The following discussion continues on from a previous Health Alert in August 2022 ‘Payroll tax concerns for medical and healthcare providers’ by Russell Kennedy – read it here.
There have been several important developments on the topic of payroll tax and contractor arrangements for medical and healthcare providers since our last alert.
First, the Court of Appeal Supreme Court of NSW has rejected an application to appeal against the Thomas and Naaz tribunal ruling and the precedent set by the Optical Superstore case in Victoria.
Second, recent revenue rulings in Queensland and South Australia clearly spell out the rules that will be applied to contractor arrangements in those states off the back of existing legislation and court decisions, including the Thomas and Naaz and Optical Superstore cases.
Perhaps most significantly, the Royal Australian College of General Practitioners (RACGP) has secured important payroll tax amnesties on payments to contracted general practitioners in both Queensland and more recently South Australia. These are not reciprocated in Victoria, New South Wales, Tasmania and the territories.
Finally, WA Deputy Premier and Treasurer Rita Saffioti confirmed on 20 July 2023 that the WA Government will not alter the way it applies payroll tax to general practice. We note that WA is not part of the payroll harmonisation agreement for the treatment of contractors that covers the above jurisdictions, and there is also no contractor deeming provision in WA. Further details below.
To recap
Payroll tax is not just a tax on wages paid to employees. The tax also applies to certain contractor arrangements, including those commonly applied in general practitioner medical centres and other medical and healthcare service businesses.
The rate of tax varies between states and territories but there is a substantial degree of harmonisation as to when the tax applies. The major exception is in Western Australia where the contractor deeming laws don’t apply.
Businesses that fail to declare taxable payments and pay the correct amount of tax can be investigated and have the tax assessed retrospectively, and may also be liable to pay substantial interest and penalties.
Update on Thomas and Naaz
In March 2023 the Court of Appeal Supreme Court of NSW rejected the taxpayer's request to appeal the Thomas and Naaz NCAT ruling. This means that the NCAT ruling stands.
In that case, patients were bulk-billed for the doctor’s services. The centre operator was authorised to claim, collect and reconcile the benefits payable to the doctors for the services they rendered to patients. The centre would then pay 70% of claimed funds into the doctor’s nominated bank account, and retain 30% of claimed funds as fees for administrative services rendered by the centre. The payments to the doctors (70% of the claimed funds) were held to be for or in relation to the performance of work and deemed to be taxable wages.
The judgment of the Court of Appeal does, however, helpfully distinguish between the payment arrangements that were typical for the centre and alternative arrangements adopted by three medical practitioners who administered their own claims and received money directly from Medicare, from which they then paid 30% to the centre for the administrative services. There were no payments to those three medical practitioners which could be treated as taxable wages.
Revenue rulings in Queensland and South Australia
If the position wasn’t already clear from the legislation and the case law, the Queensland Revenue Office and RevenueSA have released their own public rulings on the topic - PTAQ000.6.1 in Queensland and PTASA003 in South Australia.
Both rulings are far reaching and seek to close a range of loopholes and address counter arguments against the imposition of the tax, including some of those raised in the relevant cases.
Amnesties in Queensland and South Australia
The payroll tax amnesties apply to payments to contracted general practitioners in both Queensland and more recently South Australia, effectively meaning that payroll tax will not be levied on those payments in the amnesty period.
The Queensland amnesty is available to payments made to contracted GPs up until 30 June 2025. Medical practices wishing to take advantage of the amnesty must:
- submit an expression of interest using the online form by 29 September 2023
- make a voluntary disclosure and, if not already registered for payroll tax, register for payroll tax in Queensland by 30 June 2025
- and comply with their ongoing payroll tax obligations after making the voluntary disclosure from 1 July 2025.
Details of the Queensland amnesty can be found here.
The South Australian amnesty is available to payments made to contracted GPs up until 30 June 2024. Medical practices wishing to take advantage of the amnesty must:
- submit an expression of interest using the online form by 30 September 2023
- make a voluntary disclosure and, if not already registered for payroll tax, register for payroll tax in South Australia by 30 June 2024
- and comply with their ongoing payroll tax obligations after making the voluntary disclosure from 1 July 2024.
Details of the South Australian amnesty can be found here.
It is important to note that the amnesties only apply to payments to contracted general practitioners.They cannot be applied to payments to other contracted specialist medical practitioners who are notgeneral practitioners, nor to contracted allied health professionals.
Key takeaways for private and medical healthcare providers:
Our top 3 takeaways for general practitioner and other medical and allied health centre operators
- Seek our advice on your arrangements with medical and allied health professionals, including all relevant documentation, cashflow and payment model and marketing material (including practice websites).
- Seek our advice on any potential payroll tax exposure and available exemptions.
- If you engage with contracted general practitioners in Queensland or South Australia, seek our advice on the merits of registering for the applicable amnesty before the September 2023 deadlines.
How we can help
Russell Kennedy’s expert health law team is staying up to date on all developments and will be following the other States and Territories closely to see how they respond to the payroll tax obligations and whether they will also offer amnesty.
For further information or assistance, please contact Rohan Harris, Michael Gorton AM, Johnathan Teh, Felicity Iredale or Jacqueline Vuong.
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