The short answer: Most psychology services are GST-free, income arrives as a blend of Medicare Better Access rebates (up to 10 subsidised sessions a year on a mental health treatment plan), private health and client gap payments, and the two things that trip practices up are reconciling bulk-billed versus gap sessions and correctly classifying associated psychologists as employees or contractors.
Key takeaways
- Psychology services are GST-free, so most practices are not registered for GST unless retail or other taxable income tips them over the threshold.
- Better Access gives clients up to 10 Medicare-subsidised sessions a year, with a higher rebate for clinical psychologists than for registered psychologists.
- The reconciliation headache is splitting each session into the Medicare benefit and the client gap, not treating them as separate income.
- Associate psychologists working in your rooms under your systems are usually employees, which brings PAYG, super and payday-super obligations.
On this page
Is psychology GST-free?
Yes. Psychology is a recognised health service and is GST-free under the same ATO GST rules that cover other allied health. That means most sole practitioners and small practices across the Geelong and Bellarine region never register for GST at all. The exceptions are worth naming: medico-legal report writing for a third party, corporate EAP or training work, and any resale of books or tools can be taxable, and enough of it will push you over the $75,000 threshold and into a mixed-GST return.
Medicare Better Access explained
Better Access is the scheme most clients use. With a GP mental health treatment plan and referral, a client can claim a Medicare rebate for up to 10 individual sessions in a calendar year. The rebate amount depends on the practitioner: a clinical psychologist attracts a higher benefit than a registered psychologist. You can bulk bill (Medicare pays, client pays nothing) or charge a fee and let the client claim the rebate back, leaving a gap. Your books need to know which of those happened for every session.
| Session type | Who pays you | GST | What to record |
|---|---|---|---|
| Bulk-billed (Better Access) | Medicare, in full | GST-free | One Medicare receipt, no client portion |
| Private fee with rebate | Client pays full fee | GST-free | Full fee as income; client claims rebate themselves |
| Gap billing | Medicare + client gap | GST-free | Split the receipt: Medicare benefit + gap |
| Private health extras | Insurer via HICAPS | GST-free | Match HICAPS settlement to takings |
Bulk bill versus gap
The most common mess is a practice that records the full session fee as income and then records the Medicare benefit as a second income line. That double counts. The clean approach is to treat one session as one piece of income, made up of the parts that funded it. Reconcile Medicare against the Medicare remittance (which lands in batches, not per session), and reconcile the gap and private-fee payments against the bank feed. If those two never meet, it is almost always a timing gap, not missing money.
Software and Xero
Halaxy, Power Diary and similar tools run the diary, take payments and lodge Medicare claims. Keep them as the clinical and billing record and post a daily takings summary to Xero, split by payment method. Do not sync every appointment as an invoice; it inflates income and creates reconciliation work that never ends.
Contractors, employees and payday super
Growth usually means adding a second psychologist, and that is where classification bites. A psychologist who uses your rooms, your booking system and your brand, on hours you set, is generally an employee, which brings PAYG withholding, leave and super, and the Health Professionals and Support Services Award published by the Fair Work Ombudsman. From 1 July 2026 super must be paid every payday, not quarterly, at the 12 per cent super guarantee rate. Even genuine contractors paid mainly for their labour can be owed super, so get the arrangement checked rather than assumed.
| Test | Points to employee | Points to contractor |
|---|---|---|
| Control over hours | You set the roster | They choose their own hours |
| Tools and rooms | You provide them | They bring their own |
| Who the client belongs to | The practice | The practitioner |
| How they are paid | Set wage per hour/session | Invoice with their own ABN, own risk |
Medicare timing and remittances
Medicare pays in batches on its own schedule, not session by session, so your bank feed will never line up appointment by appointment no matter how tidy your diary is. Reconcile the total Medicare deposit against the Medicare remittance report, then reconcile gap and private fees against your card settlements. The most common false alarm in a psychology practice is an owner deciding Medicare income has gone missing when it is simply sitting in the next batch, a day or two away. Build your month-end around the remittance, not the calendar of sessions, and the panic disappears. It also pays to check the rebate actually received against the item billed, because a rejected or downgraded claim is easy to miss when you are only watching the bank balance rise.
Adding a second psychologist
The jump from a solo practice to two clinicians changes the books more than most owners expect. Rooms and software cost roughly the same, but wages, super, leave provisions and payroll compliance all appear at once, and your break-even climbs overnight. Decide before you hire whether the second clinician is a genuine employee or a genuine contractor, because that single decision drives PAYG withholding, super, WorkCover and leave entitlements, and getting it wrong is one of the most expensive corrections a small practice can face. From day one, use tracking categories in Xero so you can see revenue per clinician separately and tell quickly whether the second seat is paying for itself. As a rough guide, if an associate's total cost sits above roughly half of the revenue they personally generate, the margin on that seat is thin and worth a closer look at fees, hours or the caseload mix. Across Geelong, the practices that scale smoothly are the ones that treated the second hire as a financial decision with real numbers behind it, not just a diary that looked full.
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Book a Free 20-Minute CallThe bottom line
A psychology practice in Geelong is a GST-free service with a deceptively complex cash flow: Medicare in batches, gaps by card, private health through HICAPS, all for the same list of sessions. Record each session as one funded event, reconcile Medicare to its remittance rather than to your diary, and sort out employee-versus-contractor before you add your second clinician. That is the difference between books that reconcile in an hour and books that never quite balance.