How Does Medicare Billing Affect Your Taxable Income as a General Practitioner (GP)?
- johnry8
- Sep 2
- 2 min read
As a General Practitioner (GP), a significant portion of your income likely comes from Medicare billings, but how that revenue is treated for tax purposes can be confusing. Many GPs assume that because Medicare sets the fees, the tax process is simplified. Unfortunately, that’s not the case.
Misunderstanding how Medicare earnings are taxed can lead to:
Unexpected tax bills
Inaccurate BAS or PAYG instalments
Problems with practice structure or contractor arrangements
How Medicare Billing Translates to Taxable Income
1. Medicare Earnings Are Treated as Taxable Income
Medicare payments, whether received directly by you or on your behalf, are considered taxable income just like private billings or other revenue streams. It doesn’t matter if the funds are paid into your personal account or your practice’s account. They are still assessable by the ATO.
Sole traders: All Medicare receipts are included as personal income.
Contractors or employees: Your tax obligations may differ depending on whether you're truly independent or treated as an employee by the ATO.
Tip: Keep detailed records of Medicare statements and reconcile them with your practice's financial reports.
2. Deductions That Offset Medicare Income
Yes, you’re taxed on the full Medicare amount, but eligible deductions can lower your taxable income.
Common deductible expenses for GPs include:
Medical indemnity insurance
Equipment purchases or leasing
CME (Continuing Medical Education) and conference costs
Work related car expenses (when visiting multiple sites)
Practice management software and subscriptions
Best Practice: Work with an accountant who understands medical professionals to ensure you're not missing any industry specific deductions.
3. Watch Out for GST and BAS Confusion
Medicare billings are GST free, but that doesn’t mean you can ignore BAS altogether. If you also provide private services or sell products (e.g. supplements, cosmetic treatments), those components may be subject to GST.
Do: Separate GST free and GST applicable revenue streams in your records.
Don’t: Assume all medical income is exempt from GST reporting.
4. Practice Structure Matters
Your business structure influences how Medicare income is reported and taxed. For example:
Sole trader: All income and expenses are reported in your personal tax return.
Partnership or trust: The structure may offer asset protection or tax advantages but increases administrative complexity.
Company structure: Suitable for high income earners looking to cap tax at the corporate rate but comes with extra compliance obligations.
From our experience, many GPs opt for a hybrid model receiving a fixed wage from a company they control while retaining flexibility for other consulting work.
Want to make sure your Medicare billings are helping not hurting your tax position?