Payroll tax implications for medical practices – are you prepared?

Payroll tax implications for medical practices – are you prepared?


Followed by rulings in QLD and SA, the Victorian State Revenue Office and Revenue NSW have issued rulings that may subject many medical practices to payroll tax on practitioner payments processed through the practices.

The NSW and VIC Revenue Authorities have recently published harmonised revenue rulings (Revenue Rulings PTA-041) following similar rulings in QLD and SA. These rulings confirm the Revenue Authorities official position that payroll tax is likely to apply to payments made by medical practices to medical practitioners under the ‘relevant contracts’ payroll tax provisions irrespective of whether the fees under contractual arrangements are merely processed on behalf of the medical practitioner.

This ruling has far-reaching implications for medical centres, dental clinics, physiotherapy practices, radiology centres, and similar healthcare providers that have not been treating these payments as subject to payroll tax. We recommend that immediate action to assess compliance both retrospectively and on an ongoing basis as well as consider whether arrangements are optimally structured. If retrospective issues are found, employers can consider voluntary disclosure or amnesty/exemptions if available. The SW Team is here to guide you through these complex changes.


Followed by rulings in QLD and SA, the Victorian State Revenue Office and Revenue NSW have issued rulings that may subject many medical practices to payroll tax on practitioner payments processed through the practices. We have provided links to each of the rulings below:

These rulings, influenced by recent court decisions, aim to impose payroll tax on practitioner payments processed by medical practices which would not ordinarily be considered derived as income or treated as an expense when paid by the medical practices for income tax or accounting purposes. It casts a wide net, potentially impacting a broad spectrum of healthcare providers.

While it is important to recognise that the rulings are harmonised, meaning they are consistent across different jurisdictions, each jurisdiction has responded differently to the impact of the changes, with responses mainly in relation to General Practitioner (GP) medical practices. See below for details on concessions in ACT, SA, QLD and NSW.

The rulings provide clarity on the harmonised position adopted by the Revenue Authorities but also raises urgent concerns for medical practices. It applies to existing arrangements and can have retrospective effect depending on whether amnesty or an exemption is available.

Relevant contract provisions

The recent payroll tax rulings and court decisions centre around the application of the Relevant Contract provisions and understanding how these provisions work is essential for medical practices.

A relevant contract is an agreement that can be characterised as a contract for the performance of work, such as a service or contracting agreement. Prior to the recent court decisions, it was generally only payments that were directly referrable to services rendered which were treated as subject to payroll tax. This meant many medical practices may not have included payments distributed to practitioners as subject to payroll tax on the basis that patient fees were directly derived by the practitioners as income (though the collection and distribution of the patient fees was processed by the medical practice). The medical practice then earned its income from a proportion of patient fees charged by the medical practitioner as payment for administration and facility services.

In other words, the rulings and court decisions expanded the conventional understanding of the types of payments which could be 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. Payments while not derived or treated as income by the medical practice are considered taxable payments under the ‘relevant contract’ provisions.

In other words, the medical centre is deemed to be an employer, and the practitioner is deemed to be an employee, making any payments under the contract subject to payroll tax.

While the rulings have broadened the scope of what constitutes a relevant contract and the type of payments the provisions capture, certain exclusions may still apply to mitigate or eliminate payroll tax liability. The exemptions that are more likely to apply to a contract between a medical centre and a practitioner include:

  • 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).

It’s essential for medical centres to carefully evaluate their contractual arrangements on a case-by-case basis to determine if the work performed by the medical practitioner is considered services for the practice, whether the payments are capture by the provisions and if so, whether any of these exclusions apply. Professional advice is recommended to ensure complete understanding and accurate compliance with these provisions, and whether arrangements should be re-structured or clarified on a go forward basis.

Medical centres should also consider whether the employment agent provisions may apply to the arrangement (meaning that the Relevant Contract exclusions do not apply).

It is important to note that there are a number of jurisdictions which have not issued the harmonised ruling and we briefly summarise the “state of play” in these jurisdictions:

  • ACT – Has recently announced concessions for general practitioners so it is likely that a similar position is adopted
  • NT and TAS – There has not been any indication in these jurisdictions as to whether a similar view will be adopted
  • WA – The legislation in WA is significantly different and in a letter to the RACGP, confirmed that most General Practitioners will continue to be treated as independent contractors (i.e. not subject to payroll tax).

What concessions have been made available?

Certain concessions have been announced/offered in ACT, SA, QLD and NSW which we briefly outlined below:

  • ACT – the ACT Government announced that payroll tax on payments made to General Practitioners (GP) is waived to 30 June 2023 with the compliance deadline extended to 2025. Further, an exemption to 30 June 2025 will be available for GP payments for practices which bulk bill 65 percent of all patients and have registered for MyMedicare. Applications will need to be made to the ACT Revenue Office by 29 February 2024
  • SA – An amnesty is available on GP payments up to 30 June 2024 for designated medical practices that make a voluntary disclosure and register for payroll tax if necessary. Medical practices must comply with payroll tax obligations post 30 June 2024. Expressions of interest must be made by 30 September 2023
  • QLD – An amnesty is available on GP payments up to 30 June 2025 for medical practices that make a voluntary disclosure prior to 30 June 2025 and register for payroll tax if necessary. Expressions of interest must be made by 29 September 2023
  • NSW – the NSW Government announced that they will pause audits on medical centres for 12 months to consult with GP groups. Interest and penalties accrued will be paused.

Who is impacted?

  • Medical centres not only including GPs
  • Dental clinics, physiotherapy practices, radiology centres, optometrist centres
  • Other allied healthcare providers contracting with medical, dental, and other health practitioners.

It should be noted that while the cases and rulings focus on the medical industry, it would not be inconceivable for the Revenue Authorities to apply the principles to other industries which rely on similar legal constructions for structuring work performed and payments. Examples could include veterinarian practices, personal trainers in commercial gyms or sports coaches, nail technicians in nail salons etc.

What is the impact?

Immediate action is required given the ruling’s retrospective and prospective application.

The impact will differ depending on whether the medical practice is a GP medical practice. 

All medical practices will need to consider how their medical practitioner arrangements should be treated under payroll tax law, whether payroll tax shortfalls arise on a retrospective basis and whether an increase in the payroll tax oncost is likely on an ongoing basis. If payroll tax shortfalls do arise there is a potential for interest and penalties to accrue which can be mitigated by making voluntary disclosures.

GP medical practices should consider the various concessions that are available to reduce any payroll tax shortfalls or ongoing oncost, as well as interest and penalties. In particular, practices should ensure that applications or expressions of interest have been lodged by the due date if relevant.

How can SW help?

Medical practices must review their current agreements to assess whether they evidence a relevant contract and consider whether agreements should be updated or changed and any voluntary disclosures which may need to be made (even if amnesty applies).

There are essentially three limbs for payroll tax to apply under the Relevant Contract provisions:

  1. that services are provided to the medical centre
  2. that there is a payment for payroll tax purposes and
  3. whether an exclusion applies.

Each of these should be considered in the review of retrospective arrangements, but also with a view to compliance or risk mitigation on an ongoing basis.

The SW Team, with its expertise in tax law, is ready to assist you in navigating these complex changes. Our dedicated team can:

  • conduct a comprehensive review of your existing agreements and structures
  • provide tailored advice on compliance and potential exclusions
  • work with the business to restructure arrangements to mitigate risk with ongoing payroll tax obligations
  • assist with private rulings on for prospective arrangements with the SRO
  • assist with voluntary disclosure if needed
  • offer ongoing support to ensure alignment with the latest legal requirements.

Contact the SW Team today to schedule a consultation and ensure that your practice is prepared for these significant payroll tax implications. Our expert team is here to support you every step of the way.

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