No leniency for doctors on payroll tax, states warn

By Geir O'Rourke

17 Aug 2023

Specialist practices in NSW and Victoria have been told to expect no amnesty on payroll tax, after officials in both states issued rulings that contracted doctors could be considered employees for tax purposes.

The warnings last week follow a high-profile case two years ago where a chain of primary care medical practices was ordered to pay $795,000 in backdated tax after losing a legal battle against Revenue NSW.

Coming in the wake of similar notices from South Australia and Queensland in recent months, they also reference a case upheld by the Supreme Court of Victoria which saw the Optical Superstore assessed for $267,560 for six financial years, related to optometry services at the company’s stores.

Each ruling is identical in wording outside of references to the state’s legislation and stresses payroll tax may apply on the income of any doctor found to have a ‘relevant contract’ – making them akin to an employee.

Such relevant contracts can occur even if contracts use language claiming the medical centre is ‘not employing the practitioner’ or ‘only providing administrative services’ to them, they state (links to full rulings below).

On Wednesday, the Royal Australian College of General Practitioners ramped up its campaign on the issue, saying it was aware of several GP practices in regional NSW that had received fresh tax payroll tax notices, including one for $450,000.

With just 21 days to pay, they were now facing closure, according to the college.

“They simply can’t absorb the costs,” said RACGP NSW/ACT chair Professor Charlotte Hespe.

“It’s absurdly contradictory that our government is offering up to $20,000 in incentives to get more healthcare workers in regional and rural NSW, while on the other hand its risking the closure of countless local practices with this tax grab – which is a tax on patients.”

“This is threatening access to essential care for communities across NSW. It will also cost our state government a lot more in the long run – because any extra payroll tax revenue will be rapidly eaten up by higher spending on hospital services, which is much more expensive than GP care.”

“I’m calling on our Premier to intervene before it’s too late and we see any more practices close in NSW.”

The AMA has also lodged a public protest, pointing out South Australia and Queensland had announced amnesty periods after issuing their rulings.

Last month, Western Australia also confirmed that it did not intend to change the way its existing payroll tax provisions would be applied.

The rulings issued last week do stress some exemptions apply under the legislation, including that some specialists would likely to be excluded under a section of the act that exempts practitioners who perform work at a particular medical centre no more than 90 days in a financial year.

In addition, nursing or administrative staff directly employed by the specialist would be exempt from the practice’s overall payroll tax assessment, as would the earnings of a specialist who simply leased a room and operated an independent practice.

A practitioner “who ordinarily performs services of that kind to the public generally” may also be exempt, although the medical centre would be required to apply for a determination, the rulings state.

Full text of each state’s ruling:

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