Locum work, or private assisting, is a great way to gain experience in different hospitals, explore career opportunities and top up your income.
However despite the obvious perks, there are important compliance obligations to locuming that you will need to keep on top of to avoid some hidden surprises come tax time.
Most of these obligations are no concern to doctors employed by a public hospital as the main obligation for the employee doctor is to lodge their annual income tax return on time (times vary depending on your situation, for more information check out the DPM Be tax-ready checklist).
What do you need to know when considering locum work?
You will need an Australian Business Number (ABN)
As a locum worker, you may find yourself being asked by a hospital or a locum agency for your Australian Business Number or ABN. The hospital that engages you for your services will request this when it chooses to employ you as a contractor as opposed to a regular employee. Effectively, if you are not an employee you are self-employed. Self-employed tax payers are required to provide a valid tax invoice to receive payments and to make a tax invoice valid, it must include an ABN.
Right away, you can:
Apply for an ABN: To do so, you can either speak with your accountant or apply for an ABN directly from the Australian Business Register website www.abr.gov.au.
Important: You need to make sure that your tax invoice is in line with ATO requirement standards. Again, you can either speak with your accountant or review rules regarding the provision of a valid tax invoice directly on the Australian Tax Office website www.ato.gov.au.
As you know, locum work is a great way to earn a substantial amount of money, faster than being employed in the public system. However, there’s a catch!
For example, you will need to be mindful of your projected turnover. In the case of the self employed locum, you may find yourself with an additional compliance obligation if your turnover earned doing private work exceeds $75,000 per annum.
You will need to register for Goods and Services Tax (GST)
That’s the rule! The ATO requires all self-employed tax payers to register for GST when their ABN turnover exceeds $75,000 (you do not need to do this if your turnover is lower).
Once registered, you may find yourself having to charge GST to a hospital or locum agency. The current rate of GST in Australia is 10 %. There are a number of GST free services in Australia. You will need to check with your accountant or confirm with the payer (hospital/locum agency) as to whether your locum work is GST free or not.
You will be required to account for your GST on quarterly Business Activity Statements (BASs). A BAS will provide you with the means to remit GST that you have collected comes Tax time.
Beware of the Income Tax trap
Arguably the biggest compliance obligation for the self-employed locum is that they will be required to pay their own income tax. Unlike the employer/employee relationship, income tax will not be withheld from payments. You need to plan ahead and seek advice regarding an appropriate percentage of your income to set aside for lump sum tax payments. You may find yourself on an ATO tax payment plan (paying interest to the ATO ) otherwise.
If you have any questions regarding locum/private assisting work or want some more information about what locum tax deductions there are, get in touch on 1800 376 376 or request a free initial consultation.
* The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.