Locum guide for optometrists 1. Introduction A locum is a person who provides professional optometric services, on an irregular basis, to other optometrists. The period of the locum might be a few hours, or up to a year in the case of maternity leave for example, but the key factor is that the locum is different from an employee. It is possible to be an employee locum (i.e. someone who is taken onto the books of the business as a part time or casual employee). For the purposes of this guide however, the term locum refers to someone who contracts their professional services to another optometrist or dispenser for a period of time. The following simple questions may assist in determining whether you are considered an employee or a locum. Is the locum contract open ended i.e. there is no firm start and finish date to the agreement? Do you work for the same practitioner on regular days, for example every Monday and Wednesday? Do you only have one or two regular practitioners to whom you provide all or the bulk of your locum services? If you answered YES to any of these questions, you are unlikely to be considered a locum. However determining whether you are a locum for tax and other purposes is a complex area. It is also important to remember that while the gross income that you earn as a locum may initially seem very appealing, there are a number of financial requirements when working as a locum that do not apply when you are a full or part time employee. In addition you won t receive sick leave, holiday leave, carers leave, superannution or other employee benefits. It is important to obtain advice from an accountant who specialises in tax if you are currently or considering establishing yourself as a locum. Optometry Victoria can also provide advice and assistance by telephone (03) 9652 9100 or email office.vic@optometry.org.au 2. Setting up as a locum There are a number of key legal and financial requirements involved in establishing yourself as a locum. Trading structure The most common trading structures that locums operate under are either as a sole trader or as a company. Sole trader A sole trader is usually a fairly simple business structure. As a sole trader you don t have to register a business name, as you can use your own personal name. As a sole trader you can 1
also use your individual tax file number (TFN). You will need an Australian Business Number (ABN) if you wish to avoid your employer withholding 46.5 per cent of any payments made to you. A sole trader owns all of the business assets and is responsible for all the liabilities of the business. Liability is unlimited and includes all personal assets, including any assets the owner shares with another person, such as a jointly owned home or money in a joint bank account. Ensuring you have the right insurance coverage can help to protect you and your business. Company A company has members (shareholders) who own the company and directors who run it. However, if you are an independent contractor you can set up a one person company with a sole director and member. It is more expensive to register as a company, so it s important to be sure that it is the right structure for your needs. A company must have its own TFN and either an ABN or Australian Company Number (ACN) which must be displayed on a range of documents. There are also strict standards and legal obligations to the Australian Securities and Investments Commission (ASIC) that apply to companies. While companies have limited liability, directors can be personally liable under the Corporations Act 2001. There are different company structures including proprietary companies and limited companies, and the rights and responsibilities for each of these arrangements are quite different. It is an individual decision as to which trading structure will best suit your personal situation. For more information on choosing the right trading structure for you, including details on applying for relevant licences and registrations, visit the Business Victoria website at www.business.vic.gov.au and follow the links to Setting up a Business. Goods and services tax The provision of optometric locum services is a taxable supply for the purposes of Goods and Services Tax (GST). If you anticipate that in a year, you would earn more than $75,000 1 gross turnover from this activity, then you must register for GST. In order to register for GST you will also need an ABN. If you provide locum services on an irregular basis and earn other income as a part time employee for example, any income you earn as an employee does not count towards the $75,000 threshold. If you expect your annual turnover to be less than $75,000, you may still register for GST. You might wish to do this if you anticipate buying a substantial quantity of goods or services in the course of your business on which you will pay GST. The advantage of being registered is that you can then claim an input tax credit for all these purchases provided, of course, that they are genuinely business related. It is important to be aware, however, that the reporting requirements for GST can be onerous. Unless you really think that you will have a reasonable amount of GST that you can 1 This rate is current as at 1 July 2015 2
claim back as an offset against the GST that you will charge your clients, then it may not be worth registering, unless you are required to. You can register for GST and a range of other requirements depending on your trading structure, through the Australian Taxation Office (ATO). For more information visit www.ato.gov.au/business Goods and services tax: invoicing If you have registered for GST, you will need to provide your clients with a tax invoice for all services you provide. There are a number of good quality apps available that are suitable for locums and allow you to invoice quickly and easily, while mobile. Broadly, a tax invoice must show the following things: the name and address of the person/company supplying the goods or service (i.e. your business name and address); your ABN/ACN; the words tax invoice must be included; a description of the goods or services supplied, and the total cost of the supply. Unless otherwise indicated, it is assumed that the total cost of supply includes GST. In addition including the following details on the invoice can save you a lot of time: your mobile and email contact details so that you can be easily contacted, and the method of payment as EFT with full bank details included, and specifying the invoice number as the reference so that you know who has paid you. Medicare provider number If you will be providing locum services at a location for less than two weeks, you can use any current provider number. If you do this, be aware that you will be paid directly by Medicare and you MUST forward these Medicare payments to the practice to which you are providing services. You can give authority for benefits that would usually be made payable to you to be transferred to another optometrist, practice owner, or your employer. This is known as a pay group link. If you are an employee optometrist, you generally will need to complete a pay group link form when submitting your application for a provider number at a particular location. If you do not submit a pay group link form, benefits will automatically be made payable to you as the provider. Most practices will have the pay group link form for you to fill out to ensure the payments generated at their practice are forwarded to them. If you will have regular days at a specific location then you should apply for an additional provider number at that location. Visit the Medicare website at www.humanservices.gov.au/health professionals/forms/hw020 to download the form. Medicare has now also introduced a system where they issue a provider with a USB stick which identifies the provider so that when you log in, Medicare can quickly generate a new provider number for the new location. The benefit of this system is that it is a faster way to generate a new number, which can be useful where you have locum jobs booked at short notice. Contact Medicare on 1800 700 199 for further information, and to register for a USB stick. 3
If you are planning to locum for a reasonable length of time you may want to apply for a separate locum provider number at your business address (which may also be your home address). In instances where you will be providing a locum service for more than 14 days at a particular location, Medicare requires that you obtain a provider number specifically for that location. Medicare prohibits providers from using another practitioner s provider number under any circumstances. Superannuation If you are providing locum services as a sole trader you are responsible for your own superannuation arrangements. If as a sole trader you employ others, you will need to make superannuation payments for any eligible employees. If you are providing locum services through a company trading structure, your company must pay superannuation to you, or any other eligible employees. The current rate for superannuation is nine and a half per cent of your usual income. When setting your pay rate for a locum assignment it is important to consider whether you are paying superannuation, and therefore whether this expense needs to be included in the rate. There are a wide range of superannuation funds available, and it is worth shopping around to find the best product to suit your individual circumstances. PAYG tax If you are providing locum services as a sole trader without an ABN, it is highly likely that you will be regarded as an employee for taxation purposes. Therefore your employer will be required to deduct PAYG tax. If you are providing locum services through a company or trust trading structure your employer does not have to deduct PAYG tax. Therefore your company will need to be registered for PAYG tax, and PAYG tax will need to be deducted from the salary that the company pays to you, at the appropriate rate. It is important to note that in the first year of operation as a locum you may incur only minimal PAYG payments. However in the years after this, you will generally be required to make regular, quarterly PAYG payments to the ATO. It is worth taking this into consideration when setting your locum rate. For more information regarding PAYG registration and responsibilities visit the Australian Taxation Office website at www.ato.gov.au or call them on 13 28 66. Insurance If you have set up a proprietary company for your locum services, you are required to obtain workers compensation insurance for yourself, as the company s employee. The current rate is about three per cent of the value of the payroll. If you are a sole trader, you cannot insure yourself for workers compensation because you are not anyone s employee. Income protection insurance may be worth considering in this instance, as it may offer you additional income security. 4
There are a number of companies that offer workers compensation and income protection insurance, and it is worth shopping around to find the best product to suit your individual circumstances. A locum has a range of expenses that need to be considered when setting a rate including superannuation, PAYG tax and insurance. 3. Other considerations Written agreement Obtaining a written agreement for the provision of locum services will ensure that both parties have a clear understanding of what is expected to happen, and when. While some optometrists will not use formal written agreements, others will find this a necessary and proper requirement. It is important to try and gauge this from either a phone call or (ideally) a visit to the practice and a face to face discussion. Your written agreement can be as simple as an email, which includes: dates, hours and location(s) you have agreed; hourly rate before GST, and payment terms (seven days is standard). This may be appropriate where you have a one off job, or where you know the optometrist very well, and you have had good previous dealings with them. Alternatively formal written contracts may be more appropriate in some circumstances, particularly where the arrangement is: over a long period of time; with an optometrist you have not met before, or with a larger corporate group. Optometry Australia s (OA) Member Assist Service can provide a locum contract template at the OA discounted member rate. For more information, contact the OA Industrial Relations Hotline Service on 1300 101 391. Financial advice and support A good accountant with tax expertise can be extremely helpful in running your small business. Shop around until you find an accountant with the right expertise to suit your circumstances and needs. Finding work There are a number of different ways to find out about locum work that may be available including: OA online classifieds; agencies that advertise for locum work only for large firms e.g. Specsavers Recruitment Service; agencies that advertise for locum work for independent optometrists; Facebook groups where people post seeking locums, or talking to other locums. 5
Further advice If you require any further information regarding locum work, contact Optometry Victoria on (03) 9652 9107 or by email office.vic@optometry.org.au This guide has been adapted with the kind permission of Optometry NSW/ACT, who developed the original material. 6