How Doctors Are Taxed in Australia

Doctors often argue about labels. The Australian Taxation Office (ATO) looks at outcomes, because PAYG, superannuation, GST, personal services income and payroll tax consequences depend on what actually happens, not what a contract is called.

This guide explains how doctors are taxed in Australia across the main working arrangements: hospital employee, locum, contractor through an entity, practice owner and tenant doctor. We provide accounting and advisory for doctors, so the examples reflect real arrangements. Where a topic has its own depth, we link to a dedicated guide rather than repeat it here.

Which doctor are you? A quick tax map

Use the table below to find your situation, then read the section that applies. The same person can sit in more than one row, for example a staff specialist who also does private locum work.

How is a doctor's income taxed in Australia?

Income from providing medical services is assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Deductions are available under section 8-1 where the expense is incurred in gaining assessable income and is not private, domestic or capital in nature, with apportionment for any private use.

The ATO's occupation guide for doctors and specialists, last updated on 11 May 2026, is the baseline reference for common income types, deduction categories and substantiation expectations.

What can employee doctors claim, and what cannot they claim?

Employee doctors are integrated into the hospital or practice. The employer controls rosters, systems and leave, and bears most of the commercial risk. The payer generally must withhold PAYG from salary and wages under Taxation Administration Act 1953 Schedule 1 section 12-35. Compliance is simpler, but there are fewer structuring options.

Commonly deductible, where work-related and substantiated

• AHPRA registration and medical college fees.
• Medical indemnity insurance.
• Continuing professional development, courses and professional seminars.
• Stethoscope, loupes and other work-related medical equipment.
• Protective clothing and occupation-specific uniforms.
• Work-related travel between separate workplaces on the same day.

Usually not deductible

• Conventional or ordinary clothing.
• Grooming and personal care.
• Home-to-work travel.
• Private portion of phone and internet use.
• General fitness and gym expenses.

Salary-packaging options can also matter for employed doctors, including the FBT treatment of electric vehicles. We cover that separately in our guide to EV salary packaging and the FBT exemption for medical practices. For return preparation, our personal tax service helps doctors claim correctly and keep records.

How are contractor and locum doctors taxed, including GST?

Calling yourself a contractor does not settle the tax position. The ATO looks at control, risk, delegation and integration. Worker classification is a topic in its own right, and we cover the tests in detail in our guide to the employee versus contractor ATO rules.

On GST, many patient-facing medical services are GST-free under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999, broadly where a Medicare benefit is payable or the statutory health conditions are met. However, GST outcomes depend on the nature of the service, the recipient of the supply, and whether those conditions are met. Doctors should separately review patient services, third-party and medico-legal reports, cosmetic procedures, locum invoices, service fees and mixed supplies, because these can produce different GST results. The ATO sets out the boundaries on its GST and medical services guidance.

Where GST registration is required, ABN, GST and BAS and IAS lodgement obligations follow. Contractors also commonly move onto PAYG instalments. This is a frequent compliance gap for locums in their first year of contracting.

Can a contractor doctor still be owed superannuation?

Under section 12(3) of the Superannuation Guarantee (Administration) Act 1992, a person working under a contract wholly or principally for their labour can be treated as an employee for superannuation purposes. Many practices assume contractor means no super. The superannuation rules are broader than employment law and frequently catch medical arrangements.

There is an important qualification. The ATO's view in TR 2023/4 is that the extended labour-contract rule applies only where the party providing the labour is a natural person, contracting in their individual capacity rather than as a trustee or partner. Where a doctor genuinely contracts through a company or trust, the section 12(3) analysis is different. That does not automatically remove the risk, but it means the correct legal pathway, including the actual contract terms, the payment flow and who is legally engaged, must be reviewed separately.

Do PSI and Part IVA rules affect doctors?

The PSI rules sit in Part 2-42 of the ITAA 1997, with the meaning of PSI in section 84-5, attribution in section 86-15 and the personal services business tests in Division 87. Passing a PSI test does not make income splitting automatically defensible. The ATO's guideline PCG 2025/5, issued in late 2025, sets out when Part IVA of the Income Tax Assessment Act 1936 may apply to a qualifying personal services business.

For example, a specialist operating through a company may pass the PSI tests. If profits are then retained in the company at the lower corporate rate, or distributed to family members who do not materially contribute, Part IVA risk may still arise under PCG 2025/5. We explain the tests, the 80% rule and the risk indicators in our dedicated guide to the PSI rules for doctors.

Are service entity arrangements still allowed for medical practices?

Service entities are accepted where services are genuinely provided, fees are commercially priced and charges are properly substantiated. They become high-risk when the fee mainly strips a doctor's personal income rather than paying for real services. The Commissioner's detailed view is in Taxation Ruling TR 2006/2, which builds on the earlier service entity principles in IT 276.

Because service entities are a major risk area for medical practices, we cover the fee benchmarks, documentation and PCG 2025/5 interaction in full in our guide to service trust structures for medical practices.

Do medical practices pay payroll tax on contractor doctors?

This is the issue many practice owners care about most, and it is state-based, so the answer varies by jurisdiction. The starting point is the relevant-contract provisions in each state's payroll tax law, which can pull payments to contractor doctors into the practice's taxable wages.

What the Thomas and Naaz case decided

In Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40, the NSW Court of Appeal upheld payroll tax on payments to doctors at three medical centres. The practice collected patient Medicare benefits and paid a share to each doctor under written agreements. The court treated those agreements as relevant contracts, so the payments were taxable wages. The decision exposed many practices to reassessment for prior years.

State differences and the GP bulk-billing exemption

States have responded differently. Victoria's revenue office has issued medical industry payroll tax guidance confirming that contractor arrangements can be relevant contracts. From 1 July 2025, Victorian GP medical businesses can access an exemption for wages paid to employee and contractor GPs to the extent the work is bulk-billed or otherwise fully funded, which broadly supports bulk billing. The exemption does not apply to privately billed fees or to non-GP practices. NSW and Queensland have applied their own guidance and amnesty arrangements, so the position depends on the state and the practice model.

Practice owners should review payment flows, service agreements, who collects patient and Medicare receipts, and whether any contractor or GP exemption applies. Getting this wrong is expensive, and it is best modelled before a restructure. Our business advisory and forecasting team works through these scenarios with practice owners.

2026 tax settings for doctors

These are the current settings most relevant to doctors. Build them into any planning before year end.

High-income doctors should plan concessional contributions carefully, because Division 293 and the contributions cap interact. Proactive tax planning well before 30 June usually beats a rushed decision in late June.

Worked examples and a quick checklist

In our experience advising Melbourne doctors and practices, these short scenarios show how the rules apply.

• Employee registrar: claims AHPRA, indemnity and CPD, but not home-to-work travel or grooming. Super is paid by the hospital.
• Locum over the threshold: a locum invoicing $90,000 must register for GST, even though most patient services are GST-free, and should move onto PAYG instalments.
• GP through a company: income is likely PSI; passing a PSB test does not licence splitting profits to a non-working spouse, which raises Part IVA risk under PCG 2025/5.
• Practice owner with a service trust: fees must be commercial and documented, with genuine services actually provided.
• Clinic engaging contractor GPs: payments may be taxable wages for payroll tax, subject to any bulk-billing exemption in the relevant state.

• Confirm your real working arrangement: control, risk, delegation and integration.
• Review your ABN, GST and BAS position, including GST on non-patient income.
• Check superannuation exposure on contractor arrangements.
• Assess PSI and Part IVA risk if you use a company or trust.
• For practices, review payroll tax on contractor doctors and any GP exemption.
• Keep contracts, billing flows and money movements consistent with each other.

Good bookkeeping underpins all of this. The documents, the day-to-day behaviour and where profits actually land need to tell the same story.

Frequently asked questions