How am I treated for tax purposes as a VMO at a public hospital?

Visiting Medical Officers (VMO) are not employees of the public health system, however are classified as independent contractors for taxation purposes.

As an independent contractor you must have an Australian Business Number (ABN) in your own name and if your business turnover is over $75,000 a year, also be registered for the GST.

Most VMO’s already have their own specialty practice set up and trade as sole traders for taxation purposes. The ABN and GST registration set up for these practices may then also be used for this purpose. The VMO payments are then included in the Business Activity Statement with other business income.

Most of the State health authorities have a specific ‘timesheet’ format that must be completed by the VMO and is then submitted by the VMO to the health authority within 14 days of the end of month for payment. However, some of the State Health authorities require the VMO to provide a ‘Tax Invoice’ (if registered for GST) or an Invoice (if not registered for GST).

We recently found an error with a VMO’s payments made by a one of the State’s health authorities. For 6 months of a financial year our VMO client received payments with no GST included (so was paid Nett of GST), then for the remaining 6 months received the GST (so received his payments plus GST). On enquiry with the State health authority, it was found that their system had not adjusted itself for the VMO’s GST registration and as a result, the VMO was backpaid just over $5,000 in unpaid GST. Had this error not been found, the client could have been $5,000 out of pocket.