What is a Visiting Medical Officer (VMO)?
A Visiting Medical Officer, also referred to as a VMO, is a medical practitioner in private practice who also provides medical services in a public hospital. VMOs are not hospital employees but are contracted by the Local Health District (LHD) to provide specific medical services in nominated health facilities.
Who can be a Visiting Medical Officer?
As a minimum, Visiting Medical Officers are medical practitioners (Doctors) that are registered or eligible for registration with the Medical Board of Australia. For specialist VMO contracts, further qualifications are required including specialist training either domestically or abroad.
Why become a VMO? The Benefits of practising medicine as a Visiting Medical Officer
There are multiple benefits of practising as a Visiting Medical Officer:
- The ability to earn additional income prior to specialist training and to save for a fellowship years abroad.
- To subsidise your income while building a private practice.
- Flexibly support your local community while maintaining a private practice.
- Maintain exposure to diverse pathology, latest technology and procedures, while continuing professional development training and networking with colleagues in the public system.
- Work where you want and with a low cost to generate your income; and
- The ability to structure yourself to minimise debt and taxes.
Things to consider when setting yourself up as a VMO
VMO income is considered business income, which includes Goods & Services Tax (GST) and a Superannuation component*. As a result, there are five implications to consider:
- Income tax is no longer withheld from payments and you will need to put aside a percentage for future income tax liabilities. It is strongly suggested to liaise with your accountant in advance to determine the applicable percentage.
- The superannuation on VMO income will reduce the amount of concessional contributions (personal tax-deductible contributions) that can be made to your superannuation fund to ensure you remain under the cap.
- If your income is greater than $250,000, you may be required to pay the additional tax on concessional contributions (division 293).
- You’ll also need to be registered for GST and required to lodge quarterly Business Activity Statements; and
- Following the lodgement of your income tax return, you will enter the Pay As You Go (PAYG) instalment system which sees you pre-paying the next year’s income tax.
Understanding the above cash flow obligations is key to achieving financial success and minimising the sudden and often significant cash outflow to a medical practitioner and their family.
*This will depend on the type of contract (see below for more information) and only applies to engagements with individuals (sole traders) because the legislation requires the recipient to be a natural person; reference – Superannuation Guarantee Determination (SGD 95/1)
How do VMO contracts work?
VMO contracts are typically with a Local Health District (LHD) although it is also common for private and private public partnership (PPP) organisations to issue VMO contracts. VMOs should be aware of the difference between sessional and fee-for-service contracts. Sessional VMOs charge an hourly rate for treatment of a public patient whereas fee-for-service VMOs charge a procedural fee.
Tax implications for Visiting Medical Officers (VMOs)
On a VMO contract, you will be a sole trader. You will need an Australian Business Number (ABN) and you will need to be registered for GST if you’re earning over $75k in a 12-month period under that ABN. This is separate to income you may derive as an employee, paid by the hospital through your Tax File Number (TFN). Your hospital salary will have tax withheld from it fortnightly and superannuation guarantee (SG) paid on top of your earnings. Under the VMO contract, you are paid 100% of your billings and you must show this income in the business schedule of your tax return. If you are registered for GST, you will also need to lodge a Business Activity Statement (BAS) every quarter showing total income, as well as GST collected and paid.
A hospital or employee salary is taxed at source and includes superannuation guarantee (SG) contributions. Your VMO income will require you to set aside money for tax and, depending on the type of contract, superannuation. VMO contracts can be fee-for-service or sessional fee contracts, the latter will attract Superannuation for sole traders, whilst those paid a fee-for-service will not attract Superannuation.
If you would like to pay yourself super (see below), there are several considerations to be made. The first is your annual cap space. For tax-deductible contributions this is $27,500. Note that this includes amounts from other income sources where you might be an employee receiving the SG. You may have unused cap space from prior years being carried forward which you can use only if your total super balance is under $500k.
If you make super contributions and your total adjusted taxable income (including reportable fringe benefits from salary packaging, investment losses, the super contributions themselves and several other items) exceeds $250k, you will also have to pay Division 293 tax. See our article detailing Division 293 tax here.
FAQs about Visiting Medical Officers
What is a Visiting Medical Officer contract?
In NSW a “VMO contract” is issued by a NSW health service provider to a medical practitioner for the provision of medical services. The Health Service Provider is typically a Local Health District (LHD). Services can range from General medicine through to Specialist medicine and are specified in a given contract.
A VMO contract is usually a zero hours contract, offering no minimum hours of work for a given term.
A VMO contract also specifies what both parties to the contract will contribute to the ongoing management and care of a patient. Beyond medical care this can include: booking, billing, communicating, and attending to the patient’s non-medical care.
Can I have more than one Visiting Medical Officer contract?
Yes, it’s possible to have more than one VMO contract at one time. Practitioners will often hold multiple VMO contracts when first fully qualified and yet to have an established private practice and seeking to fill a working week.
Should I sign a Visiting Medical Officer contract in my own name or in a company?
You should sign a VMO contract in your own name, as the Personal Service Income (PSI) rules state income derived mostly from your personal exertion must be taxed in your name. Also, if you are on a sessional fee contract, superannuation is only payable to natural persons, not a company or trust
Do I have to pay super on my Visiting Medical Officer income?
Superannuation may be included in your VMO income, depending on your contract being either fee-for-service or a sessional fee, as noted above. If on a sessional fee contract, the rate of superannuation is 11% of your earnings from 1 July 2023. Otherwise, superannuation contributions are made at the taxpayer’s discretion and you should seek out financial advice.
What is a zero hours Visiting Medical Officer contract?
A zero hours VMO contract is one in which the contracting party (hospital) does not guarantee any minimum amount of work, and the VMO’s hours can vary from week to week or even day to day.
Under a zero hours contract, you are only paid for the hours you actually work as a VMO. This can make it difficult to plan and manage your budget and finances as income can be unpredictable from one week to the next.
Despite zero hour contracts being commonplace, in many areas, there is high demand and a large volume of work available for VMOs. In any case, most practitioners tend to integrate VMO income with their private practice income to “smooth” out the unpredictable nature of VMO income.
What tax deductions can you claim as a Visiting Medical Officer?
Deductible expenses are not dissimilar to working as an employee. Regardless of where you are working, you can only claim travel costs if on-call, re-called or travelling between workplaces.
As a sole trader, if you pass certain tests within the Personal Services Income (PSI) rules, you may be able to claim additional expenses such as costs related to employing an associated individual (wage and super). An example of this is a spouse who assists with bookkeeping and BAS lodgement. You may also be able to claim additional home office costs; of course this depends on how much work you are actually doing from home. For more information on tax deductions you can claim due to working from home, see our article detailing tax deductions you can claim when working from home here.
Are Visiting Medical Officer contracts specific to doctors practising in NSW?
Yes, VMO contracts are specific to Doctors practising in New South Wales (NSW). While other states, territories and Specialty Network (SN) in Australia may have similar arrangements (QLD and ACT for example), the details of contracts and the way VMOs are managed can differ.
What is the difference between a Visiting Medical Officer and Staff Specialist?
The difference between a Visiting Medical Officer and a Staff Specialist is that a VMO provides services under a fee-for-service arrangement, whereas a Staff Specialist is a salaried employee.
VMOs are generally independent practitioners who have their own private practices and may also work in other hospitals and healthcare facilities. They are paid on a fee-for-services basis and may have admitting rights to the hospital.
On the other hand, a Staff Specialist is a salaried medical position within a hospital or health service. They are contractually employed by the hospital or health service and work as part of a team to provide medical care to patients. Staff Specialists are typically required to have a higher level of training and experience than VMOs as they have a specific area of expertise. They may also be involved in teaching and research.
What should be included in an individual employment contract?
There are multiple things to consider being included in an individual employment contract. An employment contract is an agreement between an employer and employee that sets out the terms and conditions of employment. An employment contract can’t provide for less than the legal minimum entitlements set out in the National Employment Standards (NES) and all employees are covered by the NES, regardless of whether they’ve signed a contract.
The National Employment Standards (NES) are 11 minimum employment entitlements that have to be provided to all employees:
– Maximum weekly hours
– Requests for flexible working arrangements
– Offers and requests to convert from casual to permanent employment
– Parental leave and related entitlements
– Annual leave
– Personal/carer’s leave, compassionate leave and family and domestic violence leave
– Community service leave
– Long service leave
– Public holidays
– Notice of termination and redundancy pay
– Fair Work Information Statement (the FWIS) and Casual Employment Information Statement (the CEIS).
Setting yourself up for success as a VMO
Working as a VMO can be a beneficial and flexible way to practice medicine, but also requires careful planning for your finances. We recommend that you consult with a professional medical accountant and financial planner who can advise you on the best strategies for your situation.
Also listen to our podcast on service trusts and agreements
Thanks to recent guidelines and exclusive intellectual property DPM has proactively and privately procured with the ATO, our consultants are in a unique position to provide specialist advice in this area.
If you’d like to find out more and understand whether DPM may be able to help you, visit this page for a free contract review and obligation-free consultation.
Disclaimer: This article contains general information only and does not consider your personal objectives, financial situation or needs. You should assess whether the information contained in this article is appropriate in relation to your own objectives, financial situation or needs and seek professional advice before taking action.
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