Accounting and Tax for Locum Doctors
Locum work creates a specific set of financial issues that don’t apply cleanly to either employed doctors or established practice owners. You’re earning ABN income, often across multiple practices or locations, managing your own PAYG instalments, claiming travel and accommodation costs, and dealing with lenders who may view your income as irregular. Getting the tax side of this right from the start saves considerable pain later.
We work with locum doctors across Melbourne and regional Victoria — GPs, emergency medicine specialists, anaesthetists, and others who work locum arrangements whether full-time or alongside a primary employment role.
How locum income is taxed
As a locum, you typically earn income on an ABN — either as a sole trader, through a company, or through a trust. The income is not subject to PAYG withholding by the practices you work for (they pay you gross), so you’re responsible for managing your tax through PAYG instalments and an annual tax return.
PAYG instalments are quarterly prepayments of your expected income tax, calculated by the ATO based on your previous year’s income. In your first year of significant locum income, you won’t have instalments set up — so you’ll receive a potentially large tax bill at lodgement unless you’ve set aside money or arranged voluntary instalment payments.
If your locum income exceeds $75,000 in a 12-month period, you must register for GST. Medical locum services provided to Medicare-eligible patients are generally GST-free — but the registration requirement still applies, and you’ll need to lodge a BAS even if your net GST liability is nil.
PSI and locum doctors
If most of your locum income comes from one practice or agency, and you’re paid for time worked rather than a specific result, the ATO will generally classify your income as Personal Services Income (PSI). PSI means the income must be attributed to you personally, you can’t income-split with a spouse, and deductions are limited to those available to an employee.
The PSI business tests — results test, unrelated clients test, employment test, business premises test — need to be assessed for your specific locum arrangements. If you work across multiple independent practices and can demonstrate you’re running a genuine business, you may pass one of the tests. If you work exclusively through one agency or one practice, PSI almost certainly applies.
This doesn’t mean having a company is pointless for a locum. Even under PSI, a company structure can be useful for managing cash flow, holding equipment, and building a financial foundation. It just changes what the structure can and can’t do from a tax perspective.
What locum doctors can claim
Even under PSI, legitimate work-related deductions include travel between different practice locations on the same day, accommodation when working rural or interstate, AHPRA registration and specialist college fees, indemnity insurance (MDA National, Avant, MPS), professional memberships (AMA, specialty colleges), medical equipment and bags, home office expenses for managing bookings or telehealth, professional subscriptions and journals, and income protection insurance (deductible personally).
Accurate records matter. Keep a logbook for vehicle use, receipts for everything, and a diary or calendar showing work locations.
Finance applications as a locum
Lenders treat locum income with varying degrees of caution. What matters for a loan application is two years of tax returns showing consistent ABN income, a clean BAS lodgement history (demonstrating compliance and income consistency), and a clear explanation of your typical working arrangements.
If you’re planning to buy a home or apply for practice finance, speak with us before you approach a lender — we can make sure your returns are presented in the most useful form and advise on timing.
Related services
- Accounting and tax for doctors — full overview
- PSI rules for doctors and medical professionals
- Tax deductions for doctors
- Finance for medical professionals
Frequently asked questions
Do PSI rules apply to locum doctors working through an agency?
Almost certainly yes. Working through a single agency, being paid for time rather than a specific result, and having no genuine business infrastructure are all hallmarks of a PSI classification. This does not mean a company structure is useless — but it changes what the structure can and cannot do from a tax perspective.
Can I vary my PAYG instalment amount if my locum income changes?
Yes. You can vary your PAYG instalment amount each quarter using the ATO variation process. If your income has dropped significantly or if you have changed structure, varying your instalments is worthwhile — otherwise you overpay throughout the year and wait for a refund at lodgement.
Can a locum doctor get a home loan in Melbourne?
Yes, but the presentation of your income matters significantly. Lenders treat locum income more favourably when two years of consistent tax returns and clean BAS records are available. We prepare financials in the most useful form for lender assessment and advise on the timing of applications.
Contact us on 1300 212 663 or at our Melbourne CBD office.