Buying a Dental Practice in Australia: Legal Due Diligence for Dentists

Start with the transaction structure

A dental practice acquisition is usually structured as either an asset purchase or a share purchase.

In an asset purchase, the buyer acquires specified business assets from the seller. Those assets may include goodwill, business names, phone numbers, domain names, equipment, stock, intellectual property, records access arrangements, software contracts and lease rights. Asset purchases can help a buyer limit some historical liabilities, but every asset and contract must be identified and transferred properly.

In a share purchase, the buyer acquires shares in the company that owns the practice. This may preserve existing contracts and continuity of ownership, but the buyer also acquires the company with its historical liabilities unless the sale agreement reallocates that risk through warranties, indemnities, price adjustments or completion conditions.

The structure should be settled before signing heads of agreement. Changing structure later can affect finance approval, landlord consent, employee arrangements, GST, duty and the seller’s warranties.

Define the assets and excluded items carefully

The practice purchase agreement should identify every material asset included in the sale. Dental practice goodwill is often tied to a collection of operational assets rather than one obvious item.

Common assets include the trading name, patient recall systems, phone numbers, websites, domain names, social media accounts, Google Business Profile access, practice management software, supplier accounts, clinical equipment, sterilisation equipment, imaging equipment, compressors, suction systems, fitout, consumables and stock.

Buyers should be careful with generic descriptions such as “the business” or “all assets used in the practice”. A clinic may use personally owned equipment, leased equipment, financed equipment, software subscriptions, cloud booking platforms and outsourced IT systems. The contract should state what transfers, what is excluded, what is subject to finance or third-party consent, and what must be delivered at completion.

Check patient records, privacy and continuity of care

Patient records are health records, not ordinary commercial files. A buyer needs practical access to records so the clinic can continue patient care, but the transfer or management of records must comply with privacy law, professional obligations and any applicable state or territory health records requirements.

The Office of the Australian Information Commissioner states that an organisation providing a health service and holding health information is covered by the Privacy Act 1988 even if it is a small business. The Dental Board of Australia also points practitioners to the shared Code of conduct as the main regulatory document for health records, including the expectation that practitioners keep clear, accurate and up-to-date health records.

Due diligence should check the practice’s privacy policy, patient consent processes, record retention systems, cyber controls, access permissions, backup arrangements, data breach response process and arrangements for notifying patients about the change in ownership. The sale agreement should deal with pre-completion access, the transfer or custody of active and inactive records, and the seller’s limited future access for professional indemnity, complaints or regulatory matters.

Review the lease before the deal becomes urgent

Many dental practices are location-sensitive. Patients may value the suburb, parking, accessibility, referral patterns and continuity of the clinic site. A weak lease position can therefore reduce the value of the goodwill being purchased.

The buyer should review the permitted use, term, options to renew, assignment provisions, landlord consent requirements, rent reviews, outgoings, make-good obligations, signage rights, exclusivity, security deposit, bank guarantees and personal guarantees. If the lease does not clearly permit dental use, or if the landlord can refuse assignment or impose new conditions, the transaction timetable may be exposed.

The sale agreement should make completion conditional on landlord consent where needed. It should also allocate responsibility for lease assignment costs, transfer documents, guarantees and any make-good disputes identified before completion.

Inspect equipment, infection prevention systems and clinical operations

Dental goodwill depends on safe and reliable clinical systems. Equipment due diligence should go beyond a list of chairs and instruments. The buyer should check ownership, finance, leases, PPSR registrations, age, service history, warranties, calibration, maintenance records, imaging equipment compliance, sterilisation systems and supplier support.

Infection prevention is a practical acquisition issue. A buyer should ask for current infection prevention policies, staff training records, sterilisation logs, cleaning protocols, incident records and evidence that the practice has systems suitable for its services and premises. If gaps are found, the buyer may need a price adjustment, completion condition, seller rectification obligation or post-completion remediation plan.

Where the clinic provides higher-risk services or uses specialised equipment, the buyer should also check whether radiation, medicines, sedation, waste, local planning or other approvals are relevant in the particular state or territory.

Review employees, contractors and service facility arrangements

Dental practices often rely on a mix of dentists, oral health therapists, hygienists, dental assistants, reception staff, practice managers and contractors. The buyer should identify who is employed, who is engaged as an independent contractor, who uses a service facility model, and who is essential to preserving goodwill after completion.

Employment due diligence should cover contracts, award coverage, pay rates, rosters, leave balances, superannuation, bonuses, restraint clauses, workplace policies, work health and safety issues and any unresolved complaints. Fair Work transfer of business rules may affect continuity of service and employee entitlements where employees move to the buyer.

The sale agreement should state which employees will receive offers, who pays accrued entitlements, what happens if key staff decline to transfer, and whether any clinician or practice manager must stay for a handover period.

Audit advertising, reviews and brand assets

Dental clinics advertise regulated health services. AHPRA’s advertising guidance applies to advertising a regulated health service or a business that provides one. The National Law restricts advertising that is false, misleading or deceptive, uses testimonials or purported testimonials about the service or business, offers gifts or discounts without stating terms, creates an unreasonable expectation of beneficial treatment, or encourages indiscriminate or unnecessary use of regulated health services.

Buyers should review the website, social media pages, Google Business Profile, online booking platforms, before-and-after galleries, paid ads, brochures, treatment claims and review use before completion. If non-compliant advertising assets are acquired, a buyer may need to amend or remove them immediately after settlement.

Brand due diligence should also check business name ownership, trade marks, domain control, image licences, marketing agency contracts and access to analytics, hosting and social accounts.

Deal with restraint and seller handover arrangements

Usually sellers will be restricted from opening, joining or promoting a competing dental practice near the acquired clinic for a reasonable period (typically 12-24 months). The restraint should be connected to the goodwill being purchased and drafted by reference to the practice location, patient base, services, referral relationships and transition arrangements.

Overreaching restraints can be harder to enforce and may also create practical problems if the seller is meant to keep working in the practice for a period of time post-completion. The contract should separately deal with any consulting period, patient introductions, communications with staff, supplier handover, referral relationships and access to systems after completion.

Consider GST, duty, finance and settlement mechanics early

Tax and duty advice should be obtained before the transaction documents are settled. A practice sale may be structured as a GST-free supply of a going concern if the statutory requirements are satisfied, including that the parties agree in writing and the buyer is registered or required to be registered for GST. The legal documents need to support the intended tax treatment rather than leave it as an accounting assumption.

The buyer should also confirm transfer duty issues, finance conditions, security releases, PPSR discharges, stock valuation, apportionments, completion deliverables and what happens if a condition is not satisfied by the target completion date.

Dental practice buyer checklist

Before signing, a buyer should usually confirm the following matters:

• Transaction structure, purchase price adjustments and key conditions.
• Assets, excluded assets and third-party consents.
• Patient records, privacy compliance and cyber security controls.
• Lease assignment, landlord consent and premises risks.
• Equipment ownership, finance, maintenance and sterilisation systems.
• Staff, contractor and service facility arrangements.
• Advertising compliance, reviews, websites and brand assets.
• Seller restraints and handover obligations.
• GST, duty, finance, PPSR releases and settlement mechanics.
• Warranties, indemnities and buyer remedies for discovered issues.

Frequently asked questions