ATO and lump sums for doctors joining a medical centre

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The ATO is reviewing lump sum payments in the health care industry, and in particular where a lump sum is received from one of the major ‘corporates’ in exchange for continued services (typically 5 years) by the doctor to or rather via the medical centre. Apparently the ATO is looking to previous years (going up to 5 years back) to see if this lump sum was reported as capital gain or ordinary income. The ATO holds that in most cases these lump sums are NOT a capital gain, but are income and where they find this has been incorrectly reported on the doctor’s tax return the ATO will amend the return to recoup any tax lost – plus interest and possibly penalties. This of course also applies prospectively: any such dealings will be scrutinised closely by the ATO in the future.

Unsurprisingly our advice is: talk to us first before you commit, so we can work out the figures and ensure you achieve the best result.