Buying a Dental Practice: Tax, Structure and Finance

Australia had 21,308 registered dentists at the end of 2024, and 6,928 dental practitioners in Victoria alone. Most begin as associates. The jump from associate to owner is usually a single transaction: buying a practice. It is also the largest financial decision most dentists ever make, and the tax treatment set at settlement follows you for the life of the practice.

This guide walks through buying a dental practice from the numbers side: valuation, purchase structure, GST, depreciation, duty and funding. It reflects the questions we work through with medical and dental clients in exactly this position.

Is Buying a Dental Practice Worth It?

The demand backdrop matters when assessing any practice. The ABS Patient Experiences survey found 53.9 per cent of Australians saw a dental professional in 2024-25, while 16.1 per cent delayed or skipped dental care because of cost. A practice's fee mix, location and payer profile determine which side of that statistic its patients sit on, and that shows up directly in revenue quality.

The supply side is competitive too: the Dental Board's registrant statistics counted 28,677 registered dental practitioners at 31 December 2024. The buyers you are bidding against are well informed, which makes disciplined analysis of the accounts more valuable, not less.

How Are Dental Practices Valued?

Two practices with identical revenue can be worth very different amounts. The first has three long-serving clinicians, a stable hygiene book and a ten-year lease. The second is a one-dentist practice where most goodwill walks out the door with the vendor. The earnings may look the same in the accounts; the risk does not. Published rules of thumb circulate in the industry, but no reliable multiple applies across practices, so we treat them as conversation starters rather than evidence.

Our advice is to commission an independent assessment before signing anything, and to test the vendor's addbacks line by line: family wages, personal expenses, under-market rent from a related landlord. That analysis is the core of our business valuation service, and it routinely changes the offer price.

Should You Buy the Assets or the Company?

The ATO's guidance on acquiring a business puts the share-purchase risk plainly: you may be accepting the risk associated with that company's tax history. An asset purchase also lets you set fresh depreciable values for the equipment you are actually buying, while goodwill becomes your CGT cost base for an eventual exit.

The vendor will be negotiating with their own tax position in mind. The small business CGT concessions in Division 152 of the ITAA 1997 can dramatically reduce a vendor's tax on sale where the vendor satisfies the basic conditions, including the active asset requirement and either the $2 million aggregated turnover test or the $6 million maximum net asset value test, with further conditions applying in some cases. Understanding what the deal looks like from their side of the table is a genuine negotiating advantage, particularly on how the price is allocated between goodwill and equipment.

Which entity should do the buying is its own decision: company, trust or a combination, weighed against asset protection, profit distribution and the practice's growth plans. Our guide to how trusts work in Australia covers the building blocks, and structure selection is standard scope in our tax planning engagements.

Do You Pay GST When You Buy a Dental Practice?

The conditions come from section 38-325 of the GST Act 1999, explained in the ATO's guidance on selling a going concern and in ruling GSTR 2002/5. Each condition is practical, not decorative: the written agreement must exist, the buyer must be registered or required to be registered (as practical risk management, have registration effective by settlement), and the sale must include everything necessary, which usually means the lease is assigned as part of the deal.

Get it wrong under a contract with a GST gross-up clause and the buyer funds an extra 10 per cent at settlement: $80,000 on an $800,000 GST-exclusive price, recoverable later through the BAS but tied up in the meantime. Make sure the contract's GST clause is settled before exchange, not after.

Worked Example: An $800,000 Practice Purchase

A dentist buys a suburban Melbourne practice for $800,000 through a new entity with projected turnover under $10 million. The rooms are leased, the vendor is GST-registered, and the contract allocates the price as follows.

If the going concern conditions are met, no GST is added to the $800,000. First-year depreciation deductions are roughly $100,000 written off immediately plus 15 per cent of the $110,000 pooled imaging equipment ($16,500): about $116,500, plus whatever share of the fitout qualifies as plant. The building-works share of the fitout deducts at 2.5 per cent a year under Division 43, which is why a component breakdown of the fitout is worth obtaining before settlement. The allocation between goodwill and equipment is negotiable only within reasonably attributable market values (section 40-195 of the ITAA 1997 recognises nothing more), and because the vendor's CGT position and the buyer's depreciation position pull in opposite directions, an independent valuation of the equipment schedule protects both sides.

What Can You Depreciate After Settlement?

The $20,000 instant asset write-off applied to 2025-26 and, under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 enacted in August 2026, is now permanent for eligible assets first used or installed ready for use from 1 July 2026; the ATO's new-legislation page confirms both measures are law. The practical effect for practice buyers: the annual scramble to settle equipment purchases before 30 June is gone, and the write-off can be planned around the practice's actual profit profile. The pooling mechanics are set out in the ATO's guide to simpler depreciation for small business.

Because the threshold applies per asset, what counts as one asset matters. Whether items are separate depreciating assets or components of one composite item is a question of fact and degree about how they function, not how the invoice is written: three independently functioning chairs costing $18,000 each may each qualify, whereas a single integrated system does not become three assets because it is billed in three lines. A well-itemised equipment schedule is still worth having, as the evidence base for the allocation rather than as the test itself. Fitout needs the same discipline: plant components can qualify under the simplified rules, while structural and building works fall under the Division 43 capital works regime at 2.5 per cent a year.

Premises, Duty and Funding the Purchase

If the freehold is part of the deal, Victoria's rules changed materially from 1 July 2024. A qualifying transaction in commercial or industrial property generally attracts a final round of land transfer duty and starts a 10-year transition; after that period, the commercial and industrial property tax generally applies at 1 per cent of the property's site (unimproved land) value each year. Where you are buying the business only, with the rooms leased, land transfer duty attaches to property transactions, so a goodwill-and-equipment purchase without land generally sits outside it; have your lawyer confirm the duty position for your specific contract.

On funding, established dental practices can attract favourable lending terms where servicing and borrower strength support the application, but loan structure deserves as much attention as the rate: the split between goodwill lending and equipment finance, the term matched to the assets, and personal guarantee scope. Our commercial finance service arranges practice acquisition funding, and asset finance can carry the equipment component separately where that produces a better structure. Credit decisions sit with lenders; our role is putting the numbers in a form they lend against.

Structure, Staff and the Fine Print

Many established dental groups run a service entity: a separate entity owns the equipment and employs support staff, charging the clinical entity a service fee. Done properly, at commercially realistic rates, it is a legitimate structure with a long history in healthcare; the benchmark is TR 2006/2 and the ATO's service entity guidance: services genuinely provided, charges commercially supportable. Excessive or non-commercial charges invite deductibility and Part IVA scrutiny, and where practitioner income is involved, the personal services income rules and the ATO's professional-firm profit allocation guidance (PCG 2021/4) also deserve attention. Our service trust structures guide covers the design questions in detail. Set it up at purchase, when everything is being papered anyway, rather than restructuring later.

One more due diligence item that dental buyers routinely miss: Victorian payroll tax. The SRO's medical industry guidance expressly covers dental clinics, and payments to practitioners engaged as contractors can be deemed wages under the relevant contract provisions in Division 7 of Part 3 of the Payroll Tax Act 2007 (Vic), even where the practitioner operates through a company or trust. In an asset purchase the exposure informs how you set up the new arrangements; in a share purchase, the company's historic practitioner arrangements come with it, so review them before settlement, not after.

Staff transfer has its own rules. When a business changes hands between unrelated parties, the buyer can choose not to recognise prior service for some entitlements such as redundancy, per the Fair Work Ombudsman's guidance on transfer of business; accrued leave liabilities should be priced into the deal either way. On the regulatory side, Ahpra regulates practitioners rather than practice ownership, but advertising, records and clinical governance obligations follow the practice, and the purchase contract, lease assignment and radiation licences belong with a healthcare-experienced lawyer. Income tax questions for the dentists themselves, employees or contractors, are covered in our guide to how doctors are taxed in Australia.

Key Takeaways

• Value the practice on maintainable earnings after a market wage for your own dentistry, and test every vendor addback. Commission an independent assessment before you sign.
• Prefer an asset purchase unless there is a compelling reason to buy the company; shares carry the vendor company's full history with them, including historic practitioner payroll tax arrangements.
• Paper the GST going concern exemption properly: written agreement, buyer registered or required to be registered, everything necessary supplied, business carried on to settlement day.
• Break down the equipment schedule: each separately functioning asset under $20,000 is generally immediately deductible under the now-permanent instant asset write-off (turnover under $10 million, assets first used from 1 July 2026); fitout splits between plant and Division 43 capital works.
• Decide the ownership structure, including any service entity, before settlement. Restructuring later costs more and can trigger duty and CGT events.

Frequently Asked Questions