Medicare, Private Billing, and the ATO: What Every Doctor Must Know
- Jenine L.
- 3 days ago
- 3 min read
Doctors across Australia face an ever-changing landscape when it comes to billing. Whether you bulk bill, privately bill, or use a mixed billing model, the way you record and report income can make the difference between smooth sailing and an ATO audit.
If you bulk bill or privately bill, you may be making common mistakes the ATO is watching.
Here’s what every doctor should know about billing and tax compliance.
Bulk Billing: What It Means for Tax
Bulk billing is straightforward: the patient assigns their Medicare benefit directly to you, and Medicare pays you 100% of the scheduled fee.
These payments are still assessable income and must be declared in your tax return.
Bulk billing income is GST-free, as medical services are exempt.
Reconciling Medicare statements with bank deposits is crucial, mismatches raise red flags with the ATO.
Tip: Keep electronic copies of your Medicare payment statements for each financial year. They form part of your tax records.
Private Billing: What to Watch For
Private billing is when patients pay your fee directly, with Medicare rebates claimed back by the patient.
The entire fee you charge is taxable income, not just the Medicare rebate portion.
Where part of your services fall outside Medicare (e.g., cosmetic procedures), GST may apply.
Under-reporting private billing is a key trigger for ATO reviews.
Tip: Use a separate merchant facility or EFTPOS terminal for private billings to make reconciliation easier.
Mixed Billing: The Compliance Trap
Many doctors now adopt a mixed billing model, bulk billing certain patients (children, concession card holders) while privately billing others.
Each income stream must be recorded separately and accurately.
Medicare payments must match bulk-billed services, while private fees must be tracked in your accounting system.
Failure to separate these streams is one of the most common mistakes that leads to compliance issues.
Tip: Run regular reconciliations between your practice management system, Medicare statements, and bank records.
Common ATO Red Flags for Doctors
Unreported private billing
- Declaring only the Medicare rebate instead of the full patient fee.
Mismatched records
- Medicare data not aligning with bank deposits or accounting records.
GST errors
- Treating all services as GST-free, even when cosmetic or non-Medicare services require GST.
Poor record-keeping
- Incomplete or inconsistent reconciliation of billing systems.
Best Practices to Stay Audit-Proof
Use a practice management system that integrates billing, patient records, and accounting.
Keep separate bank accounts for business to avoid mixing personal and professional funds.
Schedule quarterly reconciliations to ensure Medicare, patient billing, and bank records match.
Seek advice on whether any services you offer (particularly cosmetic) fall within GST rules.
Keep digital records for at least five years, in line with ATO requirements.
The Dolman Bateman Difference
At Dolman Bateman, we specialise in helping doctors and medical professionals:
Set up compliant billing and reporting systems
Avoid common ATO red flags
Separate income streams for tax efficiency
Provide peace of mind so you can focus on patient care
Book a consultation today and ensure your billing practices don’t put you on the ATO’s radar.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
