Bookkeeping for Physiotherapists in Melbourne

Melbourne has one of the highest concentrations of allied health clinics in the country — from single-physio practices in Brunswick and Northcote to multi-disciplinary clinics along Chapel Street and in the CBD. Most physiotherapists are excellent clinicians and average bookkeepers, which is fine until BAS time, a health fund reconciliation goes sideways, or a contractor physio's superannuation status gets questioned. Here's what actually matters.

GST on physiotherapy services — what's taxable, what isn't

Physiotherapy treatment is GST-free under section 38-10 of the A New Tax System (Goods and Services Tax) Act 1999, provided the service is generally accepted in the physiotherapy profession as necessary for appropriate treatment of the recipient, and it's supplied by a recognised physiotherapist. This covers most standard consults, dry needling, exercise rehabilitation, and manual therapy sessions.

But not everything in a clinic is GST-free. Common taxable items include:

• Retail sales of braces, resistance bands, foam rollers or supplements
• Massage services if not delivered by a recognised health practitioner for medical necessity
• Gym membership or class fees run alongside clinical services
• Merchandise or branded clothing sold at reception

Mixing GST-free and taxable income in the one Xero file without correct tax codes is the single most common error we see in Melbourne physio clinics. Get the chart of accounts right from day one and BAS prep becomes a five-minute job instead of a half-day forensic exercise.

Reconciling HICAPS and health fund payments in Xero

HICAPS settlements are notoriously messy to reconcile because the bank deposit is a net, batched figure covering multiple patients, multiple health funds, and a merchant fee — all in one line. If you try to match that single deposit against individual patient invoices in Xero, you'll never balance the books.

The fix: run a clearing account. Record each day's HICAPS claims at their gross value into the clearing account as they process, then reconcile the actual bank deposit (net of merchant fees) against that clearing account balance, coding the fee difference to a "Merchant Fees" expense account. This keeps patient-level revenue reporting accurate — useful when you're comparing which Medicare/DVA/private health streams are actually profitable — while your bank rec stays clean.

Same logic applies to Medicare bulk-billing rebates and DVA claims, which settle on their own schedules and need their own clearing logic if your clinic treats veterans or chronic disease management plan patients.

Contractor vs employee physios — getting it right

Most multi-physio clinics in Melbourne run on a room-hire or service agreement model, where associate physios pay a percentage of billings for use of the room, admin support and brand. This can be a legitimate contractor arrangement — but only if the substance matches the paperwork.

The ATO and Fair Work Ombudsman look past the contract title to the actual working relationship. Key indicators the ATO weighs include:

• Control — does the clinic set hours, dictate which patients the physio sees, or mandate specific treatment protocols?
• Integration — does the physio operate under their own ABN and invoice separately, or are they presented to patients as clinic staff?
• Equipment and risk — does the physio supply their own tools and carry their own professional indemnity insurance, or does the clinic provide everything?

Even where PAYG withholding correctly doesn't apply, the Superannuation Guarantee (Administration) Act 1992 can still capture contractors who are paid principally for their labour. Getting this wrong exposes clinic owners to backdated super, the super guarantee charge, and penalties. If you run a clinic with associate physios on room-hire agreements, this is worth a proper review — not a guess. See our Allied Health bookkeeping service for how we handle this for Melbourne clinics.

Payroll and super for multi-physio clinics

For genuinely employed physios and reception staff, payroll needs to track the Health Professionals and Support Services Award 2020 where it applies, including correct classification levels, penalty rates for Saturday and after-hours clinics (common across Melbourne's inner suburbs where clinics run extended hours to catch commuters), and allowances. Refer to fairwork.gov.au for current award rates and classification guidance.

Superannuation guarantee currently sits at 12% and must be paid at least quarterly to avoid the super guarantee charge, though many Melbourne clinics now run payroll and super through Xero on a per-pay-run basis to avoid cash flow surprises at quarter-end. Single Touch Payroll (STP Phase 2) reporting is mandatory for all employers regardless of size.

Xero setup that actually works for a clinic

A generic Xero chart of accounts doesn't cut it for a physio clinic. What works well in practice:

• Separate income accounts for GST-free treatment income, taxable retail sales, and telehealth consults
• A HICAPS/health fund clearing account as described above
• Tracking categories by practitioner if you're running commission or room-hire splits, so you can see profitability per physio
• Bank feeds connected directly from your business account, with bank rules set up for recurring costs like room rent, software subscriptions (practice management systems like Cliniko or Nookal), and professional indemnity insurance

If your clinic uses Cliniko, Nookal, or Halaxy for scheduling and billing, these integrate with Xero and can push daily sales summaries automatically — cutting manual data entry significantly for clinics doing 200+ consults a week.

Record keeping and BAS deadlines

Under section 262A of the Income Tax Assessment Act 1936, you must keep records explaining all transactions for five years. For a physio clinic that means patient invoices, HICAPS/Medicare settlement reports, supplier invoices, payroll records and super contribution evidence, all retained and accessible — digital records in Xero satisfy this as long as they're backed up.

Quarterly BAS lodgement due dates are 28 October, 28 February, 28 April and 28 July, with an extra four weeks if lodged through a registered BAS agent. Clinics that reconcile monthly rather than scrambling at quarter-end consistently lodge on time and catch GST coding errors before they compound.

What to do next

If your clinic is still manually splitting HICAPS deposits, guessing at GST codes on retail items, or you've never formally reviewed whether your associate physios should be treated as employees for super purposes, start there. Those three areas cause the majority of BAS corrections and ATO queries we see in Melbourne allied health practices. A proper Xero setup with clearing accounts and practitioner tracking, paired with a one-off compliance review of your contractor agreements, will save far more in avoided penalties and admin time than it costs to set up correctly.