Private specialist practices ‘will have to close’ over payroll tax


By Geir O'Rourke

27 Feb 2023

Specialists in private practice have been issued fresh warnings to get their tax affairs in order amid an escalation in the payroll tax crackdown around the country.

It comes after the Queensland Revenue Office issued a ‘public ruling’ on the levy two months ago (link here) stressing it would begin applying payroll tax on all payments from medical centres to doctors, including those under so-called service or facilities agreements.

The ruling sparked an immediate backlash from GPs, who have historically been exempt from payroll tax under contractual arrangements which said they were not technically working for their practice.

Instead, they and specialists with similar arrangements paid a service fee based on a percentage of their billings in exchange for access to facilities and admin support.

But in a high-profile case two years ago, a chain of primary care medical practices was ordered to pay almost $800,000 in backdated tax after losing a legal battle against Revenue NSW.

The “onus of proof” was determined by the NSW Civil and Administrative Tribunal to rest on the practice, even if their contracts specified otherwise, to demonstrate that they were not employing the doctors.

Last month, the Royal Australian College of General Practitioners launched a public campaign on the issue, taking out a full page advertisement in the Daily Telegraph and urging its 30,000 members to write to their MPs demanding medical practices be exempt.

It cited a member survey which found nearly one in five practices would have to shut their doors if forced to absorb the additional tax burden, while 78% would have to raise fees.

Elena Bytch, the principal of medical accounting firm Prism Accounting, said specialist practices could also find themselves in the crosshairs of state revenue offices, although the impact was likely to be less significant than in general practice.

“It’s not the time for practice owners to be complacent,” she told the limbic.

Accountant Elena Bytch

“You need to get advice from both an accountant and a lawyer with understanding of the issue and assess your potential liability for payroll tax if you don’t want to change your contractual arrangements.”

Ms Bytch added: “And it’s going to be quite expensive for many practices, especially the larger ones.”

While the RACGP’s efforts to lobby state governments to exclude medical practices from payroll tax may prove effective in the short term, the only long term solution was major legislative change around the country, she said.

Without that, the likelihood was that practices would need to ensure doctors working on their premises could not be confused with employees with measures like setting their own hours, taking leave or exiting the business without notice, and taking patients with them.

“Either way, practice expenses will go up. They’ll either be paying payroll tax or spending thousands on legal work and accounting work and extra compliance to avoid it,” she said.

“And you’ll also have less control and less certainty over your business.”

Ms Bytch said doctors with additional concerns could contact her any time on 1300 077 555 or [email protected]

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