Tax for Locum Doctors in NZ: What You Need to Know

Working as a locum doctor gives you flexibility and often higher day rates than salaried positions. But it also means you are responsible for your own tax — and the rules for medical professionals are not always straightforward.

This guide covers the key tax issues for locum doctors in New Zealand.

The first question to resolve is your employment status. This affects everything — PAYE, GST, ACC, and how you file your tax.

You are likely an employee if:

• You work exclusively for one hospital or practice
• They control your hours and how you work
• They provide your equipment and workspace
• You cannot subcontract your work to someone else

You are likely self-employed if:

• You work for multiple hospitals, practices, or agencies
• You set your own hours and rates
• You invoice for your services
• You bear the financial risk of the engagement

Many locum doctors operate through agencies, which adds another layer of complexity. Some agencies treat locums as employees (deducting PAYE), while others treat them as contractors (paying gross). Make sure you know which applies to you.

If you are genuinely self-employed, you need to manage your own tax obligations — including GST, provisional tax, and ACC.

Medical services provided by registered health professionals are exempt from GST in New Zealand. This means:

• You do not charge GST on your locum fees
• You cannot claim GST back on your business expenses
• You do not need to register for GST (and generally should not)

This exemption applies to services that are health services — the direct provision of medical care. It does not apply to all income a doctor might earn. For example:

• Medical reports for insurance or legal purposes: May be subject to GST
• Speaking fees or consulting fees: May be subject to GST
• Teaching or training fees: May be subject to GST

If you earn income from a mix of exempt and taxable services, you may need to register for GST and apportion your expenses. This is a complex area — get advice if you are unsure.

As a self-employed locum, you pay income tax through the provisional tax system rather than PAYE. This means you pay tax in instalments during the year, based on an estimate of your income.

How provisional tax works:

• In your first year of self-employment, you generally pay no provisional tax — you pay a lump sum (residual income tax) after filing your return
• From the second year onwards, you pay provisional tax in three instalments (typically August, January, and May)
• The standard method is to pay 105% of last year's residual income tax

The surprise bill problem:

Many new locums are caught off guard by their first tax bill. If you have been earning $200,000+ as a locum and have not set aside tax, the bill can be $60,000–$80,000 or more. Set aside 30–35% of every payment you receive into a separate account from day one.

Use-of-money interest:

If you underpay provisional tax, IRD charges use-of-money interest (currently 10.39% per annum) on the shortfall. This can add up quickly on large income amounts.

ACC levies for doctors are based on your earnings and your industry classification. Locum doctors are typically classified under the medical practitioners category.

Key points:

• ACC levies are charged on earnings up to the maximum threshold ($139,892 for 2024/25)
• The levy rate for medical practitioners is relatively low compared to trades and construction
• If you earn above the threshold, you pay levies only on income up to the threshold
• If you work through multiple engagements, make sure ACC has your correct classification

ACC cover provides income protection if you are injured and cannot work. Given the physical demands of medical work, this cover is genuinely valuable — do not try to minimise it to the point where you are underinsured.

As a self-employed locum, you can deduct legitimate business expenses from your income. Common deductions for locum doctors include:

• Professional registration fees: Medical Council registration, practising certificate
• Professional indemnity insurance: MDU, MPS, or similar
• Continuing medical education (CME): Courses, conferences, journals, and subscriptions
• Professional memberships: RNZCGP, RACP, RACS, and other college memberships
• Medical equipment: Stethoscope, diagnostic equipment used in your work
• Work clothing: Scrubs and other clothing required for work (not general clothing)
• Home office: If you do administrative work from home
• Vehicle: If you travel between locations for work
• Accounting and professional fees: Your accountant's fees are deductible

Keep receipts for everything. IRD can audit your returns for up to four years.

Many locum doctors consider operating through a company to reduce their tax. The key considerations are:

Potential advantages:

• Company tax rate is 28% vs personal rates up to 39%
• Ability to retain earnings in the company and draw them down in lower-income years
• Flexibility to pay a shareholder salary and dividends

Potential disadvantages:

• Additional compliance costs (company returns, annual filing fees)
• GST exemption still applies — no change there
• ACC levies may be structured differently
• IRD scrutinises arrangements where the company is essentially a personal services vehicle

The personal services attribution rules are particularly relevant for locum doctors. If you operate through a company but your income comes substantially from one source (e.g. one hospital or agency), IRD may attribute the company's income back to you personally — negating the tax benefit.

Whether a company structure makes sense depends on your specific income level, income sources, and personal circumstances. See our article on whether a doctor should operate through a company or trust for a more detailed analysis.

As a self-employed locum, you file an IR3 (individual income tax return) each year. The return is due by 7 July (or later if you have a tax agent).

Your return must include:

• All self-employment income (from all sources)
• Any employment income (if you also have salaried work)
• Investment income
• Allowable deductions

If you have a tax agent (accountant), they can file on your behalf and typically have an extended filing deadline.

1. Not setting aside tax — the most common and most painful mistake
2. Assuming the agency handles their tax — some do (PAYE), some do not (gross payments)
3. Missing deductions — particularly CME, professional fees, and home office
4. Not registering for GST when they should — if you have taxable income alongside exempt income
5. Ignoring provisional tax — leading to use-of-money interest charges
6. Not reviewing their structure — staying as a sole trader when a company might be more efficient

Locum doctors have a unique tax profile — high income, exempt services, multiple income sources, and significant deductible expenses. Getting specialist advice pays for itself many times over.

Contact Eastmure & Associates to discuss your tax situation. We work with medical professionals across Canterbury and understand the specific issues that locum doctors face.