Contractor Psychologists
Business, Tax & Financial Support for Contractor Psychologists
I've got so much information I want to share with contractor psychologists.
In fact, it was the driving reason behind putting this website together.
As a contractor psychologist you’re running your own business and this comes with responsibilities like: tax, GST, superannuation, invoicing, business structure, and understanding whether you are truly a contractor or something closer to an employee.
This page looks at many of the major concerns of contractor psychologists - Business Structure, Contracts, Tax Obligations, Superannuation, Bookkeeping, Tax Deductions.
As always, if there's anything you'd like to talk through about your business, get in touch. We offer a FREE 90-minute no-obligation initial meeting for psychologists, and subsequent one-on-one catch up meetings are also available for a fee.
Fairuz Azli
Accountant for Psychologists
To work as a contractor psychologist, you need an Australian Business Number (ABN).
Many contractor psychologists begin as sole traders because:
•setup is simple
•costs are low
•you can use your own name as your business name
However, some practices insist on contractors having a company structure.
Some practitioners later move to a company or trust structure as income grows or when hiring other clinicians.
There are a lot of considerations to take into account when choosing a business structure.
If you'd like to discuss business structure in a one-on-one meeting with a business advisor who specialises in psychology businesses, fill in the contact form and let us know.
For a broad overview of what you need when starting out, see our articles 15 Steps to Successfully Setup a Solo Psychology Business and What You Need to Register When You Start a New Psychology Business.
ABN and Business Structure for Contractor Psychologists
Tax Obligations for Contractor Psychologists
Olivia Crowhurst, Accountant
Kristy Tronnolone, Accountant
Jen Pedoc, Accountant
Unlike employees, contractors do not have tax withheld automatically, you'll be responsible for keeping track of and paying:
Income Tax
Set aside a portion of every payment you receive. A good starting point is 25–30 percent, depending on your fee structure and income level.
How to Be Absolutely Prepared for Your Taxes is a helpful read.
PAYG Instalments for Psychologists
The ATO may require quarterly tax instalments, where you pay your tax in advance based on your previous year's income. Many new business owners are caught off guard by this.
Our article Avoid the Tax Instalments Trap explains how to prepare for it and use our Tax Calculator for Psychologists to keep things on track.
GST Registration for Psychologists
You must register for GST if your turnover reaches $75,000.
Although many psychology services are GST-free, some services provided by psychologists attract GST.
Our GST Comprehensive Guide for Psychologists and Quick GST Guidelines for Psychologists give an outline and if you have questions about your specific situation, we're happy to discuss it with you.
BAS (Business Activity Statement) Lodgements for Psychologists
If you are registered for GST, you must lodge a Business Activity Statement (BAS). Our bookkeepers and accountants are able to advise and assist with this. We've also made a BAS Guide for Psychologists.
Our accountants have a wealth of experience with contractor psychologists and are here to assist you.
Your Contract as a Psychologist
Contracting is common in psychology. Many practices engage clinicians as independent contractors rather than employees.
There are three main contracting arrangements used in psychology practices.
Independent Contractor (Labour Hire Model)
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The practice invoices the client under the practice ABN.
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You invoice the practice for your share.
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You are supplying labour to the practice, not psychology services to clients.
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Client files belong to the practice.
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GST may apply.
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The ATO may consider you an employee if the arrangement is not set up correctly.
Service Agreement (Facility Hire Model)
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You invoice clients under your own ABN.
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You pay the practice a service fee (flat rate or percentage).
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You own your clients and your clinical records.
Simultaneous Arrangement (Hybrid)
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Both parties invoice each other.
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Very complex.
It’s very important to know what type of contract you have as it will affect your tax, your super, your invoicing and whether or not you own your clients and their records.
Contract Review Service
Many of the biggest headaches for contractor psychologists come from the contract itself.
GST rules, ATO guidance on what defines a contractor, superannuation, workplace legislation, and the Psychologists Code of Conduct all add layers of complexity.
How a Contract Review Works
•Email me your contract.
•I'll review it from a tax and business perspective, and against the Psychologists Code of Conduct.
•I'll highlight anything that may need a closer look.
•We book a time to talk through our findings so you can decide on your next steps.
This is not a legal review, it focuses on tax, but if we believe you need a contract lawyer, we will tell you.
Cost: typically $150–$300 depending on complexity.
Superannuation for Contractor Psychologists
Superannuation is a tricky area for contractor psychologists.
As a sole trader contractor psychologist you may be responsible for your own super contributions. When you're an employee, your employer is required to pay 12% of your income into a superannuation fund which will help to finance your retirement years. Many psychologists underfund their super, missing out on compound interest over time and selling themselves short in retirement.
In addition to this, there have been recent legal cases requiring businesses to pay super to their contracted workers. The definition of contractor is really important in these situations and you need to know where you stand.
Invoicing and Record Keeping
As a contractor, you are responsible for:
•issuing invoices
•tracking income
•tracking expenses
•keeping receipts
•maintaining records for five years
You can use accounting software such as Xero or MYOB to help you. If you are choosing software, Key Considerations for Psychologists Choosing Accounting Software may help you decide.
If your systems are very simple and you have no employees, we have made a Sole Trader Bookkeeping Spreadsheet which may be suitable for you and your business.
Our article 5 Rules for Tax Record Keeping may also be helpful.
Is it time to hire a Bookkeeper?
Do these apply to you?
Time & Energy
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I often put off doing my bookkeeping
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I spend hours trying to reconcile transactions or fix mistakes
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Bookkeeping cuts into my client hours, admin time, or self‑care
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I feel stressed or overwhelmed when I think about finances
Financial Confidence
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I’m not sure if I’m recording expenses correctly
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I don’t fully understand my business reports or software
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I’ve missed or nearly missed a BAS deadline
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I’m unsure how much tax or GST I owe at any given time
Growth & Business Stage
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I’ve registered for GST
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I’m earning more and want to be more organised
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I want to grow or take on more clients
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I’d rather focus on client work than do my own books
Peace of Mind
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I want help making sense of my numbers
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I want someone to double‑check that I’m doing things right
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I want to avoid costly mistakes or ATO stress
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I want to feel more in control and supported in my business
Your consulting rate is likely far higher than the cost of hiring a bookkeeper for a few hours each month. Every hour you spend on bookkeeping is time you could be earning more, working on your business, or taking a well‑earned break.
Our bookkeepers Lyka and Brooke understand the needs of contractor psychologists, and are here to support you.
Lyka Pelayo, Bookkeeper &
Accountant
Brooke Bandy, Bookkeeper
Tax Deductions for Contractor Psychologists
You can claim deductions for expenses that relate to earning your income.
Common deductions for contractor psychologists include:
Professional Expenses
•AAPi or APS membership
•professional indemnity insurance
•supervision
•CPD
Equipment and Tools
•laptops
•therapy materials
•test kits
•software
Home Office
If you work from home or provide telehealth, you may claim:
•electricity
•internet
•phone
Vehicle Costs
If you travel between clinics or to clients, you may claim:
•car expenses
•public transport
•parking
Marketing and Business Costs
•website hosting
•advertising
•business cards
•directory listings
It's good to know that the cost of completing your tax return, business advice, business mentoring and financial planning advice are all tax deductible.
We've made some resources to help you.
68 possible Tax Deductions for Psychologists
Working from Home Tax Deductions
Self Education Tax Deductions for Psychologists
Deductions for Seminars, Conferences & Training Courses
Therapy Animals - Can a Psychologist claim a Tax Deduction for a therapy dog or horse?
If you'd like to talk over your possible tax deductions and how to go about claiming them, get in touch.
We're here to help.
180 pages of practical information specifically for Contractor Psychologists
SORTED for Contractor Psychologists covers:
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Why Be a Contractor?
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Contracting Arrangements
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Choosing a Business Structure
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Registrations
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Employing Staff
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GST
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Income Tax
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Bookkeeping
$49.90 includes postage within Australia
The 5 Elements of a Psychology Business
Contracting is not just about tax and compliance.
A sustainable psychology business rests on five key elements:
Business DNA
Your values, vision, and goals
Systems and Processes
Scheduling, billing, record keeping, client communication.
People
Your support team: accountant, bookkeeper, supervisor, lawyer, referrers, admin, staff.
Clients
Understanding their needs and delivering a consistent experience.
Financials
Cash flow, pricing, expenses, and long-term planning.
Testimonial
Fairuz has helped me every step of the way when it has come to managing my accounting needs as an early career psychologist.
He is professional, friendly, approachable, knowledgeable (including the requirements of a psychologist), and always takes the time to answer my questions.
With Fairuz's support, managing my accounting needs has been stress free!
Jacquelyn Zientara
Registered Psychologist
Accountant for Psychologists
FREE
No-Obligation Meeting
Book a free, 90-minute no-obligation meeting with us today and experience the difference of working with a team who truly understands the finance side of psychology.
Meet us online
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at our office
593 ANZAC Highway, Glenelg, South Australia.
We'll take the time to listen to your needs and work with you to build a path to success.
Let us help you reach your financial goals and focus on what you do best - helping others.
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If you have some specific questions you'd like to ask us please
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phone us on
(08) 8376 0455