Recent court cases have challenged this view. The New South Wales Court of Appeal decision in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCA 40 and Victorian Court of Appeal in Commissioner of State Revenue (Vic) v The Optical Superstore Pty Ltd [2019] VSCA 197 have both highlighted clear risks around payroll tax.
Now, separate state authorities appear to be moving in a (relatively) coordinated way to the view that actually payroll tax does apply to these arrangements on the basis that the contracts between the individual practitioner and the medical centre – even where it involves a separate entity such as the practitioner’s own company – is a ‘relevant contract’ within the definition contained in the various state’s payroll tax laws.
Let’s look, for example, at Victoria. A recent ruling (PTA-041) has taken the outcome of the Thomas v Naaz and Optical Superstore cases and sought to use the precedents set out in those cases to state that a contract between a medical centre and a doctor engaged by it are “relevant contracts” for payroll tax purposes.
This means payroll tax must be paid on payments to the doctor resulting from that contract, even where the arrangement has been specifically structured to avoid that outcome, eg by the medical centre contracting with an intermediary (for example, a company) set up the practitioner and where the business of the practitioner and the business of the practice is separate.
Similar – in fact, almost identical – tax rulings have been issued in NSW (also PTA 041), South Australia and Queensland, although the pain of the ruling in these latter two states was to some extent alleviated by the announcement of payroll tax amnesties for medical practices. Eligible medical practices will not be required to pay payroll tax in:
- Queensland up to 30 June 2025 (limited to payments to contracted general practitioners (GPs)) – provided the practice registers by 29 September 2023
- South Australia (limited to payments to contracted GPs) between 1 July 2018 and 30 June 2024 – provided the practice registers by 30 September 2023.
In addition, the NSW government has announced that it will pause medical centre payroll tax audits for 12 months and penalties and interest are suspended on accrued payroll tax debts.
In Queensland, there has recently been some movement to restrict the scope of Payroll T. On 14 September 2023, the Queensland government announced that payroll tax will not be payable in respect of any patient fees, including any out-of-pocket expenses, when they are paid directly by a patient to a GP for that GP’s services.
It remains to be seen whether other states adopt this slight concession. No similar provisions have yet been introduced in the other states and, indeed, even the Queensland provisions have yet to be formally published (at the date of writing).
Either way, it appears that payroll tax is a cost that medical practices may have to absorb going forward, with potentially (subject to whether other states adopt the Queensland proposal) only a limited carve out where fees are paid directly to the GP by the patient.
For more information on this topic, join our CCH Learning CPD webinar: Structuring a Medical Practice.
