Professional indemnity insurance (PII) is not optional for healthcare locums in Australia. Under AHPRA's PII Registration Standard, every registered health practitioner who undertakes any form of practice must hold PII arrangements that comply with their National Board's standard, and must declare this compliance at both initial registration and annual renewal. This applies regardless of whether you are employed, contracted, or working directly as a sole trader across shifts at multiple workplaces.
This post covers the three insurance categories most relevant to locums working under an ABN: professional indemnity, public liability, and income protection. It also explains the ATO deductibility rules that apply to each.
This is general information only and is not personal financial, legal, or tax advice.
Professional Indemnity Insurance: The AHPRA Mandatory Requirement
AHPRA's PII Registration Standard applies to every profession Sessional Australia supports: GPs, specialists, pharmacists, nurses, physiotherapists, psychologists, occupational therapists, dentists, and paramedics. The standard requires cover for all aspects of practice, not just the primary role. If you are specifically excluded from cover for any area of your practice under your policy, you must not practise in that area.
For locums, the critical question is whether your arrangement is employer-indemnified or non-employer-indemnified. In employer-indemnified practice, the host facility's indemnity covers your clinical work at that site. In non-employer-indemnified practice, which includes most ABN-based contracting and agency placements, you are required to hold your own PII in your name.
Most medical defence organisations (MDOs) and professional insurers offer claims-made policies, which means the policy in force at the time a claim is lodged, not the time of the clinical event, is the one that responds. Locums who move between policies or cease practice need to consider run-off cover, which extends the reporting period after a policy lapses so that claims arising from past practice remain covered. AHPRA's registration standard effectively requires ongoing cover for past practice, making run-off a live issue for any locum who pauses, changes insurer, or retires.
You must retain documentary evidence of your PII for five years from the date you lodge your tax return, for AHPRA audit purposes.
Public Liability Insurance: Covering Third-Party Risk
Public liability insurance covers claims arising from injury or property damage to a third party as a result of your activities. For sole trader locums working at a host facility, the facility's own public liability policy often covers the physical premises, but it will not necessarily cover personal liability arising from your conduct as an independent contractor.
Whether you need your own public liability cover depends on your contract terms. Many agency contracts and direct workplace agreements require ABN contractors to hold a minimum level of public liability, commonly $5 million to $20 million, as a condition of engagement. Review each contract before you start a new engagement.
Public liability premiums paid wholly for the purposes of earning assessable income are deductible under section 8-1 of the Income Tax Assessment Act 1997. Keep your insurer's tax invoice showing the premium amount, the period of cover, and your name or ABN.
Income Protection Insurance: Replacing Your Earnings If You Cannot Work
Unlike salaried employees, locums working under an ABN have no access to paid sick leave, annual leave, or workers compensation for most clinical income streams. Income protection insurance provides periodic benefit payments (typically up to 70 to 75 per cent of your pre-disability income) if you are unable to work due to illness or injury.
The ATO allows sole traders to claim the premiums as a tax deduction, provided the policy is held in your own name, you pay the premiums yourself, and the policy pays periodic income replacement benefits rather than a lump sum. Premiums paid directly from a superannuation balance are not deductible in your personal return. If you do receive benefit payments under a claim, those payments are assessable income and must be declared on your tax return.
The 12-month rule applies to prepaid premiums: if you pay a premium in advance and the cover period extends beyond 12 months from the payment date, you can only deduct the portion attributable to the current income year.
What Locums Can Claim at Tax Time
Across the three insurance categories, eligible deductions for locums working under an ABN include:
- PII premiums, including run-off cover premiums, to the extent they relate to income-earning activities.
- Public liability premiums required under your contractor agreements.
- Income protection premiums paid in your own name (not through super), for periodic-benefit policies.
If PSI rules apply to your income, which they do when more than 50 per cent of your income comes from your own skills and efforts rather than a business structure, some deductions are restricted. However, insurance premiums are not among the restricted categories under the PSI rules, so you can generally still claim them in full. Confirm your position with a registered tax agent.
Keep records for a minimum of five years.
How Sessional Helps
Sessional tracks your deductible business expenses, including insurance premiums, in the same dashboard where you log shifts, raise invoices, and monitor your GST/BAS position. As you approach your $75,000 GST registration threshold your dashboard flags the milestone, and the built-in tax-reserve calculator sets aside the right portion of each payment for income tax so you are not caught short at year end. You can also track your super contributions against the 2025-26 concessional cap of $32,500 to optimise your position before 30 June 2026.
If you work across agencies and direct workplaces, Sessional's invoicing tools let you send, chase, and reconcile payments in one place, with auto-chasers for overdue invoices. Your AHPRA registration status and CPD deadlines are tracked under the credentialing tab, so renewal surprises do not catch you mid-shift. Explore the full feature set at /pricing or see the help centre for a walkthrough.
Sources
- AHPRA - Professional Indemnity Insurance Arrangements Registration Standard
- AHPRA - PII Fact Sheet (all boards)
- ATO - Income protection insurance deductions
- ATO - Income protection insurance payments (assessable income)
- ATO - Claiming deductions when receiving PSI
- BizCover AU - What is run-off insurance?
- MIPS - Indemnity coverage for locum healthcare work