Allied health practice bookkeeping looks straightforward at first glance — services rendered, fees collected — but the combination of Medicare rebates, NDIS plan budgets, private health fund settlements, and the GST input-taxed treatment of health services creates a set of technical issues that catch many bookkeepers unprepared. This guide addresses the key areas, with specific reference to the relevant legislation.
GST on Allied Health Services: The Input-Taxed Trap
Physiotherapy, occupational therapy, speech pathology, and psychology are all GST-free health services under s.38-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The supply of these services is not taxable — no GST is charged on consultation fees.
However, GST-free is not the same as input-taxed. Under the GST Act, a GST-free supplier can still claim Input Tax Credits (ITCs) on costs directly related to making those supplies. This means the practice can claim ITCs on:
- Treatment consumables (gloves, electrodes, ultrasound gel, exercise therabands)
- Software subscriptions used for clinical records
- Equipment repairs directly attributable to treatment
By contrast, an input-taxed supplier (such as a residential landlord) cannot claim ITCs at all. Many bookkeepers incorrectly treat allied health practices as input-taxed, which results in missed ITC claims.
The limitation is on equipment used for mixed purposes — for example, a reception desk computer used partly for clinical booking (GST-free supply) and partly for general administration. A partial ITC claim based on the proportion of creditable use (s.11-30 GST Act) applies.
Medicare and DVA Billing: Revenue Recognition
Allied health providers access Medicare through two main pathways:
- GP Management Plans (GPMP) and Team Care Arrangements (TCA): A GP-referred patient is entitled to up to five Medicare-subsidised allied health services per calendar year under Items 10950–10970 (physiotherapy, occupational therapy, etc.) of the Medicare Benefits Schedule (MBS).
- Mental Health Treatment Plans: Psychologists accessed under a Mental Health Treatment Plan can receive up to 20 Medicare-subsidised sessions per year.
The billing mechanics are as follows. The practice charges the patient the full consultation fee (e.g., $120). Medicare pays a scheduled rebate directly to the provider (or to the patient if the provider does not bulk-bill) — currently $57.10 for a standard 45-minute allied health consultation under Item 10960. The gap is the patient's out-of-pocket amount ($120 − $57.10 = $62.90).
For bulk-billing providers: The practice charges only what Medicare pays ($57.10). The patient owes nothing. Revenue is $57.10 per service.
For non-bulk-billing providers: Revenue is the full fee ($120). Medicare's payment ($57.10) reduces the patient's outstanding receivable. The patient pays the gap ($62.90). The full $120 is the practice's revenue.
DVA (Department of Veterans' Affairs) patients are billed through a separate DVA schedule. DVA pays the full fee directly to the provider; there is no patient gap for approved DVA services. DVA billing generates a debtor until the DVA payment is received.
NDIS Billing: GST-Free Under a Different Provision
NDIS-funded allied health services are GST-free, but under a different provision from the general health services exemption. S.38-38 of the GST Act exempts supplies of disability support to NDIS participants under an NDIS plan. This exemption applies because the supply is government-funded and structured under a legislated scheme — it is not contingent on the provider being a registered health practitioner.
Practically, the bookkeeper should set up two separate income accounts: one for Medicare/DVA-funded services (GST-free under s.38-10) and one for NDIS-funded services (GST-free under s.38-38). This distinction matters if the ATO ever queries the GST treatment, and it simplifies the practice management software reconciliation.
NDIS invoicing: The practice invoices either the NDIA directly (for agency-managed participants) or a plan manager (for plan-managed participants). Payment timelines are typically 2–5 business days for agency-managed claims submitted through the NDIS portal, and 5–15 days for plan-managed invoices. Accounts receivable monitoring is essential — NDIS claims can be rejected for coding errors (wrong support item number, exceeding plan budget), and rejected claims must be re-submitted.
Private Health Fund Rebates
Private health funds pay a benefit for allied health services under Members' extras cover. The mechanics mirror Medicare: the practice charges the full fee; the fund pays a benefit; the patient pays the gap. HICAPS terminal integration is standard — the fund's benefit is settled electronically at the point of service, with a 1–2 business day bank settlement lag.
Bookkeeping treatment: Record the full consultation fee as revenue. The HICAPS settlement (fund benefit) reduces the patient's receivable. The patient pays the gap at the point of service (or remains a debtor if not collected). Do not net the fund benefit against revenue — gross presentation is correct.
Reconcile the HICAPS settlement report daily against the bank. Settlement files list each claim, member, and benefit amount. Unmatched claims (paid by the fund but not in the practice management system) and aged receivables (outstanding gaps) should be reviewed weekly.
Practice Management Software Reconciliation
Cliniko, Nookal, Coreplus, and similar practice management platforms are the primary billing and scheduling systems for allied health practices. These systems generate:
- Practitioner daily appointment and billing reports
- Medicare bulk-billing statements (processed through ECLIPSE or Medicare's Health Professional Online Services)
- DVA billing statements
- NDIS invoice registers
The bookkeeper's task is to reconcile the practice management system's total revenue report to the bank deposits each month. Common reconciling items:
- HICAPS lag (services billed on the last day of the month but settled in the following month)
- Outstanding patient gaps (recognised as revenue in the practice management system but not yet collected)
- Rejected Medicare claims pending resubmission
Do not use the bank as the primary revenue record for an allied health practice — the bank shows cash receipt timing, not when revenue is earned.
End-of-Period Checklist
- GST-free coding confirmed for all health service income (s.38-10 or s.38-38 as applicable); no GST output on consultation fees
- ITCs claimed on treatment consumables, clinical equipment, and directly attributable costs
- Medicare bulk-billing statement reconciled to practice management system and bank; rejected claims re-submitted
- DVA debtors reconciled; aged DVA invoices followed up with DVA provider liaison
- NDIS debtors reconciled; rejected claims investigated (incorrect support item numbers are the most common cause)
- HICAPS settlement lag reconciled between month-end and bank cut-off
- Payroll: confirm whether practitioners are employees (PAYG, super) or genuine contractors; review any profit-sharing arrangements
- Superannuation guarantee calculated on base wages; confirm fund choice compliance under SGAA and stapled fund obligations