Australia: New year, new medical practice?

Considerations when establishing or joining a new medical practice.

It's the new year, you've had some time off to refresh and recharge for the year ahead and you might be thinking about actioning some new goals for the year. If one of those goals is establishing or starting a medical practice, then this is the guide for you!

Ownership and corporate structure

One of the first decisions to be made when establishing a practice is how the business will be owned and structured. This decision will depend on several factors including the number of owners involved and the scale of the business that will be operated. The most typical methods of ownership include:

1. Sole trader
2. Partnership
3. Company
4. Trust (whether Unit, Discretionary or Hybrid) or
5. A company acting as trustee for the trust.

Where there is more than one owner in the business, the relationship between the owners should also be governed by an ownership document. The table below shows the typical document and its corresponding business structure.

These documents can record important factors, including

1. The way the owners make decisions.
2. The process that needs to be followed if the owners have a dispute.
3. How the owners will be paid or how the profits of the business will be used and shared.
4. How owners can enter and exit the business in the future.

Location, location, location

Even in the age of remotely run businesses, the reality is that practices predominately require a practice location. With various factors such as location, demographic and price – it's easy to be overwhelmed by the options available when choosing your location. However, before you pick your fit-out company, you will need to decide whether you will own or lease your location.

No matter what you decide, securing premises and having a detailed lease outlining the security of your tenure and rent payable is a fundamental step. For leased premises, this often means Terms Sheets/Heads of Agreements and draft leases being negotiated with the landlord. Of course there are agents out there that can assist with finding and negotiating these terms for you. If you are looking to purchase a property, you will need to ensure the usual due diligence steps are followed and the premises are zoned for your intended purpose. Unsurprisingly, a contract that protects you properly during the purchasing process and lease will be a key aspect of your property plans.

Key employees

Before you hire any employees, it's important to understand the relevant minimum legal terms of employment that will apply to roles in your practice and to have appropriate employment documentation in place.
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You will need solid template employment contracts that reflect the relevant minimum legal terms of employment in accordance with the National Employment Standards (NES) and any applicable award.

Awards are legally binding instruments made under the Fair Work Act 2009 (Cth), which supplement the NES to specify additional minimum legal terms of employment on an industry or occupational basis. The Health Professionals and Support Services Award 2020 and the Nurses Award 2020 are the two awards that commonly cover employees working in a private medical practice.

You will need different template employment contracts for permanent and casual employees.
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Generally, less is more when it comes to written workplace policies and procedures. However, some policies are essential to ensure compliance with legislation, including policies dealing with work-related discrimination, sexual harassment and bullying. All employees should be trained on these policies.
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You will need to give all new employees a copy of the Fair Work Information Statement. Casual employees and employees whose contract will terminate at the end of an identifiable period will also need to be given additional information statements.

Plan for the unexpected

As the adage goes in business, 'expect the unexpected'. While you work hard to ensure that the unexpected is managed properly, it's important to ensure that this also extends to planning what will happen with the business if you, or other key owners and personnel are not available to undertake the roles you are usually able to perform.
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This could involve several matters, including:

Key contracts

Of course, there are other considerations and agreements required when establishing or joining a practice that will help mitigate risks. These include:

1. Privacy policies and disclaimers – practices have particular obligations under the Privacy Act1998 (Cth) including to have a privacy policy (also sometimes known as privacy statements) which set out the way private and sensitive information will be handled and used by the practice. Subject to where your practice is located, you may also need to comply with additional obligations when dealing with patient records.
2. Facilities and Services Agreement – following recent case law and clarification provided by various state revenue offices across Australia regarding payroll tax, it's important to ensure the practice is properly documenting the relationship with the doctors and understand what different relationship structures can exist between doctors and the practice.

For more considerations, we've created an extensive checklist to help you throughout the process.

Download your checklist here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.