Accounting Videos & Articles for Medical Professionals

August 12 2026

featured article — Barrons Top 150 Financial Advisers 2025

Smith Coffey is delighted to congratulate Stephen Jones on being recognised in Barron's Top 150 Financial Advisers 2025, ranking#59 in Australia. This recognition highlights Stephen's longstanding commitment to delivering exceptional financial advice and trusted client relationships over the past 30 years. Read the Full Article

by the admin
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June 23 2026

featured article — ATO Crackdown on Holiday Homes: What Property Owners Need to Know

The Australian Taxation Office (ATO) has introduced a significant shift in how tax deductions apply to holiday homes. These changes, outlined in TR 2026/1, are designed to address widespread errors in claiming deductions and represent a much stricter approach than in the past.

If you own a holiday rental property, it’s critical to understand how these changes may affect your tax position.

A Fundamental Change in Approach

Historically, the ATO allowed owners to apportion expenses based on rental versus private use.

Under the new approach, the ATO may instead apply Section 26-50, which treats holiday homes as a “leisure facility”.

This means that most property-related deductions can be denied entirely, even if the property generates some rental income.

What Is Considered a Holiday Home?

A property is likely to be classified as a holiday home (leisure facility) if it is used for private purposes at any time, including:

Use by the owner or family
Use by friends or relatives (free or discounted)
Even minimal private use (e.g. a few nights per year)

Importantly, the ATO looks at the overall pattern of use, not just the number of days.

When Are Deductions Denied?

If a property is classified as a holiday home and is not mainly used to derive rental income, Section 26-50 can apply.

Deductions that may be denied:

Interest on loans
Council rates
Land tax
Insurance
Repairs and maintenance

These are typically the largest deductions claimed by property owners.

Deductions that may still be claimed:

Platform fees (Airbnb, Stayz)
Property management fees
Advertising costs
Cleaning between tenants

The Key Test: “Mainly Used to Derive Rental Income”

The critical factor is whether the property is mainly used to earn rental income.
If the answer is yes:

Normal deduction rules apply (with apportionment where relevant)

If the answer is no:

Most deductions are denied under Section 26-50

How the ATO Determines “Mainly Used”

The ATO applies a holistic assessment, not just a simple time-based calculation.
Key factors include:

Actual pattern of use throughout the year
Whether the property is available during peak rental periods (e.g. Christmas, school holidays)
Level of private use or availability for private use
Efforts to maximise rental income (pricing, responsiveness, marketing)

Important:

Even if a property is rented or available for rent more than 50% of the year, it may still fail this test—particularly if the owner blocks out peak periods for private use.

ATO Compliance Focus: High-Risk Behaviours

The ATO is specifically targeting arrangements where:

Peak periods (e.g. Christmas, Easter, school holidays) are blocked out for private use
The property is not genuinely available for rent
Owners impose unreasonable restrictions (e.g. excessive pricing or conditions)
Rental activity is passive or limited
Private use is prioritised over commercial returns

These cases are more likely to result in denied deductions and potential audit activity.

Risk Rating: Green, Amber, Red

The ATO has introduced a practical compliance framework to assess risk:

Low Risk (Green Zone)

High occupancy, especially during peak periods
Minimal private use
Clear focus on maximising rental income

Medium Risk (Amber Zone)

Increased private use by owners, family or friends
Some missed rental opportunities
Property is used during peak income-producing periods
Less active management

High Risk (Red Zone)

Property primarily used for personal holidays
Peak periods blocked out
Limited effort to rent commercially
Unreasonable restrictions are placed on potential renters
Limited or no attempt to increase the occupancy of the property

Red zone arrangements are most likely to attract ATO scrutiny.

When Do These Changes Apply?

The ATO confirms they will not devote compliance resources for expenses incurred in relation to holiday homes before 1 July 2026, unless there is evidence of avoidance, fraud or inappropriate advantages gained from this transitional compliance approach.

What You Should Do Now

If you own a holiday rental property, consider:

Reviewing how often the property is used privately
Ensuring it is available for rent during peak demand periods
Minimising non-commercial use
Actively managing listings to maximise occupancy
Keeping detailed records of availability and bookings

If you have any questions in relation to these changes, please contact your Smith Coffey advisor or email info@smithcoffey.com.au

by the admin
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June 11 2026

featured article — Personal Services Income for Doctors & Dentists: Your Questions Answered

If you work as a doctor, dentist, locum, or contractor, particularly through a company or trust, you have certainly come across the term Personal Services Income (PSI), one of the most important tax concepts affecting healthcare professionals in Australia. For many healthcare professionals, it is one of the most misunderstood areas of Australian tax law, and getting it wrong can be costly. This guide answers the most common questions we hear from doctors and dentists about PSI rules in Australia, including what is personal services income, how the Personal Services Business (PSB) tests work, what happens if the rules apply to your income, when to seek professional advice, and more. Let’s explore answers for them here.

What is Personal Services Income (PSI)?

Personal services income is an income you earn mainly through your individual skills, knowledge, or efforts, rather than through the sale of goods or assets. Personal services income for dentists and doctors commonly includes:

Medical consulting
Dental services
Locum work
Contracting arrangements
Specialist services
Sole practitioner work

Under the Australian Taxation Office’s (ATO) definition, your income is classified as PSI when more than 50% of what you receive under a contract is for your personal effort or skills. For most doctors, dentists, locums, and healthcare contractors, this threshold is easily met. For example: A locum doctor contracted to provide services at multiple clinics may earn PSI because the income depends on their personal expertise and labour. A common misconception is that using a company or trust automatically avoids PSI rules. It does not. The ATO can still treat your income as PSI if it flows through a business entity, called a Personal Services Entity (PSE). The PSI rules are specifically designed to prevent individuals from using such structures to reduce their personal tax obligations unless they genuinely qualify for an exemption.

Does PSI Apply to Doctors and Dentists in Australia?

Yes, PSI rules in Australia apply to the majority of doctors and dentists, particularly if you work as a locum, contractor, or through a private practice structure. Here are some common examples where PSI is likely to apply:

Scenario	PSI Applicability
Locum doctor working short-term contracts	Yes
A dentist contracted to one clinic	Yes
Specialist billing through own company	Often yes
Medical practice employing multiple practitioners and staff	Possibly not

Even if you are running a thriving private practice, the ATO's approach to personal services income for medical professionals focuses on whether income is genuinely tied to a business or to the individual personally. Understanding this distinction is the starting point for any sound tax strategy. If you want tailored advice on how PSI affects your specific situation, our team provides specialist tax advice for doctors and tax advice for dentists across Western Australia.

What is the Difference Between PSI and a Personal Services Business (PSB)?

PSI (Personal Services Income) is a classification of income, specifically, the income derived from your personal skills or efforts. And PSB (Personal Services Business) is a tax status that can exempt you from the PSI rules for a given income year. Think of it this way: PSI describes what your income is; PSB status determines whether the restrictions that normally come with that income apply to you.

Scenario	PSI Applicability
Locum doctor working short-term contracts	Yes
A dentist contracted to one clinic	Yes
Specialist billing through own company	Often yes
Medical practice employing multiple practitioners and staff	Possibly not

In short, if you pass the ATO’s personal services business tests, the PSI rules, including restrictions on deductions and income splitting, do not apply to your income for that year. If you do not qualify, they do. Further guidance is available through the ATO Personal Services Income guidance.

What Are the PSB Tests and How Do I Know If I Pass?

There are four Personal Services Business tests set out by the ATO. Passing one (plus satisfying the 80% rule where required) allows you to self-assess as a PSB for that income year.

The 80% Rule

Before looking at each test, it is important to understand the 80% rule. This rule states that no more than 80% of your PSI in an income year can come from a single client (and their associates). If more than 80% comes from one source, you cannot use most of the PSB tests unless you also apply for a PSB Determination from the ATO This is particularly important for healthcare professionals who work predominantly at one hospital, clinic, or dental practice. Now, let’s understand all four PSB tests.

Personal Services Business tests	Key Requirements	80% Rule Needed?
Results Test	75%+ of PSI paid for specific results, with own tools, rectifying errors at own cost	No. Pass this, and you can self-assess as a PSB
Unrelated Clients Test	PSI received from 2+ unrelated clients via genuine offers to the public	Yes. Must also pass the 80% rule
Employment Test	20%+ of principal work done by others, or at least one apprentice for 6+ months	Yes. Must also pass the 80% rule
Business Premises Test	Dedicated business premises used solely to earn PSI, separate from home and clients	Yes. Must also pass the 80% rule

What Happens if the PSI Rules Apply to My Income?

If the PSI rules apply and you do not qualify as a PSB, there are important tax consequences:

Income attribution: Your income is attributed back to you as an individual, even if it has been paid to a company or trust.
Restricted deductions: You cannot claim many deductions you might otherwise claim through a business entity. Expenses such as rent, mortgage interest, and some home office costs are typically off the table.
No income splitting: You cannot distribute income to a spouse, family member, or beneficiary at a lower tax rate via a trust or company.
Personal tax rates apply: The full income is taxed at your marginal rate as an individual.

For example: A doctor earning $400,000 through a discretionary trust, hoping to split income with their lower-earning spouse, may find the ATO attributes all $400,000 back to them personally if PSI rules apply and no PSB status is confirmed. The expected tax savings disappear, and penalties may apply if the return was filed incorrectly. This is one of the most common consequences of personal services income for doctors operating through a discretionary trust. That’s why having the right accounting advice for doctors and dentists makes the difference between a structure that saves tax and one that creates liability.

Can I Still Use a Company or Trust if I Earn PSI?

Yes. A company or trust can still be used for operational, legal, or administrative reasons. But it is important to understand what having a structure does and does not do for you. If the PSI rules do apply:

The income is attributed back to you personally, regardless of the entity
You cannot use the structure to split income with associates or beneficiaries
Certain deductions available to the entity are disallowed

If you qualify as a PSB:

The PSI restrictions do not apply for that income year
You can legitimately retain income in the structure
You have more flexibility around distributions and deductions

Having a company or trust is not a problem, but the issue is whether you have correctly established your PSB status.

How Do I Apply for a Personal Services Business Determination (PSBD)?

A Personal Services Business Determination (PSBD) is a formal decision made by the Commissioner of Taxation that grants you PSB status for a specific income year, even if you cannot self-assess as a PSB using the standard tests. You may want to apply for a PSBD if:

You are uncertain whether you will pass any of the four PSB tests
Unusual circumstances (such as a pandemic, illness, or industry disruption) prevented you from passing a test you would otherwise meet
You passed the Unrelated Clients Test but failed the 80% rule due to circumstances beyond your control

The application is submitted directly to the ATO, and the Commissioner will review your situation and determine whether PSB status is appropriate. If granted, you receive a PSBD notice that exempts you from PSI rules for that year. Given the complexity of the application and the nuances the ATO considers, we strongly recommend getting specialist healthcare tax advice from Smith Coffey before lodging a PSBD request.

by the FSD Team
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