Lead Financial Solutions

𝐋𝐢𝐦𝐢𝐭𝐞𝐝 𝐑𝐞𝐜𝐨𝐮𝐫𝐬𝐞 𝐁𝐨𝐫𝐫𝐨𝐰𝐢𝐧𝐠 𝐀𝐫𝐫𝐚𝐧𝐠𝐞𝐦𝐞𝐧𝐭𝐬
Effective 10 August 2026, SMSFs may only use LRBAs to acquire business real property. Existing arrangements entered into before this date remain unaffected.


Photo by Alex Krum

𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐄𝐧𝐭𝐢𝐭𝐲 𝐀𝐫𝐫𝐚𝐧𝐠𝐞𝐦𝐞𝐧𝐭

The Service Entity Arrangement has been in place for many years, dating back to ATO Income Tax Ruling IT 276, issued in 1978 following the Federal Court decision in the Phillips case.
The primary intention of a service entity is asset protection - separating operating risk from asset ownership within a business structure.
When deciding which structure (company or trust) to incorporate as a service entity for medical professionals, there are several key factors to consider. Below are three common scenarios:

𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨 𝟏 - 𝐒𝐨𝐥𝐞 𝐏𝐫𝐚𝐜𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 𝐰𝐢𝐭𝐡 𝐚 𝐃𝐢𝐬𝐜𝐫𝐞𝐭𝐢𝐨𝐧𝐚𝐫𝐲 𝐓𝐫𝐮𝐬𝐭
This is the most common arrangement.
The service entity operates through a discretionary trust, allowing net profits to be distributed flexibly to beneficiaries such as:
• Spouse/partner
• Adult children
• Minor children (capped at $416 tax-free threshold)
• Parents (including non-residents, subject to non-resident tax rates)
If there are excess profits not required for personal distribution, the trust may distribute to an investment company (commonly referred to as a “bucket company”) to cap tax at the corporate rate and retain funds for reinvestment. This structure provides flexibility in income streaming and strong asset protection.

𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨 𝟐 - 𝐒𝐨𝐥𝐞 𝐏𝐫𝐚𝐜𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫 𝐰𝐢𝐭𝐡 𝐚𝐧 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐂𝐨𝐦𝐩𝐚𝐧𝐲
Under this arrangement, killing two birds with one stone, a company acts as both:
• The service entity; and
• The investment vehicle (e.g. investing in shares and ETFs), creating a potential “snowball effect” for long-term wealth accumulation.
If access to retained profits is required, the company can declare dividends. For flexibility in distributing those dividends, the shareholder of the company should ideally be a discretionary trust.
This structure is generally simpler but provides less distribution flexibility compared to a trust unless properly structured.

𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨 𝟑 - 𝐌𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐏𝐫𝐚𝐜𝐭𝐢𝐭𝐢𝐨𝐧𝐞𝐫𝐬 𝐰𝐢𝐭𝐡 𝐚 𝐇𝐲𝐛𝐫𝐢𝐝 𝐓𝐫𝐮𝐬𝐭
A Hybrid Trust combines features of both a discretionary trust and a unit trust.
The advantage of a hybrid structure is:
• Fixed entitlement for passive income (via units); and
• Discretionary allocation of each practitioner’s service fee contributions, allowing profits to be distributed fairly and proportionately.
This structure can work well where multiple practitioners are contributing at different levels but still require fairness and flexibility.

Each structure has its own tax, asset protection, and commercial considerations. The appropriate choice depends on income levels, family circumstances, long-term investment plans, and whether there are single or multiple practitioners involved.

𝐎𝐩𝐞𝐧 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬

When a new client comes onboard, the first thing we do is ask open-ended questions to fully understand their circumstances, objectives, and any changes in their position.

Even for existing clients, if their role changes (for example, becoming a consultant), we revisit the discussion and ask open questions again. A change in structure or income source often creates new tax planning considerations and potential deductions.

It can be frustrating to see situations where former advisers/accountants have not taken this approach. Without asking the right open questions, it is easy to miss material deductions or structuring opportunities that could significantly impact the overall tax outcome.



Photo by Jose Vazquez

𝐀𝐓𝐎 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐓𝐢𝐦𝐢𝐧𝐠

ATO have adopted a stricter enforcement approach in relation to tax payments.

All tax payments must be received by the ATO on or before the due date. Payments received after the due date may attract late payment penalties and General Interest Charges (GIC).

We strongly recommend that taxpayers arrange payment at least two business days in advance to ensure the ATO receives the funds by the due date.

If payment is made on the due date, bank processing delays may result in the ATO receiving the funds after the due date, in which case penalties and GIC may apply.

Example:
If a tax bill is due on 10 February 2026, payment should be made no later than 8 February 2026 to ensure timely receipt by the ATO.



Photo by Rupixen