Dental practices have a bookkeeping problem that catches a lot of practice owners off guard: GST. Most assume that because they’re in healthcare, their revenue is GST-free. It isn’t — not all of it. Basic dental services are GST-free under the health services provisions in the GST Act, but teeth whitening, orthodontic appliances sold over-the-counter, and cosmetic procedures don’t qualify. Get the BAS coding wrong and you’re either overclaiming GST credits on inputs or underclaiming on taxable supplies. Add the Health Professionals Award covering dental assistants and receptionists, Medicare bulk-billing reconciliation, and the structural complexity of associate dentist arrangements, and bookkeeping for dental practices in Australia requires more than a generalist who handles invoices and bank reconciliation.
GST and dental services: what’s GST-free and what isn’t
Under the ATO’s GST health guidelines, dental services are GST-free when they are “services of a kind generally accepted as necessary for the appropriate treatment of a human ailment, disease, or condition.” This covers fillings, extractions, root canals, crowns, dentures, and orthodontics where there’s a clinical need. It does not cover:
- Teeth whitening (in-chair or take-home trays) — purely cosmetic, fully taxable
- Cosmetic veneers applied purely for aesthetic purposes — taxable
- Over-the-counter dental products sold at reception (whitening kits, mouthguards) — taxable
- Interest charged on payment plans — financial supply, different GST treatment
The practical implication is that a dental practice’s BAS will commonly have a mix of GST-free and taxable supplies reported across the same period. Cosmetic revenue and product sales need to be coded separately in Xero or MYOB so the correct GST is applied. A single “Dental income” account that lumps everything together creates errors on every BAS.
⚠ ATO Watch Point
GST-free vs taxable dental income must be coded separately
The ATO’s GST health guidelines draw a clear line between clinically necessary treatment (GST-free) and cosmetic or retail services (taxable). A practice that codes all revenue as GST-free will underpay GST on taxable supplies — and a BAS audit can recover four years of underpaid amounts plus interest and penalties.
Dental practice payroll: Health Professionals Award and dental assistants
Dental assistants, receptionists, and practice managers are generally covered by the Health Professionals and Support Services Award 2020 (MA000027). The Award covers several health sector support roles and sets minimum rates by classification level. Dental assistants are classified under the Support Services stream of the Award.
Key payroll obligations for dental practices under the Award:
- Dental assistants classified at Award level with appropriate minimum base rates
- Casual loading of 25% for casuals (many dental practices use casual dental assistants for flexibility)
- Penalty rates for Saturday work (ordinarily time-and-a-half) and Sunday (double time)
- Superannuation at 11.5% on ordinary time earnings, rising to 12% from 1 July 2025
- Single Touch Payroll lodgement to the ATO with each pay run
Dentists themselves — particularly practice principals — are typically not employees covered by the Award. But associate dentists engaged by the practice may be classified as either employees or contractors, which has significant payroll and GST implications.
Associate dentist arrangements: employee or contractor?
Most dental practices engage associate dentists on a percentage-of-billings arrangement — the associate earns 40–45% of the revenue their chair generates, with the practice retaining the balance to cover costs. The question of whether that associate is an employee or a contractor has major financial implications.
The ATO applies a multi-factor test — not a single rule. Factors pointing to employment include: the practice controls how and when the associate works, the associate cannot substitute another dentist, and the associate doesn’t operate genuinely independently. Factors pointing to genuine contracting include: the associate has their own ABN, sets their own hours, uses their own equipment, and takes on real financial risk.
This distinction matters because:
- An employee associate requires PAYG withholding, superannuation, and STP reporting — the practice pays these obligations
- A contractor associate invoices the practice (with or without GST depending on their registration status) — no PAYG withholding, but superannuation may still be required under the extended super guarantee rules if the contract is wholly or principally for labour
- Misclassifying an employee as a contractor exposes the practice to back-payments of PAYG, super, and penalties under the ATO’s contractor rules
Associate Dentist Checklist — Key Distinction Points
- Does the associate have their own ABN and professional indemnity insurance?
- Can they work for other practices simultaneously?
- Do they set their own patient schedule, or does the practice control it?
- Who supplies the equipment — the associate or the practice?
- Is there a written agreement clearly stating the nature of the arrangement?
Reconciling billing: private fees, Medicare bulk billing, and health funds
A busy dental practice has three or more income streams that need to be reconciled separately: private fee-for-service billing, Medicare bulk billing for eligible items (including Child Dental Benefits Schedule — CDBS — which covers up to $1,095 over a two-year period for eligible children), and health fund payments.
Each stream has a different payment timing and reconciliation process:
- Private patients pay at point of service — relatively straightforward to reconcile against the appointment system
- Medicare CDBS claims are lodged online via HPOS and paid by Medicare into the practice bank account — typically within a few days but needs matching against individual claim lodgements
- Health fund payments (BUPA, Medibank, HCF, etc.) come as consolidated batch payments with a remittance that needs line-by-line matching against patient invoices
Where practices fall behind is in accounts receivable — outstanding patient balances and unpaid health fund claims that sit unreconciled for weeks. This makes the P&L unreliable and the actual cash position opaque. A bookkeeper keeping the receivables current means the practice principal knows which claims are outstanding and whether the health fund payments received match what was expected. See the accounts receivable and payable page for how ongoing debtor management works.
Equipment, infection control, and claimable expenses
Dental practices have significant, ongoing equipment expenses — chairs, handpieces, X-ray units, autoclave sterilisers, infection control consumables — and the tax treatment varies. Equipment purchases above $1,000 are typically depreciated as capital assets under the ATO’s effective life schedule, unless the Small Business Immediate Deduction rules allow immediate write-off (currently subject to annual legislation for assets under set thresholds).
Infection control supplies — gloves, masks, pouches, barrier film — are fully deductible operating expenses. So are laboratory fees paid to dental laboratories for crowns, bridges, and dentures — these are a significant cost of goods for many general practices. Getting these correctly coded as expenses (not capital) keeps the practice’s cost structure visible in the monthly P&L.
What Free My Cloud handles for dental practices
✓ GST coding — GST-free vs taxable revenue
✓ Medicare and health fund reconciliation
✓ Associate dentist invoice processing
✓ Accounts receivable — private and health fund
✓ Payroll (Health Professionals Award MA000027)
✓ BAS preparation quarterly
✓ Equipment and lab fee expense coding
✓ Monthly P&L by income stream
The bookkeeping service sits alongside your practice management software — Dental4Windows, Pracsoft, or similar — with Xero or MYOB as the accounting layer. See the medical and dental bookkeeping page or contact us for a discussion specific to your practice setup.
Use the savings calculator to estimate costs, or see the accounting services overview for a broader picture of what’s included in an outsourced bookkeeping engagement.
Most are, but not all. Clinically necessary dental treatment — fillings, extractions, root canals, crowns, dentures, and braces where there’s a diagnosed need — is GST-free under the health services provisions of the GST Act. Cosmetic procedures like teeth whitening, cosmetic veneers, and over-the-counter dental products sold at reception are fully taxable. Both types of income typically appear in the same practice, so the BAS needs to code them separately.
Dental assistants are covered by the Health Professionals and Support Services Award 2020 (MA000027), under the Support Services stream. The Award sets minimum pay rates by classification level and includes provisions for casual loading (25%), overtime, and penalty rates for weekend work. Dental receptionists and practice managers may also fall under the Award depending on their role.
It depends on the specific arrangement — there’s no blanket rule. The ATO applies a multi-factor test covering control, substitution rights, equipment provision, and financial risk. Many associate arrangements are structured as contracting, but if the ATO determines the associate is actually an employee, the practice is liable for PAYG withholding, superannuation, and STP reporting back to when the arrangement started.
Dental practices that bulk bill under the Child Dental Benefits Schedule (CDBS) lodge claims through HPOS (Health Professional Online Services). Medicare pays claims into the practice bank account, typically within a few business days. Each payment needs to be matched against the individual claim lodgement in the practice management system. Unreconciled Medicare receipts inflate the bank balance without corresponding income entries in the accounting software.
Most Australian dental practices use practice management software — Dental4Windows, Pracsoft, or similar — for patient records, appointment scheduling, and billing. This integrates with Xero or MYOB for general accounting, bank reconciliation, and BAS. A bookkeeper typically works in both systems — reconciling banking in Xero/MYOB and verifying that income posted from the practice software matches receipts.
