The short answer
As a broad guide, small owner-operated general practices in Australia change hands at somewhere between one and four times normalised earnings — earnings after a market-rate clinical wage for every doctor who works in the practice, including the owner. Larger group practices with genuine management infrastructure and a spread of six or more FTE GPs support multiples toward and above the top of that band, and corporatised acquirers buying at scale have historically paid more again. Specialist practices frequently sit at the bottom of the range or below it, because the referral relationships and clinical reputation that generate the earnings usually belong to the specialist personally. Older heuristics still circulate — goodwill at 30–50% of gross billings, or a goodwill figure quoted per full-time-equivalent GP — and brokers still list practices on those terms. Treat them as sanity checks at best. Published transaction evidence for private Australian practices is thin, the spread across genuine transactions is wide, and the two factors that move a specific practice within the range — how much of the profit survives normalisation, and how much of the goodwill actually transfers — cannot be read off a benchmark table.
Why capitalised earnings is the default method
For trading medical practices, capitalisation of future maintainable earnings is the default methodology, and for good reason. A practice is an earnings business: tangible assets are modest — fit-out, equipment, minimal stock — so net asset value provides a floor rather than a value. Discounted cash flow requires forecast assumptions a small practice can rarely substantiate to a defensible standard, so it is rarely the primary method. That leaves two questions that decide the entire valuation: what level of earnings is genuinely maintainable once the accounts are normalised, and what multiple do those earnings support. Both are contested in almost every practice engagement, and both are exactly where owner expectations and defensible positions part company. The multiple debate gets the attention; the earnings debate does most of the damage.
The adjustment that changes everything: the owner-doctor's clinical wage
Take a hypothetical suburban general practice: $2.6m in patient billings across four GPs. Three are contractors retaining 65% of their billings under service agreements. The owner bills $800k and has never drawn a clinical wage through the practice — the profit is her income. Reported EBITDA is $610k, and at the 4x multiple she has heard quoted, she believes the practice is worth around $2.4m. Normalisation says otherwise. A buyer must engage a GP to replace her sessions on the same terms as every other doctor in the building: 65% of $800k is $520k, and it comes off the earnings. Add back a one-off legal cost of $22k and the above-market portion of a family member's wage, $28k. Future maintainable earnings land at about $140k. At 3.0–3.5x — a supportable multiple for a practice of this size and dependency profile — enterprise value is roughly $420k to $490k. That is not the valuation being harsh. The practice was never worth $2.4m; $520k of the reported profit was always the owner's clinical labour, and she takes it with her when she leaves. Every practice valuation we prepare runs this adjustment, and it is the single largest driver of the gap between what owner-doctors expect and what the evidence supports.
The goodwill problem: what transfers and what walks
Goodwill is the bulk of any practice value, and the valuation question is not how much goodwill exists but how much of it transfers. Personal goodwill — the patients who book because of a specific doctor, the referrers who refer to a specific specialist — attaches to the practitioner and leaves with them. Transferable goodwill attaches to the practice: the location, the brand, the appointment systems, the nurse-led clinics, the contracted doctor cohort, the patient database. Market value is what a willing-but-not-anxious buyer would pay — the Spencer v Commonwealth standard that underpins Australian valuation — and that is a price for what remains after the vendor departs. In general practice, where patients often follow the clinic as much as the clinician, a meaningful proportion of goodwill usually transfers. In a single-specialist practice, where the referral base is personal, transferable goodwill can be close to nil — which is why some specialist practices are worth little more than their fit-out and equipment, regardless of how much the specialist earns. The evidence that settles the question is specific: billings by practitioner, patient rebooking patterns, referrer concentration, what happened to billings when doctors previously departed, and restraint provisions that would actually hold.
Payroll tax on contractor doctors: the exposure that compresses value twice
Since Thomas and Naaz v Chief Commissioner of State Revenue and Commissioner of State Revenue v The Optical Superstore, state revenue offices have treated payments flowing through practice entities to contractor doctors as potentially taxable wages under the relevant contract provisions of the state payroll tax acts. The state responses have diverged, and at the time of writing the differences matter to value: Queensland has legislated a permanent exemption for payments to general practitioners, effective from December 2024; Victoria exempts payments to GPs from 1 July 2025 in proportion to the practice's fully bulk-billed GP services; New South Wales provides a rebate from 4 September 2024 where the centre bulk-bills at least 80% of GP services in metropolitan Sydney or 70% elsewhere, alongside an exemption for earlier unpaid amounts. Two valuation consequences follow. First, the relief is largely GP-specific — specialist and allied health practices generally remain exposed, and GP practices that miss the bulk-billing thresholds in NSW and Victoria carry the cost — so where arrangements are likely caught, maintainable earnings must be restated with payroll tax on the contractor payments, which compresses value directly. Second, historical exposure is a contingent liability a buyer will price: if the contract set fails the tests for prior years, due diligence will find it, and the price adjusts whether or not the vendor's valuation acknowledged it. A supportable practice valuation states the payroll tax position by state, on evidence, rather than assuming it away.
What moves a practice within the range
Once the earnings are normalised and the transferable share of goodwill assessed, the multiple question is about risk and dependency. These are the factors a buyer prices and a valuation file needs evidence for:
- ·Billings concentration — a practice where one doctor generates half the billings is riskier than the same EBITDA spread across six
- ·Contractor agreements — written, current, assignable, with restraints a court would actually enforce
- ·Payroll tax position — documented by state, including whether GP relief thresholds are met and any historical exposure
- ·Billing mix — bulk-billed versus private billing, and sensitivity to Medicare rebate settings
- ·Management depth — a practice manager, nurse-led services and systems that run without the owner in the building
- ·Tenure — lease term and options over the premises, and the cost and portability of the fit-out
- ·Accreditation and compliance history — current accreditation and a clean Medicare compliance record
When an indicative range is enough — and when you need a signed report
Not every question needs a signed report. An indicative range is enough when the number informs a decision rather than a transaction or a tax position: early succession conversations, testing whether a sale is worth pursuing, first-round buy-in discussions before terms are agreed. A signed valuation prepared under APES 225 Valuation Services is warranted when the number will be relied on: completing a sale or partner buy-in, related-party transfers of practice interests, restructures — including Subdivision 328-G rollovers and practice incorporations — and small business CGT concession claims under Division 152, where the $6m maximum net asset value test turns on market value rather than book value and market value substitution under s 116-30 can apply to non-arm's-length dealings. For those matters, the value in the file must carry methodology, evidence and a signature, because it is the value the position rests on if reviewed. Prismi's Essential report (from $1,495 + GST) suits straightforward single-methodology matters; Comprehensive (from $3,995 + GST) is typically the right tier for practice sales and buy-ins with normalisation and goodwill questions; the Defensible Valuation File (from $8,995 + GST) is the level for concession claims and matters likely to be reviewed.
The supportable answer
A medical practice is worth a supportable range, and the honest answer to "how much is my practice worth" starts with two uncomfortable adjustments — pricing the owner's clinical work at market, and separating the goodwill that transfers from the goodwill that walks. Our reports conclude at the most supportable position within that range, with the normalisation, the goodwill analysis and the payroll tax treatment documented so the position is defensible if reviewed — prepared with the ATO's market valuation guidance and IVS 104 in mind, senior-reviewer signed, working file retained ten years, fees fixed at engagement and never contingent on the outcome. Where an owner wants a number the evidence does not support, we will say so and decline the engagement on those terms. One boundary worth stating plainly: Prismi prepares independent valuations only. We are not registered tax agents and do not provide tax, legal or financial advice — the payroll tax position, concession eligibility and transaction structure are matters for the practice's accountant and lawyer, working from the valuation evidence.