Income Types and Bookkeeping Treatment for Paediatricians
A paediatric specialist practice draws income from several distinct sources, each with different GST treatment, payment timing, and reconciliation requirements. Understanding these differences is the foundation of accurate bookkeeping for specialist medical practices.
| Income Type | GST Status | Payment Source | Reconciliation Notes |
|---|---|---|---|
| Medicare bulk billing | GST-Free | Services Australia HPOS | Batch deposit; match to remittance advice by patient/date |
| Private consultation (gap) | GST-Free | Patient pays full fee; rebate is patient's | Record full invoice on service date; reconcile to receipt |
| Hospital VMO income | GST-Free | Hospital pays gross | Match to hospital remittance; track debtors for unpaid |
| Telehealth consultations | GST-Free | Medicare or private patient | Same as in-room; separate income line recommended |
| Medicolegal reports | Taxable (10% GST) | Insurer, law firm or NDIS agency | Invoice with GST; collect and remit via BAS |
| TAC / WorkSafe assessments | Taxable (10% GST) | TAC or WorkSafe Victoria | Invoice with GST; not clinical treatment |
| Medicare rebate (patient claim) | Not practice income | Patient claims directly from Medicare | Does not appear in practice accounts |
Reconciling Medicare Bulk Billing in Xero
The most common bookkeeping challenge for paediatric practices is reconciling Medicare batch payments. Services Australia makes batch deposits covering multiple patients across multiple service dates. A single bank deposit may represent dozens of individual Medicare claims submitted over several days. The deposit does not identify individual patients or service dates on the bank statement line.
To reconcile correctly in Xero:
- Download the HPOS remittance advice that corresponds to each bank deposit
- Match the total of the remittance advice to the bank deposit amount
- Identify any rejected or adjusted claims in the remittance advice (these appear as negative items or zero-value lines)
- Post the income to the correct income account with a GST-free tax code
- Record rejected claims as adjustments for re-submission
For detailed guidance on accessing HPOS remittance advices, Services Australia's HPOS portal is the authoritative reference. Practices that process bulk billing without reconciling to HPOS remittance advices are at risk of both under-recording income (rejected claims never followed up) and over-recording income (deposits recorded against wrong periods).
Tax Deductions for Paediatricians
| Deduction | Deductible? | Xero Account | Notes |
|---|---|---|---|
| AHPRA registration | Yes | Registration and Licences | Annual fee for medical registration |
| Medical indemnity insurance | Yes | Insurance | MDA National, MIPS, MDA etc |
| CPD costs | Yes | CPD and Training | Conference fees, travel, accommodation |
| Consulting room rent | Yes | Rent and Leasing | Hospital or rooms rent |
| Equipment depreciation | Yes | Depreciation | Entered via Xero Fixed Assets module |
| Professional memberships | Yes | Subscriptions | RACP, specialty colleges |
| Journal subscriptions | Yes | Subscriptions | Clinical decision support tools; medical journals |
| Mobile and internet (work %) | Partial | Telephone and Internet | Work-related proportion only |
| Staff wages and super | Yes | Wages; Superannuation | Fully deductible if genuine employment |
| Clinical clothing | Yes (protective/uniform) | Uniforms and Protective Clothing | Uniforms and scrubs; not general clothing |
Practice Structure and Personal Services Income
Many specialist medical practitioners operate through a service entity or corporate trustee structure, which can provide superannuation and tax planning benefits. However, the personal services income (PSI) rules under Division 86 of the Income Tax Assessment Act 1997 limit the ability to split or divert income where the income is primarily attributable to the practitioner's personal effort or skills.
The PSI rules apply when 50% or more of income from an activity is for the personal effort or skills of an individual, and the income fails the relevant PSI tests (the results test, the 80% rule test, and the unrelated clients test). For a specialist paediatrician with a single-practitioner practice, the income is likely PSI, which means distributions to other beneficiaries may be limited to arm's-length amounts for genuine services rendered.
True Tally works alongside your accountant to ensure the bookkeeping accurately reflects the structure, that income is correctly attributed in Xero, and that the accounts are ready for the accountant's PSI assessment each year. The AHPRA website and Services Australia Medicare resources are useful references for regulatory obligations.
Watch: Specialist Medical Practice Bookkeeping Explained
Read the full video transcript
Running the accounts for a specialist paediatric medical practice involves a layer of complexity that general bookkeeping does not prepare you for. Today I want to cover the key income streams for paediatricians, how they are correctly treated in Xero, the deductions that specialist doctors are entitled to claim, and the practice structure questions that affect how tax and income splitting work.
A paediatrician's income typically comes from several sources. Medicare bulk billing is the most common: the practice bulk bills through HPOS, receives a batch deposit from Services Australia covering multiple patients across multiple service dates. Reconciling this correctly requires matching the HPOS remittance advice to the bank deposit, identifying rejected claims, and posting income correctly by service date. This is not automatic in Xero and needs a clear reconciliation process.
Medicolegal work is a different category. Independent medical examinations, expert reports, and WorkSafe or TAC assessments are not clinical treatment and are therefore not GST-free. These invoices attract GST at ten percent. If your practice is doing medicolegal work and not charging GST on it, you have a GST liability that needs to be corrected.
On deductions, paediatricians can claim AHPRA registration fees, medical indemnity insurance, CPD costs including conferences and travel, professional memberships, clinical equipment depreciation, staff wages, and the work-related proportion of mobile and internet costs. All of these need to be correctly categorised in Xero so your accountant has clean data to work from at year end.
The personal services income question is important for specialist medical practices. PSI rules limit income splitting where eighty percent or more of income is attributable to your personal effort. Your accountant needs to review whether your structure passes the PSI tests before year end distribution decisions are made. True Tally works alongside your accountant to ensure the bookkeeping accurately reflects the structure. If you are a specialist medical practice in Victoria looking for a bookkeeper who understands Medicare income and how to handle it correctly, book a free call with True Tally at truetally.com.au or call 0468 159 950.
Last updated July 2026
Frequently Asked Questions
Is paediatric medical income GST-free?
Yes. Clinical paediatric consultations and specialist services are GST-free under Division 38-B of the GST Act. Medicolegal reports and TAC/WorkSafe assessments are professional services and are taxable at 10% GST.
How do I reconcile Medicare bulk billing in Xero?
Match each bank deposit to the corresponding HPOS remittance advice from Services Australia. Identify rejected claims and post income with a GST-free tax code. Do not treat the lump deposit as a single unreconciled receipt.
Do PSI rules affect how I structure my medical practice?
Yes. Personal services income rules limit income splitting where income is primarily attributable to your personal effort. Your accountant must review PSI compliance before any year-end distribution decisions are made. True Tally ensures the bookkeeping supports that review.
Specialist medical practice bookkeeping across Victoria
True Tally provides bookkeeping for specialist medical practices including Medicare reconciliation, correct GST treatment, deduction coding, and Xero reporting your accountant can use. Book a free 20-minute call.
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