Since late 2023, there has been significant uncertainty within the medical industry around the application of payroll tax to medical practitioners as a result of the NSW Supreme Court finding that payments made to contracted medical professionals under the standard service fee model were taxable as wages under the “relevant contract” provisions of the Payroll Tax legislation.
An amnesty was introduced in South Australia in the latter half of 2023, which relieved eligible medical practices from a payroll tax liability on eligible payments made to general practitioners from the 2018 – 2019 financial year until 30 June 2024. Importantly, this amnesty only applied to payments to general practitioners, and did not apply to other medical practitioners or specialists.
With the amnesty set to end on 30 June 2024 and very little guidance published by the relevant authorities as to how payroll tax would be assessed from 1 July 2024 onwards, there has been significant concern regarding future payroll tax obligations for both GPs and other medical practitioners and specialists.
General Practitioners
On 22 May 2024, the South Australian Government announced an exemption to the Payroll Tax Act 2009 (SA), which has the effect that General Practitioners (as defined in the Act) would not be required to pay payroll tax on any payments to doctors in respect of bulk billed services from 1 July 2024.
Importantly, this concession only applies to general practitioners (and not other medical professionals or specialists) and only applies to bulk billed services. Where practices provide both bulk billed and non-bulk billed (i.e. out of pocket) services, the concession will apply based on the percentage of services that are bulk billed.
General Practitioner is defined for these purposes as “a medical practitioner who is registered under the Health Practitioner Regulation National Law in the specialty of general practice”, or any other medical practitioner of a kind prescribed in the regulations. Therefore while it will currently only apply to GPs, there is scope within the legislation for the concession to be extended to other medical practitioners in the future.
While the amendment provides some relief for practices that bulk bill, and in doing so provides more incentive for practices to increase their bulk billed services, the general consensus amongst the industry is that the concession is far too limited in its application.
Other medical professionals and specialists
Of particular concern is the lack of concessions for non-GP medical practitioners and specialists. Both the initial amnesty and the proposed legislative amendments do not apply to non-GP medical practitioners and specialists.
As a result, these medical practitioners and specialists are not only faced with a potential payroll tax liability moving forward, but are also at risk of being audited and assessed for past payroll tax going back 5 years or more.
Fortunately, the Government has last week announced that it will not pursue payroll tax in respect of payments to contracted medical specialists and dentists for the period up to 30 June 2024. This relief applies to medical specialists registered with the Medical Board of Australia and dentists registered with the Australian Health Practitioner Regulation Agency.
To be eligible for this concession, the medical specialist and dental practice must register for payroll tax by 30 June 2024.
While this provides some form of relief for historical payroll tax liabilities, it does not address future liabilities, meaning that these practices will be faced with an additional (and in many cases significant) payroll tax liability from 1 July 2024 onwards.
Moving forward
One of the main features of arrangements that are caught under the “relevant contract” provisions is that there is a payment from the medical practice (or a relevant third party) to the medical practitioner. This therefore poses a question as to what the payroll tax position would be if the arrangement did not involve such a payment.
Queensland has updated its Public Ruling PTAQ000.6.3 to state that payments made directly by the patient or Medicare to the medical practitioner do not fall within the relevant contract or third party payment provisions.
To date, RevenueSA has not published any similar views, resulting in uncertainty as to whether such arrangements would fall outside of the payroll tax provisions in South Australia.
Medical practices are therefore still somewhat in the position of “watch this space” in the hope of further clarity or concessions being announced in the near future.
If you run a medical practice and want any further information regarding the application of the payroll tax legislation to your specific circumstances, or wish to discuss potential structuring opportunities to minimise payroll tax liabilities moving forward, please get in contact with our specialist tax team below.
