Payroll tax updates for medical practices
The rulings implied that payroll tax is likely to apply to payments made by medical practices to medical practitioners under the relevant contracts (new and existing) payroll tax provisions.
The rulings provided clarity on the harmonised official position of revenue authorities across various jurisdictions and that payroll is not just payable on employees but may also be payable on contractor doctors.
Relevant contracts
The rulings expanded the meaning of a relevant contract to include all agreements that can be characterised as a contract for the performance of work. Previously, generally only payments that were directly referrable to services rendered were treated as being subject to payroll tax.
The rulings have determined that if a medical centre engages a practitioner to practice from its premises, or if it provides patients with access to the medical services of a practitioner, a relevant contract likely exists.
Exclusions
Certain exclusions may still apply:
- the practitioner providing services to the public generally (e.g. if the practitioner provides services to more than one medical practice)
- the practitioner performing work for no more than 90 days in a financial year
- services performed by two or more persons (e.g., a practitioner personally providing a nurse or assistant).
Certain concessions have been announced/offered in ACT, SA, QLD and NSW which we briefly outlined below:
- ACT – payroll tax on payments made to GPs is waived till 30 June 2023 with the compliance deadline extended to 2025. An exemption is also available for GP payments for practices which bulk bill 65 percent of all patients and have registered for MyMedicare, ending 30 June 2025. Applications must be submitted with the ACT Revenue by 29 February 2024
Northern Territory and Tasmania have not yet issued a revenue ruling on this matter, and any amnesty arrangements are also unclear. With respect to Western Australia, the payroll tax legislation does not contain relevant contract provisions, therefore these arrangements may not be subject to the same scrutiny.
Next steps
Developments in payroll tax in recent years have made it clear that contracts with contractor doctors may be deemed a relevant contract under legislation, and money paid to the contracted doctor may qualify as wages for the purpose of payroll tax.
Contact us and we can assist you in reviewing your current arrangements, any potential payroll tax liabilities and suggest changes if required.