Doctor tax: employed, or private practice on an ABN?

Medicine is one profession, but for tax it is two worlds, and which one you live in decides how every other page in this cluster reads. Before you tally a single receipt, answer one question: are you a salaried doctor, or are you in business? This guide is written for the salaried doctor, so it is worth being certain that is you.

Why this is the first question

Whether you are a salaried hospital doctor or running or participating in a practice changes what you claim, which return you lodge, and whether GST applies to you at all. The two sides are not variations on a theme; they are separate tax regimes that happen to share a stethoscope. Interns, resident medical officers, registrars and salaried staff specialists are employees, and everything in the rest of this cluster is built around them. Visiting medical officers, private-practice principals and locums working on an ABN are in business, and their tax is a different discipline. Settle which one describes you now, because if you read the deduction chapters as an employee when you are really in business, or the reverse, you will spend the year answering the wrong questions.

How to tell which you are

You do not need to parse a contract for this. The way you are paid tells you almost everything.

• As an employee you are paid through the hospital's payroll with tax withheld before the money reaches you and shown on an income statement in myGov after the year ends. Super is paid in for you, and your indemnity for public-hospital work is usually covered by the hospital.
• In business you are paid your gross billings against an ABN with nothing withheld. You register for GST once your turnover passes $75,000 and lodge a business activity statement, the BAS, through the year. You report on a business schedule, and you carry your own super, indemnity and leave.

The point that catches doctors out is the visiting medical officer. A VMO is contracted to a hospital rather than employed by it, so the hospital lanyard and the roster do not make you an employee. Look at how the payment arrives and what obligations sit on your shoulders, not at the building you work in.

What the employed doctor claims

If tax comes out before you are paid, this is your cluster. Your work at tax time is claiming back the work costs you funded yourself and were not reimbursed for. For a salaried doctor that is self-education and exam fees, registration renewal and any indemnity top-up you pay above what the hospital covers, equipment and journals, travel between sites in a single day, the work share of your phone, and your college and association fees. All of it sits against your salary on the individual return, and each of the other chapters here works through one of them, including the catches that quietly remove the claim.

What changes in business

If you invoice under an ABN, you are not lodging a salary return. You are running a business, and the rules widen and tighten at the same time.

• Practice running costs come into play, along with service entities and trusts that structure how a practice earns and pays.
• GST and the BAS arrive once turnover passes $75,000, so you charge GST on your billings and lodge activity statements through the year.
• The instant asset write-off is open to a business, letting you deduct an eligible asset outright rather than depreciate it, which an employee cannot do.
• A home office as a genuine place of business can bring in occupancy costs such as a share of rent or mortgage interest that a salaried doctor never gets to claim.
• Personal services income rules and PAYG instalments shape how income that is mainly your own labour is taxed and when you pay it.

This is a different regime, wider and heavier than any single chapter can do justice to. If it is you, a medical accountant is the right hand there, most of all in the first year GST and a BAS come into it.

If you are both

A salaried job plus locum shifts on an ABN in the same year is a common shape in medicine, and the answer is to split the two lives cleanly. On the employee side sit your salary and the work deductions this cluster covers. On the business side sit the billings you invoiced and the business deductions that belong to them, kept as their own records so neither one bleeds into the other when you lodge.

The records differ too

Whichever side you are on, the habit that saves you is logging each cost as it happens rather than rebuilding the year from memory in July. What you keep is not the same, though. An employee keeps receipts for the work costs, a note of the work share on anything used for both work and home, and a logbook or kilometre record for travel between sites. A doctor in business keeps full business records, income and expenses both, and the BAS lodgements once GST is in play. The ATO's free myDeductions app holds the basics on either side.

The bottom line

Work out which one you are first, because everything else follows from it. Salaried, with tax withheld and super paid in, means you are an employee, and this cluster claims your work costs against your salary. Gross billings under an ABN mean you are in business, with wider deductions and, past $75,000, GST and a BAS to run. Answer that single question and every hour you spend on your tax lands where it should, instead of solving a problem that was never yours.

General information only, not tax advice. Check the ATO or a registered tax agent for your situation.