What is locum work and who is it for?
Locum work, also known as private assisting, allows junior doctors (interns and residents mostly) to gain experience in different hospitals, explore different career opportunities and increase their income. However, just like other good things out there, the advantages of locuming also come with downsides.
It’s important to understand and get the basics of locum work right, as there are very important compliance obligations to locuming that Australian doctors in training will need to consider carefully to avoid putting themselves in less than ideal situations come tax time.
Benefits of locum work for doctors in training
How locum work works
We generally speak of locum work when a fully registered doctor either substitutes or fills in at different hospitals based on positions available.
Locum work varies for each doctor and everyone has their own reason why locum work can be an attractive solution. Some like the flexibility of the work and some see it as a way to earn higher income (or both).
Depending on work rosters, some doctors might find they have a day off and can offer their services to either their primary hospital or another hospital around the country to top up on their single source of income.
Locum doctors may decide they want to travel to work at various hospitals, gaining even more experience. Some prefer working off their own schedule and decide to be full time locum doctors for periods of time.
To locum or not to locum
That is indeed a question to consider carefully for your own personal situation. The choice to do locum work is a personal one that needs to fit in with your lifestyle choices and career goals.
In a post pandemic world, due to staffing shortages in the medical industry Australia-wide, more and more doctors are deciding to take on locum shifts in city-based and rural hospitals to fill hospitals’ requirements.
Some young doctors decide to travel while locuming, whilst others use it as a means to build cash flow and pay off debt, or prepare for a specific time in their lives when they know they may not earn as much income (maybe not at all) e.g. during parental leave or an overseas medical fellowship.
Whatever your personal reasons for considering locum work, there are obvious pros and cons detailed below:
- Increased income
- Debt management
- Delays in training
- Tax planning
- Risk of burnout
Tax implications when doing locum work in Australia
When considering locuming, it is best to begin discussions with a medical accountant to ensure you understand the ins and outs of locum work as well as the steps to take beforehand. Requirements needing to be addressed include:
- Australian Business Number (ABN) application
- Goods and Services Tax (GST) registration
- Business Activity Statement registration
- Tax Planning
For Australian locum doctors
The majority of locum doctors are considered sole traders and it effectively means that they are running their own business. As you are generally not considered an employee of the hospital, you will have to act on your own and ensure you follow all your tax obligations set by the Australian Tax Office (ATO) so that you don’t incur hefty fines and penalties along the way.
The first step is setting up an ABN and working out how much locum work you will be completing. If it is expected that you will earn over $75,000 in a 12 month period, you must be registered for GST and complete quarterly business activity statements (BAS).
It is a common mistake of a doctor doing locum work to assume that medical services are GST-free when this is not usually the case as you are not billing the patient directly – therefore you are required to bill for GST on top of your locum work which is paid to the ATO each quarter.
Under the personal services rules, all income must be distributed towards yourself and taxes are paid at individual tax rates.
Tax planning is important for locum doctors to ensure there are no surprises come tax time. In addition, keeping good records becomes extremely important to ensure you are lodging accurate tax returns for each financial year.
The ATO has great oversights on ABN income and can implicate hefty fines and penalties if you are not lodging your business activity statements (BAS) and tax returns correctly.
HELP debts generally don’t get taken into consideration with locum work and this is something that needs to be paid through your tax returns. To get a better understanding of how much you will need to repay, you can use the tables provided by the ATO.
A specialist medical accountant will be able to assist you with your ABN set up, GST registration, BASs and tax returns. This is the most effective way to ensure you are correctly lodging.
For overseas locum doctors
Understanding the Australian tax system is very important and you should make sure you understand the tax implications of undertaking locum work to plan your finances effectively.
The ATO has further information on what it means to be a sole trader, which is a good starting point if you plan to come to Australia and do locum work for a short period of time.
In conclusion, locum work has its perks but also changes how you are paid and therefore, taxed.
If you do decide locum work is for you then make sure you have a good understanding of how it all works and reach out to a medical tax specialist to be set up correctly from the start.
If you have any questions regarding locum work, or want some more information about locum doctors’ tax deductions and/or tax implications, request a free initial consultation.
For more information on locum work for Australian doctors and locum GPs, read the Frequently Asked Questions below.
Depending on the hospital, demand and location, the rate locum doctors usually receive is between $120-$180 per hour. This can vary between hospitals and often locum agencies will give you the option of the rate, amount of hours required and your options of hospitals.
Upon completion of internship, most Australian doctors are eligible to complete locum work. However, it is best to check your current employee contract to ensure you are eligible to become a locum doctor and you must ensure all your registrations are up-to-date.
Yes, locum GPs are considered a sole trader once they undertake locum work and all income must be distributed to themselves under the personal service income (PSI) rules.
Some employers may ask for this to ensure you aren’t considered an employee of their hospital. This ensures employers’ obligations such as superannuation, payroll tax and leave entitlements are not required to be met whilst you are locuming. As the work you are completing is considered PSI income, it means that you must distribute the income to yourself and you can’t pay tax at company tax rates. You will also need to set up and register a company, which incurs costs and further obligations such as financial reports and tax returns. If you are in this position, it is best to seek personal advice from a specialist medical account to understand your requirements.
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 communication is appropriate in relation to your own objectives, financial situation or needs.