Australia's mental health sector has grown significantly following the pandemic, Better Access expansion, and increased NDIS funding for psychosocial supports. For bookkeepers taking on psychologists, counsellors, mental health social workers, and wellbeing practitioners as clients, the revenue landscape is unusually complex. Multiple funding streams, each with different GST treatment and income recognition rules, make clean bookkeeping essential — and mistakes can have consequences at BAS time.
Medicare Rebate Income and GST-Free Health Services
The foundational GST rule for health services: most clinical mental health services are GST-free under the A New Tax System (Goods and Services Tax) Act 1999, Division 38-B. A service provided by a registered health practitioner — psychologist, occupational therapist, social worker under Better Access — in the course of practising their profession is GST-free.
This means:
- The practitioner does not charge GST on consultations
- The Medicare rebate paid to the practitioner (or to the patient and then assigned to the practitioner) is GST-free income
- The gap payment (the difference between the full fee and the Medicare rebate) is also GST-free if the underlying service is GST-free
Common coding error: Practitioners sometimes code all income as GST (taxable) because they are registered for GST and assume that means GST applies to everything they do. It does not. Registering for GST is mandatory above the $75,000 turnover threshold, but registration does not change the GST status of a supply — GST-free services remain GST-free regardless of the provider's registration status.
Use the GST-Free (Health) code — equivalent to FRE in standard Australian GST terminology — for all eligible clinical consultations. This keeps the BAS accurate and ensures the practice is not over-remitting GST on exempt income.
Better Access Items: Psychologists and Counsellors
Better Access is the primary Medicare mental health pathway. It allows GPs to refer patients for up to 20 individual sessions per calendar year with an eligible mental health professional. Eligible providers include:
- Clinical psychologists (items 80000–80015)
- Registered psychologists (items 80100–80115)
- Mental health accredited social workers and occupational therapists (items 80150–80175)
Reimbursements under Better Access flow through Medicare — either directly to the practitioner (bulk billing) or to the patient (who then pays the practitioner the full fee). For bookkeeping purposes:
- Bulk billing: The practitioner receives the Medicare rebate directly, typically within 3–5 business days of lodging the claim. This is the full revenue for that service. Code as GST-free income.
- Non-bulk billing: The practitioner invoices the full fee to the patient, and the patient separately claims the Medicare rebate. The practitioner receives the full fee from the patient. Code as GST-free income. The patient's Medicare rebate is not the practitioner's income — it is the patient's.
Keep the two streams separated in the accounts — bulk billing income vs private fee income. This helps with understanding the practice's bulk billing rate and its cash flow profile (bulk billing pays Medicare's schedule rate; private fees can be set above schedule).
Gap Payments and Private Billing
The gap payment — the amount above the Medicare rebate that the patient pays out of pocket — is GST-free when it relates to an eligible health service. A psychologist who charges $220 for a session and bulk bills against a $137 rebate has a $83 gap; if the patient pays the full $220 and claims the rebate themselves, the practitioner's $220 is GST-free.
This surprises many new practitioners, who assume the gap must attract GST. It does not, provided the underlying service is GST-free. The ATO's guidance on health services confirms that the full charge for a GST-free health service, including any amount above the Medicare schedule fee, is GST-free.
Private sessions — those with no Medicare component, such as coaching (not clinical), workplace wellbeing programs, or services to clients who do not have a Mental Health Treatment Plan — may be taxable if they are not clinical in nature. The distinction between clinical treatment (GST-free) and coaching or wellness services (potentially taxable) is an important one to establish early with each client.
NDIS Support Work Income
Mental health practitioners increasingly provide services under the NDIS, either as registered providers or unregistered providers (for self-managed and plan-managed participants). The GST treatment of NDIS services is nuanced:
- Therapeutic supports provided by a registered health practitioner (e.g., psychology sessions for an NDIS participant) remain GST-free health services — the NDIS funding does not change the underlying GST status.
- Support coordination and plan management services are not health services and are generally taxable (GST applies).
- Community participation and social support activities are also taxable where they do not involve clinical treatment.
NDIS payments are made by the NDIA (for agency-managed participants), by plan managers (for plan-managed participants), or directly by the participant (for self-managed participants). Each stream should be coded to the correct income account with the correct GST code. A single NDIS service agreement may generate payments from multiple payer types depending on the participant's plan management type.
Private Health Fund Payments and Registration Costs
Private health fund rebates paid to practitioners for out-of-hospital mental health services are GST-free — they relate to eligible health services and are not separately subject to GST. Fund payments typically arrive weekly or fortnightly in bulk from each insurer (Bupa, Medibank, NRMA Health, etc.) and need to be allocated across individual patient invoices. Use the remittance advice from each fund to reconcile the bulk payment to individual service items.
Registration and professional development costs are a significant deduction for mental health practitioners:
- AHPRA registration fees for psychologists and occupational therapists are deductible
- Supervision fees — paid to a clinical supervisor as part of registration requirements — are deductible
- CPD and training costs directly related to the clinical practice are deductible
- Professional indemnity insurance is deductible
Code these to separate accounts by type — not to a single "professional expenses" bucket — so they are visible at tax time and can be reviewed efficiently.
Mental health practice bookkeeping is ultimately about recognising that most revenue is GST-free, keeping each funding stream clearly coded, and ensuring that the BAS accurately reflects a practice where GST-free supplies are the norm. Get that foundation right and everything else follows cleanly.