Accounting for Medical Practices: What GPs and Specialists Need to Know

Running a medical practice is demanding enough clinically — and the financial side is no less intricate. From the GST treatment of health services to the right business structure, the personal services income rules, the fast-moving world of payroll tax, and superannuation strategy, medical practitioners face accounting issues that need genuine specialist knowledge. And one of those areas — payroll tax on contractor doctors — has shifted dramatically in just the last two years. I’m from Quantum House Australia — chartered accountants, tax advisers and registered auditors — and in the next few minutes I’ll walk you through what really matters in the numbers behind your practice, and how the right accountant doesn’t cost you money, but protects it.

Here’s what we’ll cover. First, why medical accounting genuinely needs a specialist. Then the GST position — and a 100% input-tax-credit point that’s widely misunderstood. We’ll compare practice structures. We’ll work through the personal services income rules, which can override your structure entirely. We’ll spend real time on payroll tax and contractor GPs — because that landscape has changed significantly. We’ll cover superannuation strategy. And then I’ll show you how Quantum House Australia helps practices like yours. Let’s begin.

So why does this need a specialist? Because the issues facing medical practitioners interlock in ways most general accountants simply don’t see. Your services are GST-free — with an input-tax-credit consequence that’s widely misunderstood. Your structure choice has long-lasting tax and asset-protection implications. The personal services income rules can override that structure entirely. And payroll tax on contractor practitioners has become a fast-moving, high-stakes area — one where the position has shifted significantly in the last two years. Get any of these wrong and the cost can be substantial: back-tax, penalties, or simply tax paid that needn’t have been. That’s why a specialist who works in this sector every day isn’t an expense to minimise — it’s protection worth having. And unlike many businesses, a single misjudgement here can follow a practitioner for years, because tax structures and payroll tax assessments both tend to look backwards as well as forwards.

Let’s start with GST, because there’s a point here that’s widely misunderstood. Most medical services are GST-free under Division 38 of the GST Act — no GST is charged on them. Now here’s the key distinction: because medical services are GST-free, rather than input-taxed, a practice is entitled to claim back one hundred percent of the GST input tax credits on the expenses it incurs. GST-free supplies do not reduce your creditable purpose — they don’t limit your input tax credits at all. Apportionment only arises where a practice also makes input-taxed supplies, which is uncommon. But not everything a practice does is GST-free — cosmetic procedures, pharmacy sales, gym memberships, and some allied health services are taxable at ten percent. Where those exist, you charge and remit GST and code each revenue stream correctly. Get this right and you claim everything you’re entitled to.

Next, structure — because how your practice is set up shapes your tax, your asset protection and your succession for years. A sole trader is the simplest, with minimal compliance — but it offers no asset protection, taxes all income at marginal rates up to forty-seven percent, and allows no income splitting. A company offers asset protection and access to the corporate tax rate, but typically needs a compliant service trust arrangement to pay income back to the practitioner — and that has to satisfy the ATO’s guidelines. A discretionary or hybrid trust offers the most flexibility for income splitting and succession, but must respect the personal services income rules. The key message is simple: get the structure right at the outset. Restructuring later is far harder, and far more expensive, than setting it up correctly the first time. The right answer is rarely the same for two practices — it depends on your billings, your associates, your family circumstances and your plans for the practice — which is precisely why a template structure bought off the shelf so often disappoints.

Which brings us to the personal services income rules — the PSI rules — because they can override your structure entirely. They’re designed to stop practitioners using a company or trust to split income that is fundamentally a reward for their own personal skill and effort. In broad terms, income is personal services income where more than half of the amount you receive under a contract is for your labour, skills or expertise. If the PSI rules apply, and you can’t satisfy one of the personal services business tests — the results test, the unrelated clients test, the employment test, or the business premises test, with the eighty percent rule acting as a gateway — then the income is attributed back to you as an individual and taxed at your marginal rate, regardless of how the business is structured. This is most relevant for practitioners who earn predominantly from a single source — think of a specialist contracted largely to one hospital. Navigating it correctly takes specialist advice, and it’s well worth getting.

Now the area that has changed the most — payroll tax on contractor practitioners. A few years ago, cases like Thomas and Naaz in New South Wales and The Optical Superstore in Victoria established that payments under contractor arrangements — including amounts that flow through to practitioners from patient fees — can be treated as wages for payroll tax. That exposed practices to assessments reaching back several years, and it caused real alarm across the sector. But since then, the position has shifted again, and this is the part many practices haven’t caught up on: most states have introduced specific relief for general practitioners. Queensland has exempted payments to contracted and employed GPs from the first of December 2024. Victoria exempts GP wages relating to fully government-funded, bulk-billed work from the first of July 2025, with relief available for the prior year. New South Wales offers a rebate and exemption tied to bulk billing, after pausing its audits. And South Australia has exempted payments for bulk-billed consultations from the first of July 2024. Now — and this matters — that relief is largely GP- and bulk-billing-specific. So the underlying payroll tax risk still applies to non-GP specialists, to non-bulk-billed work, and it differs from state to state. If you engage practitioners as contractors, you should review both your arrangements and the relief available to you with a specialist. The single most valuable thing you can do is stop assuming last year’s position still holds: this area has moved faster than almost any other in tax, and a review today may either remove a liability you were bracing for, or reveal one you didn’t know you carried.

Let’s talk superannuation, because for high-income practitioners it’s one of the most powerful tax levers available. Practitioners operating through a service company or trust can make concessional contributions — up to thirty thousand dollars for the 2025-26 financial year — and those contributions are fully deductible. For a practitioner on the top marginal rate, a thirty-thousand-dollar contribution saves roughly fourteen thousand, one hundred dollars in income tax, with only four and a half thousand paid inside the fund at fifteen percent — a net saving of around nine thousand, six hundred dollars in a single year. Beyond that, carry-forward, or catch-up, concessional contributions can let you make larger deductible contributions where you haven’t used your caps in prior years. And for high-income practitioners, SMSF strategies can optimise the position further. Strategic superannuation planning is genuinely one of the most effective tax-reduction tools available to medical professionals. For practitioners who have had years of strong income but uneven contributions, the carry-forward rules in particular can open up a substantial one-off deduction that many simply never claim.

Let me be candid about the stakes. Going it alone, or relying on a generalist, the risks build quietly. An unreviewed contractor arrangement that misses available relief — or attracts a payroll tax assessment. A personal-services-income misstep. The wrong structure, locked in. Missed superannuation planning. Each of these can mean back-tax, penalties, or simply tax paid that you never needed to pay. Now picture the other side. With a specialist, your structure is right, your PSI position is assessed, your payroll tax arrangements and the relief available to you are reviewed, and your super strategy is genuinely reducing your tax. That’s the real point — the right accountant doesn’t cost you money. It protects your income, your structure, and your peace of mind.

So here’s exactly what we do for medical practices. We advise on your structure — sole trader, company with a service trust, or trust — and get it right from the outset. We assess your PSI exposure, particularly for specialists with significant single-source or hospital billing. We review your payroll tax and contractor arrangements — including the current state-by-state GP relief, so your advice reflects today’s rules, not last year’s. And we get your GST position right, and build a concessional and carry-forward superannuation strategy around your income. Compliance handled, and genuine tax strategy on top.

Why Quantum House Australia? Three reasons. We bring deep sector knowledge — PSI at the specialist level, the payroll tax landscape, the correct GST position — because we work in this sector every day. We stay current on payroll tax — we track the state-by-state GP relief, so your advice reflects today’s rules. And we’re a year-round partner — structure, compliance and super strategy, proactively, not once a year. And when a matter calls for legal input — a payroll tax dispute, a structuring question — our colleagues at Australian Tax Experts, who are tax advisers and lawyers, can advise alongside us. One relationship, the accounting and the law together.

Let’s bring it together. One: medical services are GST-free, and you claim one hundred percent of your input tax credits. Two: Choose your structure carefully — it’s hard to change later. Three: the PSI rules can override a company or trust entirely. Four: payroll tax is a real risk, but there’s new GP relief in most states — know where you stand. Five: Concessional Super is thirty thousand dollars for 2025-26 — use it strategically. And six: A specialist accountant protects your income and your structure. Get these right, and the financial side of your practice works as hard as you do.

Getting started is simple. It begins with a conversation — we learn about your practice, your structure, and your billing today. From there we map out a clear plan: your structure, your PSI position, your payroll tax, your GST and your super, all reviewed so there are no surprises. And then we provide ongoing support through the year, keeping you compliant and tax-effective while you focus on your patients. Most practitioners are genuinely surprised how much smoother things run with an accountant who already speaks medicine.

So let me leave you with an invitation. Whether you need your structure reviewed, a PSI or payroll tax assessment, your GST position confirmed, or a sharper superannuation strategy — Quantum House Australia is ready to help. We’ll take the complexity off your plate, make sure it’s handled properly, and give you a clear view of how your practice is performing. Visit quantumhouse.com.au, or call our Sydney office on one-three-hundred, eight-oh-nine, six-nine-seven, and ask to speak with a senior adviser. Quantum House Australia — accountants, tax advisers and registered auditors, setting a new standard. Thank you for watching, and we’d love to hear from you.