Financial Planning for Dentists in Australia

Dentists face some of the highest professional costs in healthcare, and understanding which expenses are fully deductible is foundational to tax efficiency.

• AHPRA Dental Board registration: ~$400–$460/yr for general registration; specialist registration (oral surgery, orthodontics, periodontics, etc.) ~$550–$650/yr - fully deductible as a condition of earning income
• ADA membership: Australian Dental Association fees $500–$1,200/yr depending on state branch - deductible as a professional association subscription
• CPD requirements: Dentists must complete 60 hours CPD per 3-year cycle (AHPRA); CPD courses, conferences, and associated travel are deductible against professional income
• Indemnity insurance: Dental defence organisations (DDO, Avant) - premiums range $2,000–$15,000+ depending on scope of practice; oral surgeons and implant practitioners pay at the higher end; premiums fully deductible
• Clinical consumables: Composites, impression materials, burs, gloves, PPE - deductible for owner-operators; associates usually supplied by the practice
• Radiation licence fees: Dentists using X-ray equipment require radiation use licences in each state (e.g., $100–$300/yr ARPANSA/state regulators) - deductible
• Home office: Dentists performing treatment planning, billing review, or CPD from home can claim the ATO shortcut 67c/hr (full-year logbook required) or actual method

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Dental practice ownership in Australia is highly regulated. Unlike most professions, ownership restrictions exist in several states and territories that prevent non-dentists from owning a dental practice.

• State-based restrictions: Some states (notably South Australia and Western Australia) historically restricted dental practice ownership to registered dentists; most jurisdictions now allow corporate ownership but require a dentist to be in day-to-day clinical control
• Corporate dentistry: Large dental groups (Smiles Inclusive, Pacific Smiles, Dental Corporation) operate under a management services agreement model - the clinical entity is owned by a dentist, the management company operates separately
• Solo practice structure: Typically a company or trust owns the practice assets; the dentist practitioner either owns the company or operates as an employee/contractor; distributions are subject to PSI rules for chair-side (clinical) income
• Goodwill valuation: Dental practice goodwill is typically 60–100%+ of annual billings (higher than many specialist practices) because of strong patient retention and the relationship-based nature of general dentistry; specialist practices (orthodontic, oral surgery) may attract 80–120%+ multiples
• Goodwill is not depreciable: Practice goodwill is a capital asset - the purchase price is a cost base for CGT purposes but cannot be deducted over time; only equipment and fit-out (Division 43) are depreciable
• Associate vs employee: Many practices engage dentists as associates (contractors) - if the associate's income comes primarily from chair-side procedures in one practice, PSI rules likely apply and income must flow to the individual

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Personal Services Income (PSI) rules are one of the most significant tax issues facing dentists in private practice. Getting this wrong can trigger ATO audit and back-tax liabilities.

• What is PSI for dentists? If more than 50% of a dentist's income comes from their personal skills, labour, and knowledge (i.e., clinical treatment), that income is PSI - regardless of whether it is earned through a company or trust
• Results test: If at least 75% of PSI comes from producing a result (e.g., completing a crown or extraction - not ongoing management), provides own tools/equipment, and is liable to fix defective work at own cost - the results test may be passed, allowing income to be split through a structure
• 80% single-payer rule: If 80%+ of the dentist's income comes from one source (one practice, one dental group), the results test is automatically failed regardless of other criteria - income must be attributed to the individual
• Multiple practices: A dentist working across multiple practices or clinic groups is more likely to pass the results test - each source independently assessed
• Lab fees and materials: If the practice genuinely employs dental assistants, lab technicians, or other clinical staff who substantially contribute to patient outcomes, the income may qualify as business income (not PSI) - the PSI rules include a business income test
• Specialist dentists: Orthodontists and oral surgeons often have practice structures where multiple clinicians and clinical staff contribute to outcomes - these practices are more likely to be assessed as a genuine business rather than PSI, but advice is essential

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Dental practices are capital-intensive - dental chairs, X-ray equipment, autoclaves, CBCT scanners, and CAD/CAM systems represent significant investments. Maximising depreciation deductions requires understanding ATO rules.

• Instant asset write-off: For 2023–24 and 2024–25, small businesses with turnover under $10M can immediately deduct assets costing up to $20,000 (per asset); this includes dental chairs (~$15,000–$30,000), autoclaves, and basic equipment
• Dental chairs and units: A full dental chair unit (chair, bracket table, delivery unit, light) costs $25,000–$60,000 new; if above the instant write-off threshold, depreciated over effective life (ATO TR 2022/1 lists dental chairs at 12 years effective life)
• CBCT and OPG equipment: Cone beam CT scanners ($80,000–$200,000) and panoramic X-ray machines are depreciated over 10–12 years effective life under ATO guidelines; leasing is common to preserve cash flow
• CAD/CAM systems (CEREC): Chairside milling units ($60,000–$150,000) - effective life 10 years; software licences are typically deductible immediately as intangible assets with no effective life (section 40-880 or revenue in nature)
• Fit-out and leasehold improvements: Surgery fit-out (plumbing, cabinetry, suction systems, compressors) depreciable under Division 43 (building allowance 2.5%/yr) or Division 40 where items are not structural; get a tax depreciation schedule from a quantity surveyor at fit-out
• Sterilisation equipment: Autoclaves and washer-disinfectors (~$5,000–$20,000) - ATO effective life 10 years; most will qualify for instant asset write-off under current thresholds

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Dentists typically have high incomes but uneven cash flow (patient no-shows, material costs, staff wages). Superannuation strategies must be structured around both the practice cash cycle and ATO contribution rules.

• Concessional contributions cap $30,000 (2024–25): Includes SG (11.5%) plus salary sacrifice or personal deductible contributions; high-income dentists on $250k+ will have SG of ~$28,750 - only ~$1,250 of additional concessional contributions remain before hitting the cap
• Division 293 tax: Dentists earning above $250,000 (income + concessional contributions) pay an additional 15% tax on super contributions - total tax on CCs is 30% (15% fund tax + 15% Division 293); still better than 47% marginal rate for most dentists
• Carry-forward concessional contributions: If TSB was under $500,000 at 30 June 2019 and contributions were below the cap in prior years, unused cap amounts can be carried forward up to 5 years - useful for dentists who had low-income registrar years
• Non-concessional contributions: Up to $120,000/yr (or $360,000 bring-forward if under 75 and TSB under $1.68M); after-tax profits from a dental practice can be contributed as NCCs after paying company/trust tax
• SMSF with business real property: If a dentist owns their surgery premises, an SMSF can purchase the property (business real property) - rent paid to super at market rates is deductible to the practice and taxed at 15% in accumulation or 0% in pension phase; LRBA rate for real property 8.85% (2024–25)
• Spouse contributions: Where a dentist's partner earns under $37,000, contributing up to $3,000 to the spouse's super fund generates an $540 tax offset - small but useful in years of income restructuring

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AHPRA Dental Board registration 2024–25: General dentist ~$400–$460/yr; specialist registration ~$550–$650/yr. All AHPRA fees are fully deductible against professional income.

Dental practice goodwill: 60–100%+ of annual gross billings for general practice; specialist practices (orthodontics, oral surgery) may attract 80–120%+ multiples. Unlike equipment, goodwill is not depreciable - it is a CGT cost base asset. Selling a practice after 15+ years may qualify for the small business CGT concessions (15-year exemption or retirement exemption up to $1,705,000 cap) if the $6M maximum net asset value test is met.

Equipment effective lives (ATO TR 2022/1): Dental chair units 12 years; CBCT/OPG machines 10–12 years; CAD/CAM milling units 10 years; autoclaves 10 years. Instant asset write-off at $20,000 threshold applies per asset for small businesses under $10M turnover.

PSI threshold: If 80% or more of a dentist's income comes from one payer (one practice/employer), the results test is automatically failed and income must flow to the individual dentist - income splitting through a company or trust is not permitted for that income.

Division 293 threshold: $250,000 (income + concessional super contributions). A dentist on $280,000 with $28,750 SG has $308,750 - all $28,750 of CCs attract the additional 15% Division 293 tax (total 30%). The ATO issues a Division 293 assessment after the tax return is lodged; payment can be made personally or released from super.

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