1. Medical practices in Queensland will need to consider the impact of the Queensland Revenue Office’s (QRO) current interpretation of the payroll tax framework as set out in the Ruling. Medical practices in other states and territories are not directly impacted by the Ruling, but should continue to monitor developments, including whether other state and territory revenue offices adopt a similar approach to the QRO.
2. The Queensland Premier has indicated that revenue audit activity for medical practices in Queensland will be suspended until July 2025, and Business Queensland has stated that there will be a “payroll tax amnesty” (suspension) for GPs only and only on application (until July 2025), however, the QRO is yet to confirm this.
3. All Australian medical practices (particularly those in Queensland at this time) should seek legal and accounting advice about their operating model and agreements with medical practitioners.
On 22 December 2022, the Commissioner of State Revenue in Queensland provided a Public Ruling addressing payroll tax for medical practices in Queensland (Ruling).
Importantly, the Ruling applies to all healthcare professionals, including specialists, dentists and other allied health practitioners in Queensland and has potential implications for other states/ territories given the similarities in their regulatory frameworks.
Payroll tax is a state tax payable on “taxable wages” which includes payments made to employees as well as payments made to some contractors where they are engaged for their labour under a “relevant contract”.
Prior to this Ruling and other recent cases, medical practitioners working in most medical centres were thought not to be subject to payroll tax as the medical centre and medical practitioners worked in two separate but inter-dependent businesses.
On 22 December 2022, the Commissioner of State Revenue in Queensland provided a Public Ruling addressing payroll tax for medical practices in Queensland (Ruling).
Importantly, the Ruling applies to all healthcare professionals, including specialists, dentists and other allied health practitioners in Queensland and has potential implications for other states/ territories given the similarities in their regulatory frameworks.
More recently, the revenue authorities in Queensland and in other states and territories have issued notices to medical practices requiring the payment of payroll tax in respect of payments to medical practitioners (generally, the doctor’s percentage of billings). There has been no change in the law. The revenue authorities have simply taken a different approach in applying the payroll tax law.
The Ruling comes after more than a year of concern for the medical profession after the New South Wales decision of Thomas and Naaz in September 2021 (which was subsequently upheld on appeal in July 2022) and several other similar cases. The appeal decision upheld the order for Thomas and Naaz to pay nearly $800,000 in payroll tax, as payments made under service agreements were considered taxable wages under NSW’s payroll tax legislation. A further appeal to the NSW Supreme Court is pending.
The Ruling attempts to provide clarity with several worked examples of where a relevant contract will and won’t exist for payroll tax purposes.
What the Ruling seeks to clarify
What the Ruling seeks to clarify is that:
What the Ruling doesn’t clarify
Unfortunately, the Ruling does not specifically consider an operating model where all the following occur:
Therefore, there remains some ambiguity for practices that are being engaged by the practitioners to provide administrative services under a “proper” services agreement.
Outlined below are some key high-level potential consequences:
If you have any questions, or would like more information about how we can assist your practice, please call 1800 867 113, or to organise a confidential discussion at a time that suits you, please click here.
Ben Ryan is a Senior Associate in the commercial and corporate law practice at Avant Law, based in Brisbane. Ben has been working with medical practices since 2013. Ben works primarily on commercial structuring and intellectual property matters to help clients achieve strategic and commercially sensible results. He pursued a career in law to provide reliable and honest support to those in need of legal assistance and enjoys working with clients to develop solutions-oriented legal strategy and advice.
Disclaimer: The information in this article does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of this content. The information in this article is current to 9 February 2023. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme. © Avant Mutual Group Limited 2023
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.