Service trusts for dental practices

What a service trust does

In a typical setup, the dentists' clinical work sits in the practice entity, and a separate entity, often a family trust, provides the non-clinical side: staff, premises, equipment and administration. The service trust charges the practice a fee for those services, and its profit can then be distributed to family members.

Most of the practice owners we work with use one. Done properly, it keeps the business side separate from clinical work and gives some flexibility in how profit is shared.

Making it stand up

A service trust only works if it's commercially real. In practice that means:

• a written service agreement setting out what's provided and how it's priced;
• service fees set at a commercial level for what's actually provided;
• the arrangement working day to day the way the agreement says; and
• trust distributions resolved on time each year, with clean minutes.

How associates are engaged through the practice also matters for payroll tax; see payroll tax for dental practices.

The proposed trust changes

In the 2026-27 Federal Budget (12 May 2026), the Government announced:

• a 30% minimum tax on discretionary trusts from 1 July 2028, paid by the trustee;
• a non-refundable tax credit for non-corporate beneficiaries for the tax the trustee has paid on their share; and
• a temporary three-year rollover from 1 July 2027 to move assets out of discretionary trusts into entities that aren't discretionary trusts.

Some trusts are excluded, such as fixed trusts and widely held trusts. The people most affected are lower-income beneficiaries, who would no longer benefit from the lower tax brackets on trust distributions.

As at the ATO's latest update (3 September 2026), this is still an announcement, not law, and further details are still to come.

Treasury's exposure draft (3 September 2026) also includes an excluded election trust (EET) option. An existing discretionary trust could elect out of the minimum tax by fixing, in advance, which beneficiaries receive its income and capital and in what shares, without a restructure. Departing from those shares later would revoke the election with a tax cost. This is draft too, consultation closed on 18 September 2026, and the detail may change before anything becomes law.

Our approach right now

The way practices use service trusts is likely to change because of these proposals. But the changes are still evolving, and the political environment around them may influence the final outcome. So we don't see an immediate need to restructure.

1. Keep your current service trust running properly, with agreements, fees and minutes in order.
2. Understand how much of your profit currently flows through the trust, and to whom.
3. Watch for the legislation and the rollover details.
4. Make structural decisions once the rules are settled, with plenty of time before 1 July 2028.

If you're buying or selling a practice in the meantime, structure is worth discussing early; see buying a dental practice and valuation.