Tax obligations for locum work
5 May 2022
Locum work is a good opportunity to gain experience in multiple hospitals. It also provides doctors with a chance to earn income at increased hourly rates. However, it does come with some tax complications.
You’ll need to prepare for, and meet, any related compliance obligations to avoid unexpected surprises at income tax time.
You’ll likely need to apply for an Australian Business Number (ABN) to work as a locum doctor. You can register for your ABN through the Australian Business Register website www.abr.gov.au or contact your accountant for assistance.
You must register for GST when your ABN turnover (gross income minus GST) exceeds (or is anticipated to exceed) $75,000.
Depending on your circumstances, it could be worth registering for GST, even if your ABN income doesn’t exceed $75,000 because it will enable you to claim GST on work-related expenses.
Once registered, you may be required to charge 10% GST on your services to a hospital or locum agency. You will also be required to pay any GST you collected through your quarterly Business Activity Statement (BAS) to the Australian Tax Office (ATO).
Not all services are GST-inclusive, so you may need to check with your accountant whether your situation requires that you charge for GST.
As a locum doctor, you may find that you’re spending more on travel, meals and incidental expenses. Not all of these expenses are likely to be tax deductible.
Travel related expense
- Car expenses
Generally, locum doctors can claim car expenses when travelling between two separate workplaces. It’s also allowable to claim a deduction if you travel from your regular workplace to an alternative workplace – assuming that the workplace is not your home.
You usually cannot claim a deduction for trips between home and work, as this normally occurs before you commence, or finish, earning assessable income. Therefore, it’s treated as a private expense.
If you’re travelling for both business and private use, you’ll need to identify and justify the business percentage, and then claim a deduction on the work portion of your travel.
- Accommodation expense
To claim accommodation expenses, the following conditions must be met:
- You declare any travel allowance you received.
- You have a permanent home, and the location of your permanent home must be a significant distance from your workplace.
- The expenses cannot be incurred as a result of your choice to reside in a location that is different from your work location.
- You must stay away for relatively short time periods.
- Your employment duties must require you to be at that specific location.
- Disallowed work-related expenses
Work-related expenses are not allowed under certain circumstances. For example, a work-related travel expense, where the employer did not pay an allowance, is not allowed.
Provisioning for tax
Always make sure your tax is lodged before it’s due, to avoid any penalties or interest.
Salary and wage
If you work as an employee, you’re usually on a set salary package, which is based on permanent full-time, part-time or job-share arrangements. Some tax will have been withheld from your salary and remitted to the ATO throughout the financial year.
As an employee, you may also consider salary packaging benefits.
If you’re registered for GST, your quarterly BAS statements will require that you pay any GST you have collected to the ATO.
Unlike the employer–employee relationship, income tax for a self-employed locum will not be withheld from payments. So, you may find it useful to plan ahead.
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Manager Doctors in Training
Financial Consultant (BBA accounting/marketing), Dip FS (FP), Cert. IV FMB
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