Medical practices in VIC and NSW have been left exposed following Fridayโs payroll tax rulings from each state, which are similar to those recently announced in QLD and SA, but do not provide an amnesty to allow practices to rectify historical non-compliance and avoid large payroll tax bills.
On 11 August 2023, the Victorian State Revenue Office (VIC SRO) and Revenue NSW (RNSW) finally broke their silence on payroll tax for medical centres, with each office releasing a Ruling.
Belinda Hudson, Director, Business Advisory and Health Specialist at William Buck said the announcement confirmed harmonisation with Queensland (QLD) and South Australia (SA), which previously released similar rulings.
โThis now brings four states together in their stance on payroll tax for medical centres. Western Australia confirmed last month that they were not aligning their legislation with the other states,โ said Belinda.
โBoth QLD and SA however have announced amnesties for practices, but nothing has been announced from VIC or NSW, nor do we believe it will be likely as both states have previously said they would not be going down this path.โ
โThis effectively leaves practices in VIC and NSW exposed. Add that to the recent announcement in QLD about the amount of expected payroll tax to be collected over the next few years and it is a real risk that practice owners cannot ignore.โ
Gil Abras, Director, Business Advisory and Health Specialist at William Buck said the rulings set out the position of the VIC SRO and RNSW and confirm there is no change in legislation and this is merely providing greater clarity to their longstanding position.
โHistorically, typical service fee arrangements where medical centres collect patient fees and then deduct a service fee to cover administration services (billing, room rental, staff costs, etc.), were considered by many to be outside the payroll tax regime. After the conclusion of the Thomas & Naaz and Optical Superstores cases which both found in favour of the State Revenue bodies, these practices have been highlighted as requiring change,โ said Gil.
โMany practices have been sitting and waiting for this moment to enact change in their processes and agreements, this should be the call to action,โ he said.
โWe are currently aware of audit activity across the states which increases the risk.
โWhatever the next steps are for practices, we are concerned this may ultimately lead to an increased cost of healthcare in Australia as practices deal with the impact of increased payroll tax.โ
For more on the state rulings, visit the below webpages:
VIC ruling: Relevant contracts – medical centres | State Revenue Office (sro.vic.gov.au)
NSW ruling: PTA 041 Payroll Tax Act- Relevant Contracts – Medical Centres | Revenue NSW
