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News Bulletin : ADA News Bulletin July 2011
48 July 2011 The ADA is pursuing on behalf of specialist dental practices a widening of the ATO dental factsheet that allows an alternative basis to charge service entity fees that is currently available only to general practices. The factsheet released in 2009 is a supplement to the ATO guidance booklet Your service entity arrangements for general dental practitioners and their advisers. The general dental practice fact sheet acknowledges that the service arrangements in the dental profession are significantly different to other professional service arrangements where particular services are provided to a professional practice. It outlines that a dentist may form a service entity to render a suite of services to conduct a general dental practice. The service entity effectively administers the business of the practice while the dentist provides their dental services through the practice. This arrangement allows the dentist to concentrate on the core activity of treating patients and not get involved in the administration of the practice. The service entity employs, as required, a practice manager, reception staff, clerical support staff, assistant dentists, dental hygienists, dental therapists, dental technicians and dental nurses, to undertake the general management of the dental practice, including: • assistance to the dentist; • billing and collection (including clients and health insurers); • maintaining patient records and office systems; • marketing; • legal and regulatory obligations (excluding the professional obligations personal to the dentist); • general administration; and • payments to suppliers. The service entity also provides the premises (usually leased), the furniture, and the equipment. The service entity takes responsibility for all the expenses of the dental practice, including the wages for all the staff it employs, while the dentist is responsible for the costs of professional indemnity insurance, income protection insurance, personal work- related transport, superannuation and other costs incurred in meeting their personal professional obligations. The dentist pays a service fee that would result in the service entity earning a percentage of the dentist’s gross fees from patient consultations and procedures. In these circumstances, it is clear that the service entity is providing services to the dentist that clearly support the dentist’s ability to provide dental services to patients and to earn income from clinical activities. In our view it is apparent from the fact sheet that the operation of a service entity and services provided as described above whether it is a general or a specialist practice are similar if not the same. This supports the view that the fact sheet should be widened to included specialists as opposed to obtaining a separate fact sheet or Tax Ruling. We have observed that the range of service fees in many case are similar for the dentist’s gross earnings from patient consultations and procedures both for general and specialist practices, depending on factors such as the location of the practice, the extent of services, equipment and premises provided by the service entity and the dentist’s level of involvement in the conduct of the practice. The ADA in conjunction with Crowe Horwath are in dialogue with the ATO examining the extent that the fact sheet is able to be widened to include specialists. The position to be put forward is being prepared which will include data, analysis and external evidence that are required to be provided to the ATO to support the submission. Focus is also on differences between the operation of the general and specialist dental practice and how they impact on financial outcomes. The key to the submission for the general dental practice fact sheet was the ability to obtain external independent data to support the basis of service fee charging that exists for general dental practices. Similar data for a specialist practice will strengthen the submission and the final outcome for specialists that operate a service entity within their practice structure. Further updates on the progress of the submission will be provided in future issues of the News Bulletin. We have a number of members from specialist practices offering assistance. Any member interested in providing input to the project please contact the ADA on 02 9906 4412. UPDAte – SPeCiALiSt DentAL PRACtiCeS An alternative method to charge service entity fees practice management Compiled by Andrew Chen
ADA News Bulletin June 2011
ADA News Bulletin August 2011