Private ruling: Deductions for payments to a related entity, administrative duties at award rate
Date of advice: 31 March 2020
Published: May 2020
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for payments made to a relative for duties performed in relation to the operation of your business? | A1: Yes As the amount you are paying is considered reasonable, it is the award rate for their qualifications, the remuneration will be an expense incurred in producing your assessable income.

Relevant facts and circumstances: You are a registered medical practitioner who runs specialist type practices exclusively in the field of XXX. You receive referred and non-referred patients and have surgical operating privileges at some hospitals. You have an agreement with a local medical services provider, XXX, to provide you with administrative services when you consult at a local medical centre. However, this agreement does not extend to the provision of any administrative or clerical services when you perform surgery at the hospitals. There are many administrative duties required in making the appropriate arrangements for patients when you carry out your duties at the hospitals. These include: · liaising with patients and the hospitals regarding dates and times for surgery · assessing priority cases and formulating a theatre list · managing theatre medical records · notifying hospitals of item numbers · sending invoices and receipts to patients · sending claims to private health insurance funds · liaising with referring general practitioners including post-surgery medical letters · organise pre and post-surgery photos and sending copies to referring GP. The time required of you to fulfil the abovementioned duties impacts the time you can make available for client appointments. You employ your relative to run the surgical practice at the hospitals. Your relative has experience in running a large medical centre. You estimate that your relative will be required to work approximately XX to XX hours per week, XX weeks per year. It is expected however, that their weekly hours will increase during the COVID-19 pandemic. The hourly rate of payment is determined by the current award taking into account your relative's qualifications.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 26-35(1) | Income Tax Assessment Act 1997 section 85-20(2)