Contractor vs employee: tax and super for GPs

Why most GPs are contractors

In the NHS you are an employee, and everything financial flows from that: tax deducted at source, a pension, paid leave, sick pay. Australian general practice mostly works the other way. The common model is that a GP is a contractor, effectively running a small business, billing under Medicare and keeping an agreed percentage of those billings, with the practice keeping the rest for premises, staff and systems.

Some employed and salaried roles do exist, particularly for newer arrivals, in hospitals, or in some corporate and community settings, and they can be a gentler landing. But the contractor model is the one most UK and Irish GPs will meet, so it pays to understand what it changes. Tax and superannuation are regulated, personal and genuinely complex, so treat this as an educational overview of the shape of the difference, not tax or financial advice. This guide sits in the Money and practice cluster within the complete relocation guide.

Tax

An employee has income tax withheld from their pay before they see it, largely automatically. A contractor generally manages their own tax: you typically register for an Australian Business Number, set aside money from your earnings to meet your tax bill, and lodge through the tax system rather than having it taken at source. Depending on your circumstances, this can involve a particular business structure, keeping proper records, and possibly lodging a business activity statement.

This is more admin, but it can come with legitimate deductions for genuine business expenses that an employee cannot claim in the same way. The danger for a new arrival is treating your full billings share as spending money and being caught short at tax time, so disciplined setting-aside is essential. The Australian Taxation Office is the authority. This all feeds into your true take-home, which is why a gross billings figure is not money in your pocket.

Superannuation

Superannuation, Australia's compulsory retirement saving, is the second big difference. An employee generally receives employer super contributions on top of their pay. A contractor often has to fund their own superannuation from their earnings, though the rules on when super obligations apply to contractors can be nuanced and depend on the arrangement.

For UK GPs the contrast with the NHS pension is stark. In the NHS a valuable defined-benefit pension accrues in the background whether you think about it or not; in Australian general practice, as a contractor, your retirement saving is largely your own responsibility to organise and fund. The practical implication is that a contractor percentage has to stretch further than an equivalent employee salary, because it may need to cover the super an employer would otherwise pay, so treat super as a non-negotiable part of your own planning from the start. GPs who carry an NHS pension may want advice on what happens to it when they leave, a question for a financial adviser. Confirm how super applies to your arrangement via the ATO; do not assume it mirrors the UK.

Leave and entitlements

The third difference is leave, and it is the one that surprises people most viscerally. As a contractor, you generally do not receive paid annual leave, paid sick leave, or other employee entitlements. Put plainly: when you do not work, you do not bill, so a holiday or a sick day is time you fund yourself. An employee, by contrast, typically receives paid leave and the security that comes with it.

A higher contractor percentage is partly compensation for carrying your own leave, super and risk, so build the cost of your own time off into your income planning and factor it into how you compare roles. It also interacts with your indemnity cover, which as a contractor you usually arrange and pay for yourself too.

The two models compared

Side by side, the models trade security against upside and simplicity against control.

For a newly arrived GP, an employed role can be a gentler first step while you find your feet, and a contractor role can offer more once you are settled. Many GPs move from one to the other over time, so the right starting point depends on your appetite for admin and risk as you assess what a good job looks like.

The payroll tax question

One development worth being aware of, though it mainly affects practices rather than you directly, is payroll tax. Following the Thomas and Naaz case, state revenue offices have in some cases treated payments to contractor GPs as if they were wages for payroll tax purposes, which has led some practices to review how they structure contractor arrangements. The position varies by state: several, including Queensland, South Australia, Victoria, New South Wales and the ACT, offer exemptions or rebates, often linked to bulk-billing thresholds, while others have no GP-specific exemption. It is one more reason your choice of state has ripples beyond lifestyle and the moratorium.

You do not need to become an expert, but you should know it exists, because it can influence how a contract is written. If a practice raises it, that is context rather than a red flag; the answer is to take professional advice and choose a practice that handles its own compliance properly, which negotiating your contract can help you assess.

What it means for take-home

Contractor versus employee is one of the biggest determinants of what a role actually pays you. A contractor share is not comparable to an employee salary at face value, because it has to cover tax you manage, super you may fund, leave you do not get paid for, and often your indemnity, while the employee figure comes with those handled or included.

Model your real take-home in the GP salary calculator rather than trusting a single number; it is a guide, not a determination, so confirm current rates on MBS Online and with the ATO. When you compare two offers, one contractor and one employed, put both through the same lens of true take-home against your cost of living, and the apparent gap often narrows or reverses.

Which suits you

There is no right answer in the abstract; there is only the answer that fits your stage and temperament. A few honest questions point you toward it.

This is not a one-time, irreversible choice: plenty of GPs start employed while they learn the system and move to contracting once confident. Your registration route and where you work under the moratorium come first; the engagement model is a decision you refine once those are settled.

Get an accountant

If there is one action to take from this guide, it is to get an accountant who works with medical contractors. Australian contractor tax, superannuation and the payroll tax landscape are complex and consequential, and a good accountant pays for themselves many times over through correct structuring, legitimate deductions and peace of mind. Set this up early, ideally when you firm up a role, so your tax, super and business structure are right from your first billings. It sits alongside your other pre-start essentials: your indemnity, your CPD home and your provider number. Negotiating your first contract covers pinning down the model in writing.

In summary

Most Australian GPs are contractors: you manage your own tax, often fund your own superannuation, generally get no paid leave, and typically arrange your own indemnity, so a contractor share and an employee salary are not comparable at face value. Employment offers more security and simpler admin, usually at the cost of earning potential. Compare true take-home rather than headline figures, watch the evolving payroll tax position, and engage an accountant who works with medical contractors.

Sources

These are the primary sources behind this guide. Read them directly and confirm anything time-sensitive on the day.

Frequently asked questions