By Joe Caristo, Partner at Medi Financial

Establishing your own medical practice is an opportunity to shape your clinical environment and build a business that supports your long-term goals. Alongside the clinical vision, you need a clear financial plan covering establishment costs, everyday operations and future growth.

From choosing your business structure to managing cash flow and securing finance, the decisions you make early can influence your practice for years to come.

Market Opportunity

An ageing population and rising chronic disease prevalence continue to support demand for healthcare services in Australia.

For practice owners, however, growing demand sits alongside rising operating costs, regulatory obligations and pressure on margins. Building a sustainable practice requires an understanding of both the opportunity and the financial commitments involved.

Medicare & Billing Landscape

Your billing model directly affects revenue, patient access and cash flow.

Whether you operate a bulk-billing, mixed-billing or private-billing practice, regularly review how your fees, rebates and collection processes align with the cost of delivering care.

Keep your practice management systems and billing procedures current, and seek advice on changes to Medicare requirements that may affect your operations.

Business Structures & Tax Considerations

Choosing the right structure is one of the most consequential decisions a new practice owner will make.

Common options range from sole trader (simplest, least expensive) to company structures and service trusts. Key considerations include asset protection, profit distribution, and long-term succession planning - not just tax minimisation, as a structure driven purely by tax outcomes can constitute tax avoidance.

ATO Scrutiny – PSI Rules

On 1 December 2025, the ATO released Practical Compliance Guideline PCG 2025/5, clarifying its approach to Personal Services Income (PSI). Qualifying as a Personal Services Business may exempt practitioners from specific PSI attribution rules. However, it does not protect against Part IVA anti-avoidance provisions where the dominant purpose is tax minimisation.

Practices operating through companies, trusts or service entities should review their arrangements and ensure their structures reflect the underlying commercial reality. A transition period is available until 30 June 2027.

Service Trust Arrangements

GP practice owners have historically overpaid taxes—estimated at up to $20,000 annually per full-time GP—due to unrealistic fee structures and suboptimal business structures.

An alternative approach is the tenant doctor model, where doctors operate independently within a shared facility, renting consulting rooms, administrative services, practice facilities and shared infrastructure.

Potential benefits include clearer commercial arrangements, improved tax efficiency and greater operational flexibility.

Payroll Tax – A Continuing Minefield

Payroll tax has emerged as one of the most complex and financially material compliance risks for practice owners.

Since the Thomas and Naaz decision, where contracted medical professionals under the standard service fee model were found to attract payroll tax liability, uncertainty has loomed across the industry. With amnesties expiring and limited jurisdictional guidance, specialist, dental and allied health practices face significant concerns regarding future obligations.

Contractor arrangements must demonstrate a genuine contractor relationship rather than an employment relationship, and service agreements must accurately reflect commercial reality. State-based thresholds and exemptions vary significantly. GP exemptions are now available in several states, including Victoria from 1 July 2025, while specialists and allied health practitioners generally remain exposed without equivalent exemptions.

When assessing arrangements, regulators consider factors including work hours, rosters, patient fee collection, invoicing arrangements, advertising responsibilities and operational control.

Tip: Business structures should support commercial objectives, succession planning and asset protection - not solely tax outcomes. Professional legal, accounting and lending advice should be obtained before implementing structural changes.

Key Actions for Transitioning Doctors

Setting up a private practice requires navigating several regulatory requirements. At a minimum, a doctor will need an Australian Business Number, a Medicare Provider Number, a registered business name, and payroll and tax arrangements in place.

Beyond the basics, new owners should:

1. Engage a specialist medical accountant and a broker who specialises in medical finance early to ensure the right structure, tax position and commercial protections are in place from the start.

2. Obtain an ATO review of your Personal Services Income (PSI) exposure. Review PSI and service trust arrangements against PCG 2025/5 to confirm compliance and reduce risk.

3. Review service trust arrangements to ensure they reflect commercial reality and meet ATO requirements.

4. Conduct a state-by-state payroll tax risk assessment, evaluating contractor arrangements and applicable exemptions before engaging doctors.

5. Decide on a billing model. Choose the right mix of bulk billing, mixed billing or private billing in light of Bulk Billing Practice Incentive Program (BBPIP) incentives and patient needs.

6. Seek independent strategic advice to assess opportunities and risks, including private equity approaches, before making decisions.

The transition from clinician to practice owner requires a significant shift in financial, legal and operational understanding. Professional advisory support from day one is essential for long-term success.

Building Your First Medical Practice: Mistakes Australian Doctors Should Avoid

or many Australian doctors, building a purpose-built clinic is the culmination of years of training - a chance to finally create a practice that reflects their own clinical vision, rather than working within someone else's.

But building from the ground up is a different challenge altogether from buying an established practice or leasing consulting rooms. It involves land acquisition, construction finance, council approvals, architects, builders and a long list of project milestones — all while you continue seeing patients.

Having helped hundreds of healthcare professionals finance their practice developments, we've seen the same mistakes surface again and again.

Here are five of the most common:

1. Getting the financing structure wrong from the start

2. Buying land before understanding your borrowing capacity

3. Designing for your dream practice instead of your first

4. Choosing a builder without proper due diligence

5. Building too early in your medical career

Finance

1. Getting the Financing Structure Right from the Start

Before land, design or builders even enter the picture, one of the most overlooked mistakes is failing to structure the finance correctly from day one.

A useful principle to keep in mind: match the term of your funding to the term of your need. Short-term requirements - such as a bridging facility while a lease runs down, or funding equipment that will be upgraded in a few years - are best served by short-term finance. Longer-term commitments, like the land and building itself, call for longer-term structures.

Layer this with the right tax and ownership structure for your circumstances - whether that's a company, trust, or self-managed super fund - and the difference in outcome over the life of the practice can be substantial.

Because this decision sits underneath everything else in the project, it's worth resolving early, in partnership with a lender and adviser who understand medical practice finance specifically, rather than retrofitting it once the project is already underway.

2. Buying Land Before Understanding Your Borrowing Capacity

One of the most common - and most costly - mistakes is purchasing a block of land before understanding the full cost of the project.

It's easy to fall in love with a location. But the land is only one part of the equation. Once construction costs, fitout, medical equipment, professional fees and contingency allowances are added, many projects blow well past their original budget.

Completing detailed financial modelling before signing a contract gives you a realistic picture of what you can comfortably afford - and prevents the difficult conversation that happens when a dream site turns out to be financially unworkable.

Real example:
One doctor we recently assisted had identified a premium site in a highly sought-after location. Once projected construction costs were factored in, the total project would have placed real pressure on cash flow during the early years of ownership. They opted instead for a nearby site that better matched their financial position — and the finished clinic still achieved their long-term goals, while preserving capital for staff, technology and growth.

3. Designing for Your Dream Practice Instead of Your First Practice

Every doctor pictures an exceptional clinic. The challenge is resisting the urge to build all of it on day one.

Extra consulting rooms, oversized waiting areas, premium finishes and specialised treatment spaces all add significant construction cost - often without generating additional revenue in the first few years.

A staged approach tends to deliver a stronger financial outcome. Design around your realistic patient demand today, while allowing the building to expand as the practice grows. This keeps upfront borrowing lower, protects cash flow, and gives you the flexibility to invest further once demand actually justifies it.

Tip: A staged approach delivers a stronger financial outcome. Build for your realistic patient demand today, then expand as your practice grows.

4. Choosing a Builder Without Proper Due Diligence

Few decisions affect a project's outcome as much as the choice of builder.

Quotes can vary significantly between builders, scopes of work aren't always directly comparable, and unrealistically low pricing has a habit of turning into variations and delays once construction is underway.

A good finance partner adds a layer of protection here. Construction funds should only be released once agreed milestones are genuinely completed – this keeps builders paid promptly, while maintaining appropriate oversight of progress throughout the build.

That structure benefits everyone involved: the builder gets certainty and a predictable payment rhythm, suppliers keep working without disruption, and you're shielded from delays caused by paperwork gaps or miscommunication.

5. Building Too Early in Your Medical Career

Doctors who've spent several years in private practice typically have a much clearer sense of patient flow, consulting room utilisation, staffing needs and day-to-day operational realities than those still early in their careers. That clarity translates directly into better design decisions.

One practitioner we supported chose to continue leasing for two more years before committing to their own build. In that time, they developed a clear view of room configuration, equipment needs and the kind of patient experience they wanted to create.

The result was a far more efficient practice – and money that wasn't wasted on features they didn't actually need.

A Quick Pre-Build Checklist

Before committing to a development, ask:

• Have you modelled the complete project cost?

• Do your ownership and funding structures support your long-term goals?

• Does the design reflect realistic early patient demand?

• Have you checked your builder’s references and scope?

• Do you understand how the practice will operate day to day?

• Are the funding arrangements for land, construction and equipment coordinated?

The Bottom Line

Building your own medical practice is one of the most rewarding investments you'll make in your career - but also one of the most complex.

The most successful projects start with careful planning, realistic financial modelling, the right structure, and specialist advice from people who understand how medical practices are actually funded.

Choosing a finance partner with genuine healthcare lending experience helps keep your project on budget, ensures builders are paid on time, and keeps construction moving smoothly from the first slab to opening day.

With the right planning and the right team behind you, owning a purpose-built medical practice becomes a well-managed investment in your professional future – not an unnecessary financial risk.

Common Financial Challenges Practice Owners Face

1. Revenue Leakage: Under billing, missed billings and poor follow-up lead to significant revenue loss.

2. Cash Flow Volatility: Mismatch between earnings and cash receipts creates pressure.

3. Staffing Costs: Largest expense category and can erode profitability if not managed.

4. Lending Structure: Using the wrong lending products can limit cash flow and growth.

5. Compliance Risk: MBS, payroll and regulatory obligations require diligence and accurate systems.

6. Growth Management: Scaling too quickly without the right systems and cash flow can be risky.

Profit vs Cash Flow

Understand the key difference:

Profit measures what your business has earned after deducting all expenses from revenue. It indicates long-term sustainability and whether your business model works.

Cash Flow tracks the actual movement of money in and out of your bank account. It measures immediate liquidity and the ability to pay bills.

The main difference lies in timing and accounting methods. Because many businesses operate on accrual accounting (recording sales when invoices rather than when paid) and include non-cash expenses like depreciation, a business can show strong profits on paper but run out of cash.

Cash Flow Timing Factors

More prominently in the medical field, Clinic owners need to be aware that just because the financials records look good, it doesn’t always translate to what is in your bank account.

Timing of cash flow vs accrual accountant can vary greatly when it comes to:

• Ageing Population: Most Australians are accessing specialist care.

• Medicare/Health Fund Timing: Payments are not always immediate.

• GAP Payments vs. Bulk Billing: Out-of-pocket payments impact cash flow timing.

• Issued Invoices vs Paid Invoices: Invoices do not equal cash in the bank.

• Seasonal Fluctuations: End of year slowdown, school holidays, flu season, etc

Tip: Monitor cash flow weekly, not monthly. Forecast at least 12 months ahead.

Managing Cash Flow - Roles and Responsibilities

Effective cash flow management requires a clear understanding of responsibilities across your practice.

Owner/Doctor - Strategic Oversight

The Owner/Doctors will oversee the strategic direction and financial decisions that impact the long-term health of the business.

• Reviews and approvals of cash flow reports

• Set financial policies (wage and spending limits)

• Make larger investment / capital outlay decisions

• Ensure capital is available for Tax, Super and day-to-day operation

Practice Manager - Daily Operations

Practice managers oversee the daily activities that keep cash flowing smoothly.

• Making ad-hoc payments

• Preparation of cash flow reports

• Manage accounts receivable / payable

• Monitor cash movement

Planning Ahead for Sustainable Cash Flow

1. Roadmap your first year: For the initial stages of the practice operation, we always suggest road mapping the project 1-year expected cash flow obligations with Doctors.

2. Plan for volatility: Cash flow can be unpredictable in the first couple of years. Be prepared for timing gaps between invoicing and receipts.

3. Build a cash buffer: Plan for this in the form of excess capital put aside to cover operating expenses, surprise costs and slow periods.

4. Consider a drawdown facility: Providing a drawdown facility Doctors can use to ease the expected cash flow volatility of the first couple of years.
   
   

“Better to have access to an established business liquidity facility and not need it, than not to have and require it.”

Loan Structures & Strategic Advice

It's incredibly important not just to have the correct operating structure, but also to have the best lenders and products to support your operation.

At Medi Financial, our job is simply to understand you and your business, then navigate the countless lenders, policies, and products in the market to ultimately provide you with the best-tailored solutions.

Far too often, we've encountered doctors who have self-diagnosed their financial structure or taken the advice of generic brokers or bankers – which, time after time, we then need to fix up and/or restructure completely.

Any incorrect product or lenders utilised, could lead to:

• Unnecessary outlay of initial capital

• Unnecessary time waste being wasted talking to the incorrect lenders or the take up of incorrect products

• Unnecessary overpayment of interest, deteriorating your bottom line and critical cash flow

• Incorrect features being enable on the loan product, which may cause ( i.e I/O vs PNI, short business loans vs loan term loans) a stagnation of business operation effectiveness and causing a drain on Cash flow.

No reputable doctor would recommend a patient self-diagnose and then self-treat. The same logic should apply to your finances. Sourcing your own loans by going direct to the bank or via a generic broker rarely lead to lending optimisation for you and your practice

Matching Funding to Purpose

The old adage of matching short-term requirements with short-term funding, and long-term requirements with long-term funding, generally comes into play here. Overlaying this with appropriate structural and tax advice for your situation typically leads to optimal outcomes.

Understanding how each funding option works - and selecting the right combination - is essential to building a financially sustainable and scalable practice.

It's recommended that practice owners collaborate with medical lending specialists, like Medi Financial, to seek professional advice tailored to their circumstances.

1. Working capital: funding everyday expenses and short-term timing gaps.

2. Equipment finance: purchasing medical equipment and funding eligible fitout costs.

3. Practice acquisition finance: purchasing an existing business or ownership interest.

4. Commercial property finance: acquiring practice premises.

5. SMSF lending: financing eligible property within an appropriate superannuation strategy.

Funding Types Overview

• Overdraft: Cash flow management

• Existing Equity: Start-up funding

• Asset Finance: Equipment and fit-out

• Commercial Loans: Practice premises purchase

• Goodwill Loans: Practice Acquisition

• SMSF Lending: Long-term wealth creation

Day-to-Day Funding

An overdraft may help manage temporary cash flow fluctuations.

Secured Overdraft

A secured overdraft is backed by an asset, such as property or a fixed deposit, which the borrower provides to the bank as security. If the borrower cannot repay, the bank can take or sell the asset.

Because the security reduces the bank’s risk, secured overdrafts generally offer lower interest rates, higher borrowing limits and easier approval for businesses. They can provide cheaper funding with higher limits.

Unsecured Overdraft

An unsecured overdraft has no collateral. The bank assesses the application mainly on the borrower’s income, credit history, account activity and business performance.

Because there is no security, the bank takes on more risk. Unsecured overdrafts generally have higher interest rates, lower borrowing limits and stricter eligibility requirements. However, they may offer faster approval, providing greater flexibility and quicker access to funds.

Choose the Right Pathway for Your Practice

1. Using Existing Equity

Borrow against the equity in your current property to fund your practice.

Typical use: Start-up funding, working capital and practice expansion.

Pros

• Can offer a lower cost of funding.

• Flexible structures, including interest-only, variable and fixed options.

• Potentially faster approval.

• May not require an established business performance history during the early stages.

Cons

• Personal property is used as security.

• Increases personal financial risk.

• Can reduce future borrowing capacity.

• Blurs personal and business finances.

2. Asset Finance (Equipment/Fitout)

Finance medical equipment, fitout and other assets.

Typical use: Equipment, fitout, vehicles and practice start-ups.

Pros

• Up to 100% financing of eligible assets and fitout, subject to lender criteria.

• Secured against the asset.

• Potentially faster approvals and a streamlined process.

• Preserves cash flow and working capital.

Cons

• Limited to specific asset purchases.

• The asset may depreciate faster than the loan is repaid, leaving its value below the outstanding balance.

• Rates vary depending on the asset and borrower profile.

• Less flexibility than broader business loans.

3. Commercial Property Loans

Finance the purchase of your practice premises.

Typical use: Purchasing owner-occupied practice premises.

Pros

• Eligible medical professionals may be able to borrow up to 100% of the property’s value, subject to lender criteria.

• Builds long-term equity in a commercial asset.

• Interest may be tax-deductible.

• Specialist lending options are available for medical professionals.

Cons

• An annual review is generally required by the lender.

• More complex approval process.

• Ongoing property costs, including rates, insurance and maintenance.

• Less flexibility than residential loans.

4. Goodwill Loans (Practice Acquisition)

Finance the purchase of an existing practice.

Typical use: Buying an existing practice or joining a partnership.

Pros

• Funding may be available for up to 100% of the purchase price, subject to lender criteria.

• Repayments can be structured around projected future income.

• Preserves working capital.

• Potential tax benefits when structured appropriately.

Cons

• Higher interest rates.

• Requires a strong business case.

• More complex due diligence.

• Financial risk if the practice underperforms.

Build Wealth Through Smart Structures

Using your practice and property to create long-term financial freedom.

• Your Medical Practice: Generate income and build value through your medical practice, while considering how property ownership could support your long-term financial goals.

• Commercial Property: Your practice premises may be owned by your self-managed super fund (SMSF), where appropriate for your circumstances.

• SMSF Ownership: Owning commercial property through your SMSF provides an opportunity to build equity within your fund.

• Retirement Wealth: This approach can contribute to building long-term retirement wealth and supporting your financial future.

Key Benefits

An appropriately established structure may offer:

• For effective structure

• Asset protection

• Rental income potential

• Long-term retirement wealth creation

• Greater control over assets

Considerations

Factors to consider include:

• Setup costs

• Ongoing compliance obligations

• Limited flexibility within an SMSF

• Funds tied up until retirement

Note: Not all funding structures are created equal! Speak to Medi Financial before committing to a lender. We’ll help you structure your practice the right way - from the start.

Track The Metrics That Matter

Focus on the key performance indicators that drive financial success.

• Revenue Per Session: Measure productivity and capacity

• EBITDA Margin: Understand your profitability

• Debtor Days: Keep on top of outstanding receivables

• Staff costs as a Percentage of Revenue: Measure productivity and capacity

• Cash Position: Understand your profitability

• Patient Growth: Keep on top of outstanding receivables

Tip: Review your numbers at least monthly and benchmark your practice against industry standards.

Build a Strong Financial Foundation for Success

Understand your cash flow: Profit is important, but cash flow keeps your practice running.

• Plan ahead: Forecast cash flow and prepare for timing and seasonal fluctuations.

• Choose the right funding: The right structure and lender can save you thousands and protect your cash flow.

• Use specialist advice: Medical lending specialists understand your world and can unlock better outcomes.

• Focus on long-term value: Build a practice that supports your lifestyle, your team and your community.
  
  

Build a Financially Strong Practice

Four practical steps to build a profitable and sustainable practice.

1. Build Financial Visibility: Track and understand the numbers that drive your business. Use real-time dashboards to monitor performance and make informed decisions.

2. Create a Funding Strategy: Align your funding structure with your goals - whether it’s working capital, equipment, property or growth capital.

3. Build the Right Advisory Team: Surround yourself with experts who understand healthcare and can help you navigate complex decisions.

4. Plan Beyond Year One: Think long-term, plan for growth, reinvestment and an eventual exit to maximise the value of your practice.

About The Author

Joe Caristo is a Partner at Medi Financial and holds a Master of Finance and Bachelor of Business. He has more than 15 years of banking experience, including roles as a Director at Westpac/St George Private Bank, on BT Financial’s derivatives and warrants desk, and in BT’s wealth advice division.

"The right lending structure isn’t just about securing finance – it’s about creating the foundation for a stronger, more sustainable practice."

This article provides general information. Seek advice from appropriately qualified lending, legal, tax and financial professionals about your individual circumstances.

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This article is adapted from Medi Financial’s comprehensive 96-page Industry Priority Report - a practical guide to the financial, legal and operational considerations involved in establishing and growing a successful private practice.

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