The GP Tax Guide: Payroll Tax, PSI, Structures and Deductions
A plain-English guide for GPs, registrars and practice owners in Victoria. What applies to you, what’s changed, and what to check before 30 June.
Key points
- Victoria exempts the share of GP wages tied to fully funded (for example bulk-billed) consultations from payroll tax, from 1 July 2025. Privately billed work is still counted.
- Payments to contractor GPs can still be treated as wages under the contractor rules.
- Most doctors’ income is personal services income. A company or trust won’t change who it’s taxed to unless you run a genuine business.
- Medical services are generally GST-free. Practice owners still often need to register for GST on service fees charged to doctors.
1. Victorian payroll tax for GP practices
Payroll tax is a state tax paid by employers. In Victoria it applies once total wages pass the $1 million annual threshold (from 1 July 2025). The general rate is 4.85% (1.2125% for eligible regional employers). The threshold phases out for larger employers.
Contractor doctors
Many practices treat GPs as independent contractors who pay a service fee. The State Revenue Office (SRO) can still treat payments to those doctors as wages under the contractor provisions of the Payroll Tax Act 2007 (Vic). The SRO set out its view for medical centres in ruling PTA-041 (August 2023). Collecting patient fees through the practice account is a key risk factor.
The bulk-billing exemption
From 1 July 2025, wages paid to employee and contractor GPs for fully funded consultations, including bulk-billed ones, are exempt. A statutory formula works out the exempt share from amounts received. Mixed-billing clinics get a partial exemption.
| Work | Payroll tax position (Vic) |
|---|---|
| GP, fully funded or bulk-billed consultations | Exempt share under the formula |
| GP, privately billed or gap fees | Counts towards taxable wages |
| Specialists, dentists, nurses, allied health | No special exemption |
2. PSI rules for doctors
Personal services income (PSI) is income earned mainly from your own skills. For most GPs, consultation income is PSI. If the PSI rules apply, income earned through a company or trust is taxed to you personally and you can’t split it with family.
You avoid the rules if you pass the results test or, if no more than 80% comes from one source, one of the other tests. Many contractor GPs working at one clinic don’t pass. Practice owners who employ staff and run a business are in a different position again. The ATO also checks arrangements that move a doctor’s income to a related entity.
3. Practice structures and service trusts
| Setup | Suits | Watch for |
|---|---|---|
| Sole trader | Contractor GPs and registrars | PSI, record keeping, setting aside tax |
| Company | Practice owners running a business | Div 7A, PSI if income is mostly your own work |
| Discretionary trust | Owners with a genuine business and family | Proposed 30% trust minimum tax from 1 July 2028 (not yet law) |
| Service entity | Practices with staff and premises | Fees must be at market rates and backed by agreements |
The ATO’s guidance on service entity arrangements expects the fee to reflect what the entity actually does. We document the arrangement and check fees each year. For larger family groups, see our high net worth page.
4. GST in a medical practice
- Medicare-funded and other necessary medical services are GST-free.
- Cosmetic procedures that aren’t medically necessary attract GST.
- Service fees a practice charges doctors are taxable, so practices above $75,000 in those fees need GST registration.
- Contractor GPs usually don’t need to register if all their income is GST-free.
5. Deductions doctors often miss
Registration & memberships
AHPRA, college fees, RACGP and AMA memberships.
Insurance
Medical indemnity and income protection outside super.
CPD & conferences
Course fees and travel for work-related education.
Equipment
Medical equipment, laptops, phones and software, by work use.
Travel
Between clinics, hospitals and home visits. Not home to your usual workplace.
Home office
For admin and telehealth from home, with records.
6. Super and investing
Concessional contributions to super are generally taxed at 15%. If your balance is under $500,000, you can use unused caps from the past five years. Senior doctors with balances near $3 million should know about the Div 296 tax from 1 July 2026. For property or shares, see our investor tax page.
Checklist before 30 June
- Review your service agreement and how patient fees flow.
- Check your bulk-billed vs private billing split for payroll tax.
- Confirm whether the PSI rules apply to you.
- Top up super if you have unused caps.
- Collect receipts for registration, insurance and CPD.
- Book a tax planning meeting in May.
Frequently asked questions
Do GP practices in Victoria pay payroll tax on contractor doctors?
They can. The SRO can treat payments to contractor GPs as wages. From 1 July 2025, the share tied to fully funded consultations such as bulk-billing is exempt. Privately billed work still counts.
What is the Victorian payroll tax threshold?
$1 million a year from 1 July 2025, with a 4.85% general rate. The threshold phases out for employers with wages between $3 million and $5 million.
Can a GP use a company to pay less tax?
Usually not on consultation income. Most GP income is personal services income, so it’s taxed to you even through a company, unless you run a genuine business.
Do GPs charge GST?
Not on GST-free medical services. Cosmetic work that isn’t medically necessary attracts GST. Practices often need to register because of service fees charged to doctors.
Is a service trust still allowed?
Yes, if it provides real services at market rates and is properly documented. The ATO reviews these arrangements. The proposed trust minimum tax from 2028 may also affect them.
What can a doctor claim on tax?
Common claims include AHPRA and college fees, indemnity insurance, CPD, equipment and work travel between sites.