to businesses with aggregated turnover under $10 million, rather than the under-$2 million test that gates the other three. Consider a practice with turnover between $2 million and $10 million that fails the $6 million net asset test. Today that practice gets no Division 152 relief at all, only the general 50% discount. After 1 July 2027 it could apply the general discount to the deferred component and the 50% active asset reduction on top.
For that cohort, waiting may be materially better than rushing. Given typical practice turnover and how much the net asset test sweeps in, this is not a small group in Adelaide. It needs modelling with real numbers rather than a rule of thumb — but if it describes you, selling in a hurry before June 2027 could be the more expensive choice.
One thing everyone should do regardless: think about a valuation at 30 June 2027. The alternative to a market valuation is a statutory apportionment method, which was still in draft when we wrote this — and the draft proposes confining it to real property and assets without a readily ascertainable market value, so it is not yet clear that practice goodwill or unlisted shares could use it at all. A contemporaneous, independent valuation of the goodwill — or of the shares, if the practice is incorporated — is far better evidence than a figure reconstructed years later.
Payroll tax is the number that kills deals
In South Australia, payroll tax is the due diligence item most likely to change a price or stop a deal.
RevenueSA treats a contract between a medical centre and a practitioner as a relevant contract where the centre provides patients with access to the practitioner’s services and the practitioner serves the centre’s patients. The centre becomes the deemed employer and the payments become deemed wages, unless one of the contractor exemptions applies — services performed on 90 days or fewer in a year, a practitioner who ordinarily provides similar services to the public generally, or work performed by two or more persons.
Two points are specific to South Australia and frequently misunderstood:
General practices have an ongoing exemption tied to bulk billing. Since 1 July 2024, a percentage of relevant general practitioner wages is exempt, worked out as the number of fully bulk-billed general practitioner services divided by total general practitioner services, with the bulk-billing incentive items left out of both. It is counted by service item numbers, not dollars, and applied at practice level across total general practitioner wages rather than doctor by doctor. It covers employee and contractor general practitioners, including registrars, and superannuation is included in the wages figure. It does not extend to nurses, reception, administration, pathology or allied health.
Specialists and dentists have no ongoing relief. The relief that covered them was a retrospective exemption for the years from 1 July 2019 to 30 June 2024, available only to practices that had registered as an employer before 1 July 2024. From 1 July 2024 a specialist or dental practice engaging contractor practitioners must rely on the ordinary contractor exemptions and nothing else.
For a transaction, three consequences follow. On a share sale, the historical liability stays inside the company the buyer is acquiring. Grouping provisions mean that a buyer who already owns practices will have wages aggregated across the group, and every member of a group is jointly and severally liable for the group’s payroll tax debts incurred while it is a member. And because a general practice’s exemption percentage moves with its billing mix, the exposure a buyer inherits is not a fixed number — it is a function of a commercial decision the buyer will control after settlement.
None of that is fatal. It is what warranties, indemnities and retention amounts exist for. But it needs to be quantified before heads of agreement, not discovered in due diligence. Our article on payroll tax and medical practices goes through the position in more detail.
Two contract points that are worth real money
Do not let the restraint be separately priced. Where parties dealing at arm’s length do not allocate a specific amount to a restrictive covenant, the ATO treats it as ancillary to the disposal of goodwill, with no separate proceeds attributed to it — so it rides along with the goodwill and picks up the discount and the Division 152 concessions. Only where the contract expressly allocates a separate figure will the ATO accept that allocation. Separately pricing the restraint converts that slice into a different kind of capital gain, one with no 12-month discount and access to the concessions only through a special condition. Purchasers sometimes want the restraint itemised. Vendors should resist it.
Get the going concern treatment right. A supply of a going concern is GST-free only if the supply is for consideration, the buyer is registered or required to be registered, and the parties have agreed in writing that the supply is of a going concern — and the supplier must actually supply all of the things necessary for the continued operation of the enterprise and carry it on until the day of supply. Clinical services being GST-free does not make the sale of the business GST-free. In a practice deal, “all the things necessary” usually means the premises lease or licence, the records, the staff arrangements, the equipment and the systems — not just goodwill.
Earnouts
Deferred consideration tied to how the practice performs after settlement is increasingly common, and the tax rules for a qualifying look-through earnout right are workable but exacting. Among other conditions, all financial benefits must be provided within five years of the end of the income year in which the sale happened, the payments must be contingent on the economic performance of the business, and the parties must deal at arm’s length. If the arrangement allows an extension that could push a payment beyond the five years, it fails.
Where the rules apply, later payments are not separate CGT events. They increase the capital proceeds of the original sale, which means going back and amending the return for the sale year — often more than once.
There is a planning point in that. Eligibility is tested at the original sale, but the amount of the gain keeps growing as earnout payments arrive. If the $500,000 retirement exemption was used to its limit at settlement, there is no headroom left for what comes later. Model the earnout ceiling against the retirement exemption limit and the CGT cap at the outset, not at the first payment.
What to do, and when
- Test Division 152 eligibility now, on both gateways. Turnover and the $6 million net asset test are alternatives. If you are close to failing one, there may be time to do something about it; at contract there will not be.
- If the practice is incorporated, run the 80% test. Surplus cash and passive investments inside the practice company are the usual culprits, and they are fixable with lead time.
- Get the characterisation right before you sign. A lump sum paid alongside a services agreement is the highest-risk structure in the market right now.
- Quantify the payroll tax position. For a general practice, that means the bulk-billing percentage and the records to support it. For a specialist or dental practice, it means testing the contractor exemptions honestly.
- Plan a valuation for 30 June 2027 if you expect to sell after that date, and book it early.
- Model the timing rather than assuming it. For some practices, selling before 30 June 2027 is better. For a practice between $2 million and $10 million turnover that fails the net asset test, it may well be worse.
- Sequence the superannuation contribution and the election form correctly. The form goes to the fund before or with the money.
Talk to us
We advise Adelaide doctors, dentists and specialists on practice structures, sales and succession, and we act on both sides of these transactions. If a sale is on the horizon — this year, or in five — the work that protects the outcome is done well before the contract.
You can read more on our accountants for medical professionals and business advisory pages. You may also find our guides to going into private practice in Adelaide and service trusts for doctors useful.
Get in touch with our Adelaide team to talk it through.
This article is general information only and was prepared in September 2026. It does not take account of your objectives, financial situation or needs, and it is not tax, legal or financial product advice. Some of the measures described commence on 1 July 2027 and supporting guidance is still in draft, so details may change. The comparison of selling before or after 1 July 2027 is our own analysis and depends entirely on individual circumstances. You should obtain advice specific to your situation before acting.
