Medical practices have some of the most technical tax positions of any small business, and they've changed fast. Several state revenue offices have used the relevant contract provisions to assess medical centres for payroll tax on payments to contractor GPs. The ATO has set out how it expects professionals, including doctors, to split practice profits. And the structure that made sense when a doctor joined a practice can leave a home, a portfolio and a building exposed to a single negligence claim that exceeds insurance cover.
We work with GP clinics, specialist practices, day procedure businesses, allied health groups and individual practitioners who contract to them.
Medical practice accounting at a glance (2026–27)
| Item | Position | Source |
|---|---|---|
| GST on medical services | Generally GST-free to patients; service fees charged to doctors are usually taxable | ATO |
| Bulk Billing Practice Incentive Program | From 1 November 2025: an extra 12.5% on MBS benefits for eligible services at fully bulk-billing practices registered with MyMedicare, split 50/50 between practice and GP, paid quarterly | Department of Health |
| Payroll tax threshold (group wages) | NSW $1.2 million; Victoria $1 million; Queensland $1.3 million; SA $1.5 million | State revenue offices |
| Contractor GP payroll tax relief | Varies by state and is mostly tied to bulk billing; see the state table below | State revenue offices |
| Super guarantee | 12%, paid with every pay run under Payday Super from 1 July 2026 | ATO |
| Concessional contributions cap | $32,500; Division 293 tax applies above $250,000 of income and low tax contributions | ATO |
| Professional firm profits | Risk-scored under PCG 2021/4 | ATO |
What does bookkeeping for a medical practice involve?
Medical practice bookkeeping is mostly a reconciliation job: every dollar a patient, Medicare, DVA, a health fund or an insurer pays has to be matched from the practice management system to the bank, split between the practice's service fee and each doctor's share, and paid out on time. When that's right, the practitioner statements, the BAS and the payroll tax position all follow from it.
| Money flow | How we record it | Common error |
|---|---|---|
| Medicare and DVA bulk-billed claims | Clearing account in Xero, matched to each remittance and to the billing report | Rejected claims never followed up |
| Bulk billing incentives and BBPIP payments | Recorded separately, with each GP's share passed on under the agreement | GP's half sitting in practice income |
| Private patient fees and gap payments | Matched to card settlements and the day sheet | Refunds and adjustments not posted |
| Health fund, workers' compensation and third-party payments | Aged as debtors by payer | Slow payers invisible until year end |
| Practitioner payments | Calculated under each agreement, with a statement to each doctor | Paid on billings when the agreement says collections |
| Accounts payable | Supplier bills for consumables, pathology, equipment and rent captured, coded and scheduled for payment | Paid twice, or GST claimed on GST-free medical supplies |
Accounts payable in healthcare is where small leaks add up: duplicate supplier invoices, consumables bought outside the agreed supplier and GST credits claimed wrongly. Our transaction coding agent suggests codes and flags anything that looks unusual; your bookkeeper approves every entry.
What problems do medical practices bring to us?
- Service fee agreements written years ago that no longer match how the practice actually runs, which matters for payroll tax and GST.
- Payroll tax letters or audits about contractor doctors, or uncertainty about whether the state's relief applies.
- Practitioner payments calculated by hand from billing reports, with disputes over what was collected versus billed.
- Profit splitting through trusts or companies that hasn't been tested against the ATO's guidelines.
- High income, high risk, assets in the wrong name. Specialists earning well, holding investments personally.
- Buying the building without a plan for who owns it.
What do we do for doctors and practice owners?
- Practice bookkeeping and reconciliation of Medicare, DVA, health fund, patient and third-party payments in Xero, matched to the practice management system.
- Practitioner payment calculations under each agreement, with clear statements to each doctor.
- Payroll tax review of every practitioner arrangement, state by state.
- Service fee and GST review to confirm the fee is commercial and GST is charged correctly.
- Accounts payable run weekly, with supplier bills checked for GST and duplicates before payment.
- Tax returns for the practice, the doctors and their family entities, with planning before 30 June.
- Structure and asset protection for practitioners, the practice and the premises.
Which numbers should a medical practice track?
| KPI | What it measures | Why it matters |
|---|---|---|
| Billings per practitioner per session | Gross fees generated in each session | Capacity planning and fair room allocation |
| Collections vs billings | Cash collected ÷ fees billed | Rejected claims, gaps and bad debts |
| Service fee income as a share of practitioner billings | The practice's actual take from each doctor | Whether the fee covers costs and is commercial |
| Room and session utilisation | Booked sessions ÷ available sessions | Empty rooms are the biggest hidden cost |
| Bulk-billed share of GP services | Bulk-billed services ÷ total GP services | Now relevant to payroll tax relief in several states |
| Wages and practitioner costs ÷ revenue | Total people costs | The main lever on profit |
| Debtor days (third party and patients) | How long fees take to arrive | Cash flow, especially for workers' compensation and medico-legal work |
What tax and compliance issues are specific to medical practices?
Service fee arrangements and GST
In the common model, each doctor bills patients and pays the practice a service fee, often a percentage of fees collected, for rooms, staff, billing and equipment. The ATO accepts service arrangements that are commercial and properly documented, and expects the fee to reflect the value of what's actually supplied (ATO service entity guidance). Medical services to patients are generally GST-free (ATO GST and medical services), but a service fee charged to a doctor is usually taxable.
How patient fees flow, who controls the money, and what the agreement says now matter for payroll tax as much as for income tax.
Payroll tax on contractor doctors: the state positions
After Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40, state revenue offices have treated payments to contractor practitioners as potentially taxable wages under the relevant contract provisions, unless an exemption applies (such as services on 90 days or fewer in a year, or a practitioner who ordinarily provides services to the public generally). The states have since responded differently, mostly with GP relief linked to bulk billing:
| State | Position for GPs (as we understand it at October 2026) | Specialists, dentists, allied health |
|---|---|---|
| NSW | Audit pause from September 2023 to September 2024; since then a rebate for contractor GP wages where bulk-billing thresholds are met (Revenue NSW) | Relevant contract rules apply; no equivalent relief |
| Victoria | Ex gratia relief for contractor GPs for periods to 30 June 2025 (conditions apply). From 1 July 2025, wages paid to employee and contractor GPs are exempt in proportion to fully-funded (bulk-billed) GP work; privately billed GP work stays taxable (SRO Victoria) | Not covered: the SRO says the exemption doesn't apply to dentists or allied health |
| Queensland | An amnesty for contracted GPs covered periods to 30 November 2024. From 1 December 2024, wages paid to employee and contractor GPs are exempt, with no bulk-billing condition; the exemption is now in the Payroll Tax Act 1971 (QRO) | A separate amnesty for contracted dentists ended 30 June 2025; normal rules since 1 July 2025. No amnesty for other practitioners |
| South Australia | From 1 July 2024, wages paid to employee and contractor GPs are exempt in proportion to the practice's bulk-billed services | Retrospective relief to 30 June 2024 only for practices registered by then; none after (RevenueSA) |
| ACT | Waiver for GP payments to 30 June 2023, then an amnesty to 30 June 2025 for practices bulk billing at least 65%. From 1 July 2025, GP wages for bulk-billed, DVA and ACT workers' compensation services are exempt, with no minimum bulk-billing rate (ACT Revenue Office) | Not covered by the GP exemption |
| WA, Tasmania, NT | No GP-specific exemption published by these revenue offices as at October 2026. WA's payroll tax law has no general relevant contract provisions. In Tasmania, both major parties promised before the 2025 state election that contracted GPs wouldn't be taxed (as reported by medical defence organisation Avant), but we haven't found a legislated exemption; check before relying on any relief | Check |
These positions change, and the detail of each relief (thresholds, registration conditions, what counts as fully funded) decides whether you qualify. Payroll tax only bites once your group's Australian wages pass the threshold, for example $1.2 million in NSW, $1 million in Victoria, $1.3 million in Queensland and $1.75 million in the ACT for 2026–27. Our payroll tax guide and state taxes service cover the mechanics. Our state taxes agent drafts the analysis for each state, and an accountant checks it against the current law before we advise you.
Got a revenue office letter, or not sure which side of the bulk-billing line your practice sits? Ask us and send the letter with your billing report.
Personal services income and professional firm profits
Two different rule sets can apply to a doctor who earns through a company or trust:
- PSI rules. Where income is mainly a reward for your personal efforts and you can't self-assess as a personal services business, it's generally taxed to you personally.
- Professional firm profits. Where you're a principal of a practice that is a genuine business, the ATO's compliance guideline on allocating professional firm profits (PCG 2021/4) scores your arrangement on how much of the profit you receive personally, the total effective tax rate across you and your associated entities and, unless a benchmark is impractical to work out, how your remuneration compares with a commercial benchmark (ATO guidance). Low scores mean low ATO attention. High scores invite review.
Our professional firm profits agent scores your arrangement against the guideline, and your accountant reviews the result and explains your options. Arrangements must first pass the guideline's gateways, which require a commercial reason and no high-risk features.
How should a doctor structure the practice, the premises and their wealth?
| What | Common structure | Why |
|---|---|---|
| Your own medical income | Personally, or a company or trust only where PSI and the profit guidelines support it | Keeps the tax position defensible |
| Practice operations (staff, leases, equipment) | A service company or trust, separate from the doctors | Contracts, employees and liability sit in one place |
| Practice premises | A separate trust, an SMSF holding business real property, or a 13.22C unit trust co-owned with your SMSF | Keeps the building away from trading risk and can suit retirement planning |
| Investments and savings | A discretionary trust with a corporate trustee | Beneficiaries don't own the assets, so a claim against you usually can't reach them |
| Family home | Often in the name of the lower-risk spouse | A common protection step when done from the start |
On premises, an SMSF can buy business real property from a related party and lease it to your practice at market rent. Where your SMSF and family trust want to co-own the building, a non-geared unit trust that meets Regulation 13.22C lets the fund invest without breaching the in-house asset limit, provided the trust stays debt-free and passive for its whole life. Our guide to 13.22C unit trusts explains the conditions, and our page on buying business premises in super covers the alternatives. Whether an SMSF suits you is financial product advice from a licensed adviser; we handle the tax, the accounts and the compliance.
On asset protection, insurance through your medical defence organisation comes first. Structure is the second layer: it only works when set up while you're solvent and for genuine reasons. Our asset protection service and the 30 June 2027 tax changes guide explain why the timing of any restructure matters now.
How do we work with medical practices?
- Free strategy call. We look at your agreements, structure and state, and tell you what needs attention first.
- Agreement and payroll tax review of each practitioner arrangement, with the GST position on service fees.
- Setup. Practice management system to Xero, clearing accounts for Medicare, DVA and funds, and automated practitioner statements.
- Ongoing bookkeeping, payroll and BAS, with every BAS checked before lodgement and signed off by an accountant.
- Annual tax planning for the practice and each doctor's group, including super and the profit allocation score.
- Structure work with your solicitor for agreements, trust deeds and leases, and a licensed adviser for super and insurance.
Our work runs on Nagaris. AI agents draft; qualified accountants review and sign off. Every change and every email waits for a person's approval, and client data is stored in Australia.
"I started using BPAG 3 years ago and they have been advising my business and myself in an extraordinary way. The team is also caring and they listen to what your needs are." Christian Luis Barbeitos Alvarez, Google review
What does it cost?
Practices with staff and practitioner payments usually sit on Business Insights from $249 per week + GST. Larger clinics and specialist groups wanting forecasting, benchmarking and annual tax planning use Fractional CFO from $499 per week + GST. Payroll tax reviews and structure advice are quoted as a fixed fee before we start. See the pricing page.
If you're a salaried hospital doctor with some private income and no practice, you may only need a well-prepared individual tax return. We'll tell you.
What should you send us?
- Every service, tenancy or contractor agreement between the practice and practitioners
- Billing and collections reports by practitioner for the last 12 months
- Payroll reports and payroll tax returns, plus any revenue office letters
- Financial statements and tax returns for the practice and each related entity
- Trust deeds and company constitutions
- Lease or title documents for the premises
- Your medical indemnity details and any personal guarantees
You can photograph documents on your phone and send them straight to us. No portal password.
Frequently asked questions
Do I charge GST on service fees to doctors?
Medical services to patients are generally GST-free, but the services a practice provides to practitioners, such as rooms, reception, billing and equipment in exchange for a service fee, are usually a taxable supply. If the practice is registered for GST, it charges GST on the service fee and the doctor can claim it back only if they're registered and making creditable supplies. Getting this wrong for years can create a large GST debt.
Is my income as a contracting doctor personal services income?
Usually the income of an individual doctor is mainly a reward for their personal skill and effort, so the PSI rules need to be considered whenever it's paid to a company or trust. Some doctors pass a personal services business test; many don't. If you can't self-assess as a PSB, the income is generally taxed in your hands regardless of the structure.
Can I salary sacrifice or contribute more to super as a doctor?
Yes, within the caps. For 2026–27 the concessional contributions cap is $32,500, and if your income and low tax contributions exceed $250,000 you may pay Division 293 tax on some contributions. Whether a particular contribution strategy suits you is financial product advice, which a licensed financial adviser provides; we work out the tax effect.
Who should own the practice building?
It depends on who is buying, how it's funded and what your asset protection needs are. Common choices are a separate family trust, an SMSF holding business real property directly, or a unit trust co-owned with your SMSF under the Regulation 13.22C rules. The premises should almost never sit in the same entity that runs the practice or employs staff.
Does the Thomas and Naaz case mean my contractor doctors are employees?
No. It concerned payroll tax, not employment. The NSW Court of Appeal found that payments made by a medical centre to its contractor GPs could be taxable wages under the relevant contract provisions. Employment, super and payroll tax each use different tests, so each needs checking separately.
We have practices in two states. How does payroll tax work?
Each state taxes the wages paid in that state, but the tax-free threshold is shared across the group nationally, and related businesses are grouped. A practice that's under the threshold in one state can still owe tax once its national group is counted. Our state taxes agent works through each state's rules and your accountant confirms the position.
Official sources
- Department of Health — Bulk Billing Practice Incentive Program
- Revenue NSW — Payroll tax guidance for medical services
- RevenueSA — Payroll tax for medical specialists and dentists
- SRO Victoria — Payroll tax and the medical industry
- QRO — Exempt wages (general practitioners)
- ACT Revenue Office — Designated medical practices with general practitioners
- ATO — Service entity arrangements
- ATO — Allocation of profits within professional firms
- ATO — GST and medical services
General information only, current as at 23 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.