Direct patient billing
How Sessional tracks the post-Thomas-and-Naaz direct-billing model where Medicare or the patient pays you and the practice takes a service fee. Guidance, not advice.
Important
Guidance, not advice. Direct-billing arrangements interact with GST, PSI, state payroll tax, and super in non-obvious ways. Sessional prepares the numbers. Take them to your registered tax agent before acting on them.
Why this model exists
State revenue offices have been applying the "relevant contract" provisions of state payroll tax legislation to practices with contractor GPs, dentists, and other practitioners. The Thomas and Naaz (NSW) and Optical Superstore (Vic) rulings established that where a practice collects patient fees and pays them through to a contractor (minus a service fee), the practice can be liable for payroll tax on those payments as if the contractor were an employee.
Several states have introduced administrative amnesties or safe-harbour arrangements that require the practice to restructure so patients pay contractors directly. The practical effect inverts the cashflow: Medicare or the patient pays the locum, and the locum pays the practice a service fee: typically 30-40%.
What Sessional tracks
When you mark a shift as Direct patient billing (the default income source for GPs, specialists, and dentists post Thomas and Naaz), Sessional captures two extra fields on the shift:
- Practice service fee percentage. The agreed fee the practice deducts: typically 30-40% of your gross receipts.
- Practice service fee amount (optional). If you know the actual fee the practice billed you, enter it here. Sessional prefers the explicit amount over the computed figure so your records stay stable when the percentage is edited.
The earnings dashboard reconciles these into a gross / fee / net take-home breakdown, weighted across your direct-billing shifts, with the GST input tax credit on the fee when you are registered.
Downstream effects
- Super Guarantee.Direct-billing shifts have no payer paying you for labour, so s12(3) SGAA does not engage. The SG tracker flags these as "not applicable". Voluntary concessional contributions remain deductible up to the $30,000 cap.
- GST. Medicare clinical services remain GST-free under s38-7. The practice service fee charged to you is GST-applicable; claim the ITC on your BAS 1B when GST-registered. Sessional estimates the 1B contribution automatically.
- PSI. Direct relationships with practices (acquired through your own offers to the public) help the PSB unrelated-clients test. Agency-only work generally fails it. If you run a portfolio of direct-billing and agency work, the classification of each stream changes the PSI picture materially.
Common questions
Is the service fee a business expense?
Yes. The practice service fee is a deductible business expense on your tax return and carries GST that you can claim back as an input tax credit on your BAS (when you're registered). Keep the practice's invoice or monthly statement as supporting evidence.
What if the fee varies by item or bulk-billed visit?
Record a weighted-average percent as an approximation, and use the explicit amount field once the practice invoices you so the figure reconciles. Sessional prefers the explicit amount over the percentage-based estimate when both are set.
Does this change my income tax?
No. Your taxable income is still gross receipts minus allowable deductions: the service fee is one of those deductions. What the direct-billing model changes is the cashflow pattern (receipts in your name, fee paid out) and the payroll-tax exposure on the practice's side.
What about private health fund gap fees or patient co-payments?
Those flow through the same pattern: patient pays you directly, you pay the practice the agreed service fee on the gross. The numbers just scale proportionally.
Related reading
Tax, PSI, super, and GST for the broader regulatory context.
Super Guarantee tracker: direct-billing shifts land in the "not applicable" bucket.
BAS preparation: where the service fee ITC flows through to label 1B.