Personal Services Income (PSI) is one of the most consequential tax rules for locum GPs in Australia, yet it is also one of the least understood. If the PSI rules apply to your income, the ATO treats your earnings as if you had earned them directly as an individual, regardless of whether you invoice through a company or trust. With the 2025-26 financial year closing on 30 June 2026, now is the right time to understand where you stand.
This article is general information only and is not personal financial or tax advice. Please consult a registered tax agent for advice specific to your circumstances.
What Is PSI and When Does It Apply to GPs?
PSI is income where more than 50% of the payment is for your personal skills, efforts, or expertise, rather than for the use of assets, the sale of goods, or the work of a team. For a locum GP, this threshold is almost always crossed: a clinic or hospital is engaging you for your medical skills, your AHPRA registration, and your clinical judgement. The income you receive from those shifts is PSI.
The 50% threshold test is the entry point. Once your income qualifies as PSI, the ATO's PSI rules in Division 86 of the Income Tax Assessment Act 1997 apply unless you can demonstrate that you are running a Personal Services Business (PSB).
The Four PSB Tests: Can You Escape the Rules?
If you can self-assess as a PSB, the PSI rules do not apply and you retain full flexibility over deductions and income distribution. To qualify as a PSB, you must pass either the results test or the 80% rule plus one of three additional tests.
Results test. At least 75% of your PSI in the income year must meet all three conditions: you are paid to produce a specific result, you supply your own tools or equipment to do the work, and you are liable to fix defects at your own cost. For most locum GPs paid a daily or sessional rate, this test fails. Paying a doctor $1,800 for a clinic day is payment for time and availability, not a defined clinical outcome. Some billing arrangements (for example, a genuine fee-for-service contract tied to a defined outcome with rectification risk) may satisfy the test, but these arrangements are uncommon in GP locum work. Get written advice before relying on this.
80% rule. If less than 80% of your PSI comes from a single client and their associates in the income year, you pass the 80% rule and may then use one of the three remaining tests. A locum working across multiple agencies and direct clients throughout the year may meet this threshold; a locum on a long exclusive hospital contract probably will not.
Unrelated clients test. You provide services to two or more unrelated clients and obtained the work as a direct result of advertising or making offers to the public. A GP with an ABN who actively markets their availability and works for several unrelated clinics can often satisfy this test alongside the 80% rule.
Employment test. You engage employees or contractors to perform at least 20% of the principal work by market value, or you employ an apprentice for at least half the year. Most solo GP locums cannot meet this test.
Business premises test. You maintain a business premises that is physically separate from both your home and your clients' premises and you use it for your work more than 50% of the time. A consulting suite you own or lease under a genuine arm's length arrangement may qualify, but a room in your home or a room within a client's clinic does not.
If you cannot pass any of these four tests, or if more than 80% of your PSI comes from one client and you cannot pass the results test, the PSI rules apply in full.
What the PSI Rules Actually Restrict
When the PSI rules apply, you lose several deductions that would otherwise be available to a business entity.
Deductions you cannot claim against PSI include: rent, mortgage interest, rates, and land tax for your home or any residence; and payments to an associate (spouse, partner, relative) for non-principal work such as bookkeeping, invoicing, or administrative support.
Deductions you can still claim include: running costs of a home office such as heating and lighting (but not rent or mortgage interest); tools and equipment used to earn the income; professional indemnity insurance; CPD and registration fees; and superannuation contributions for your own benefit or for genuine arm's length employees.
If you earn PSI through a company or trust, those rules still apply. The entity must attribute the PSI back to you as the individual, and you are taxed at your marginal rate. The entity cannot use the income to split payments to lower-income family members or retain profits at the company tax rate. The ATO's 2025 practice compliance guideline PCG 2025/5 reinforces this, clarifying that Part IVA anti-avoidance provisions remain available to the ATO even where a taxpayer qualifies as a PSB.
PSI, Your Company Structure, and Income Splitting
The most common PSI planning mistake for locum GPs is assuming that a Pty Ltd company or discretionary trust automatically shelters income at the 25% small business tax rate or enables income splitting with a lower-earning spouse. It does not, when PSI rules apply.
If your locum income is PSI and you do not qualify as a PSB, the entity must attribute 100% of that income to you in the year it is earned, and you pay tax at your individual marginal rate. There is no deferral and no splitting. A company structure adds compliance cost without a corresponding tax benefit in this scenario.
Where a structure does still provide value is in separating liability, holding equipment or intellectual property, or planning for future genuine business income that is not PSI. Speak with a tax agent who works with medical professionals before establishing or retaining a structure.
Super Contributions as a Key Planning Lever
Because income splitting is generally unavailable under PSI, voluntary superannuation contributions are one of the most effective tax levers for locum GPs. The concessional contributions cap for 2026-27 is $32,500, inclusive of any Super Guarantee contributions you receive from clinic employers. Personal contributions for which you claim a tax deduction (available to sole traders with an ABN) count toward this cap.
The Super Guarantee rate for 2025-26 is 12%. If you work as an employee-equivalent locum rather than as a contractor, your engaging clinic is obligated to pay SG on top of your rate. If you invoice as a contractor, you are responsible for your own super planning.
Contributions above the $32,500 cap are included in your assessable income and taxed at your marginal rate, with a 15% offset.
How Sessional Helps Locum GPs Stay Across PSI
Sessional's GP dashboard tracks earnings across all your agencies and direct clients, giving you a real-time view of how concentrated your income is across clients. This makes the 80% rule check straightforward rather than a tax-time scramble. The earnings and tax-reserve dashboard lets you set aside the right amount throughout the year rather than facing a lump-sum shortfall in October. The super tracker monitors both SG received and personal contributions against your $32,500 concessional cap, so you can top up before 30 June without guessing. For a quick check on what you can legitimately claim at /tools/invoice-template and /pricing, the platform keeps your records in the shape the ATO expects.
Sources
- ATO: Personal services income overview
- ATO: Working out if the PSI rules apply
- ATO: Results test
- ATO: Unrelated clients test
- ATO: Self-assessing as a PSB
- ATO: Claiming deductions when receiving PSI
- ATO: Concessional contributions cap
- ATO: Doctor and medical professional income and deductions
- William Buck: ATO PSI guidelines for medical professionals