Payroll tax continues to be a significant concern for medical practice owners across Australia. Although various state governments released legislation to confirm the application of payroll tax to general practices, there are still unresolved issues, leaving practice owners in a state of uncertainty and unease.
Unaddressed issues
The primary issues that remain unaddressed in the current payroll tax legislation and guidelines include:
- The exemptions provided in various states only apply to General Practice in line with bulk billing proportions (varies for each state) and as such all other practice owners are still caught within the ruling released in each state.
- Flow of patient fees process: The Thomas and Naaz case highlighted the importance of how patient fees are handled. Practitioners who received patient fees directly to their personal accounts were not included in payroll tax assessments. This suggests that practice owners should consider implementing a process where all patient fees are paid directly to practitioners, with service fees collected separately. Queensland is the only state that has provided clarity around this process.
- Influencing bulk billing percentages: Another critical issue is the ability to influence bulk billing percentages without exercising administrative control over practitioners. Victoria, NSW, and SA have introduced legislation for payroll tax depending on practices’ bulk billing percentages. Achieving a certain bulk billing percentage or influencing it could demonstrate administrative control by the practice over the practitioner, potentially classifying payments to practitioners as relevant contracts for payroll tax purposes.
- Bulk billing dilemma: Many GP practices moved away from bulk billing prior to last year’s long-awaited increase in Medicare rates, largely because they needed to ensure their practices were financially viable. With the Federal Government’s push to bulk billing and the exemptions applying in key States, practices need to consider which way they will go to maintain financial viability.
Where do state governments stand?
Read our full state-by-state analysis for further detail.
Other implications
There has been much comment in the medical media regarding the potential claim for superannuation and other Commonwealth taxes to apply if payroll tax applies. This is unlikely to occur where arrangements have been properly documented.
Practice owners are advised to review and update their service agreements, patient forms, invoices and websites to reflect arrangements that comply with the latest rulings if that is the true nature of the arrangement. Trading as individuals rather than under a company or trust structure may also help mitigate payroll tax liabilities for practitioners.
The impact of the Uber case
The most recent case causing waves is the Chief Commissioner of State Revenue v Uber Australia Pty Ltd. The recent appeal overturned the original finding and deemed that Uber was liable for payroll tax on the payments made to drivers. The key elements to note in this case is around the agreements, the payment of drivers (net payment to drivers after deducting a fee) and the over performance of services. While there are similarities to medical practices the facts are different and it cannot be applied as such all medical practices. Given the amounts at stake for both parties this may not be the final decision.
Compliance by State Revenue Offices
If your practice is selected for an audit by the State Revenue Office it is important to seek advice before you reply to any request for information as once you provide information it is difficult to retract or change once it has been provided.
As part of any compliance/audit as the taxpayer you are entitled to provide a voluntary disclosure, these are treated more favourably and reduce any penalties that may be applied. It should be noted that a voluntary disclosure can be done at any time and not just at the time of an audit.
All the State Revenue Offices utilise data matching which means they access information from various sources, in relation to payroll tax the most relevant information comes from the Australian Taxation Office, Workcover authorities and banks. This is where the majority of compliance activity is generated from as well as tipoffs from the general public. While the offices don’t publish the statistics on the source of the audits, they regularly confirm that they do not target industries and rely on data matching, tip off’s etc.
If you are not satisfied with the outcome of the investigation you can always consider lodging an objection, as there are specific requirements around lodging an objection it is recommended this is done under advice from an accountant and/or lawyer experienced in this area.
What should you do next?
It is important to ensure you understand the relationship your practice has with any doctors using the facilities and that there are appropriate service agreements in place that reflect that relationship. You should also seek advice relevant to the state you are located in, if you work across multiple states this should also be factored into your advice. Ensure that your processes and internal workings are consistent with the agreements you have in place.
To ensure that your exposure is minimised and your contracts are reflective of what’s necessary, please contact your local William Buck health advisor.
