The benefits and implications, fees and contracts, super and, of course, tax.
A visiting medical officer is a medical practitioner in private practice who also provides medical services in a public hospital.
VMOs are not hospital employees but are contracted by the local health district to provide specific medical services in nominated health facilities.
VMOs can enjoy the best of both worlds: the flexibility and autonomy of private practice, and the diversity and collegiality of public service. Whether you are a general practitioner or a specialist, becoming a VMO can offer you many benefits, such as:
- Earning extra income before or during your specialist training or supplementing your income while building your private practice.
- Supporting your local community by providing quality care to public patients, especially in rural and remote areas.
- Keeping up with the latest technology and procedures, as well as continuing your professional development and networking with other doctors in the public system.
- Working where and when you want, with minimal overhead
- Being able to structure yourself to minimise debt and taxes.
However, becoming a VMO also comes with some challenges and responsibilities. You need to be aware of the following implications:
- You will need to register for GST and lodge quarterly Business Activity Statements (BAS).
- You will need to set aside a percentage of your income for future income tax liabilities, as well as pay instalments throughout the year.
- You will need to monitor your superannuation contributions and be mindful of the caps.
- If your adjusted taxable income is greater than $250,000, you may be required to pay the additional tax on concessional contributions (division 293).
- You will need to understand the difference between sessional (charge an hourly rate) and fee-for-service contracts (charge a procedural fee), and negotiate the terms and conditions with the LHD or other organisations that issue VMO contracts.
- You will need to comply with the standards and policies of the public hospitals, as well as maintain your own professional indemnity insurance.
How to manage your tax as a GP VMO
As a VMO, you are considered a sole trader for tax purposes. If you are not already operating as a sole trader through your GP work, you will need to secure an Australian Business Number (ABN) and report your income and expenses in the business schedule of your tax return. You also need to register for GST if your annual turnover from your VMO work exceeds $75,000.
A hospital or employee salary is taxed at source and includes superannuation guarantee (SG) contributions. Your VMO income will require you to set aside money for tax and, depending on the type of contract, superannuation. VMO contracts can be fee-for-service or sessional fee contracts; the latter will attract superannuation for sole traders, while those paid a fee for service will not attract superannuation.
There are some important things to consider when it comes to paying yourself superannuation as a VMO:
- Your annual cap for tax-deductible contributions is $27,500. This includes any SG contributions from other sources of income, such as your clinic employment. You may be able to use unused cap space from previous years if your total super balance is below $500,000.
- If your total adjusted taxable income (including reportable fringe benefits, investment losses, super contributions and other items) exceeds $250,000, you may have to pay an additional tax on your concessional contributions (Division 293 tax). You can read more about Division 293 tax here.
- You will need to notify your super fund of your intention to claim a tax deduction for your personal contributions and receive an acknowledgement from them before lodging your tax return.
To avoid any surprises or penalties, it is advisable to consult a tax professional and a financial planner before making any decisions about your superannuation as a VMO.
What is a VMO contract?
A VMO contract is an agreement between a NSW health service provider (usually an LHD) and a doctor to provide specific medical services in public hospitals. The contract specifies the type and scope of services, the payment terms and conditions, and the responsibilities of both parties.
While VMO contracts are specific to doctors who work in NSW, other states and territories have similar arrangements, which may differ in terms of the details and management of the contracts. For example, in Queensland and the Australian Capital Territory VMOs are also contracted by the health service providers to provide medical services in public hospitals.
A VMO contract is usually a zero-hours contract, meaning there is no guarantee of work or income.
What you need to know about zero-hours VMO contracts
This is a type of contract that does not guarantee any minimum hours of work for the VMO. This means that your hours and income can vary from week to week or even day to day, depending on the demand and availability of work.
While this may sound risky or unstable, zero-hours contracts are very common for VMOs, and many doctors find them flexible and convenient. In fact, in some areas, there is a high demand and a large volume of work for VMOs, so you may not have to worry about having enough work. You can also combine your VMO income with your private practice income to balance out the fluctuations.
However, you need to be prepared for the challenges and uncertainties that come with zero-hours contracts. You need to plan and manage your budget and finances carefully, as you may not have a steady or predictable income. You also need to be flexible and adaptable, as you may have to work at different times and locations.
Can I have more than one VMO contract? Yes, you can have multiple VMO contracts with different health service providers or facilities. This can be a good way to fill up your working week, especially if you are a newly qualified GP or building your private practice. However, you need to be careful not to overcommit yourself or breach any contractual obligations.
Should I sign a VMO contract in my own name or in a company name? You should sign a VMO contract in your own name, as the Personal Service Income (PSI) rules state income derived mostly from your personal exertion must be taxed in your name. Also, if you are on a sessional fee contract, superannuation is only payable to natural persons, not a company or trust.
Do I have to pay superannuation on my VMO income? Superannuation may be included in your VMO income, depending on your contract being either fee-for-service or a sessional fee, as noted above. If on a sessional fee contract, the rate of superannuation is 11% of your earnings from 1 July 2023. Otherwise, superannuation contributions are made at the taxpayer’s discretion and you should seek out financial advice.
How to claim tax deductions as a VMO
As a VMO, you may be eligible to claim tax deductions for certain expenses that relate to your work. These can include:
- Travel costs if you are on call, recalled or travelling between workplaces.
- Costs related to employing an associated individual (such as a spouse) who assists you with bookkeeping and BAS lodgement, if you pass the personal services income (PSI) rules.
- Home office costs, if you do a significant amount of work from home. This may include phone, internet, electricity, stationery and depreciation of equipment. You can read more about working from home deductions here.
You should consult a tax professional before claiming any deductions, as the rules and requirements may vary depending on your individual circumstances.
Setting yourself up for success as a GP VMO
Working as a VMO can be a beneficial and flexible way for GPs to practise medicine, but also requires careful planning for your finances. VMO contracts can be complex and can vary depending on the hospital, the level of experience and the type of work. Many doctors sign them without fully understanding what they entail and the various avenues they can consider that could optimise their financial position.
Robert Giblin is a consultant with DPM who specialises in tax compliance, structuring, wealth creation and risk management for medical professionals.
Anthony Pane is a principal at DPM who advises medical professionals on personal and business finance, taxation, structuring and salary packaging.
Disclaimer: This article contains general information only and does not consider your personal objectives, financial situation or needs. Please seek professional advice before taking action.
This story has been updated with some clarifications around superannuation.
