In our previous article about increased audits on payroll taxes applied to contractors, we discussed how relevant contractor provisions deem contractors to be employees for payroll tax purposes unless an exemption applies. Under these provisions, amounts paid or payable by a principal to a contractor are treated as wages in relation to the work or services provided under the contract. Payroll tax is therefore payable.

The relevant contractor provisions are now being applied by revenue offices to medical centres. Similar rulings were issued last year by revenue offices in Queensland, Victoria, New South Wales and South Australia, supported by case law, which state that unless an exemption applies, the relevant contractor provisions will apply in the following circumstances:

  • a practitioner carries on the business or practice of providing medical-related services to patients
  • in so doing, the medical centre provides members of the public with access to medical-related services and engages a practitioner to the medical centre by serving patients on its behalf.

The medical centre will be deemed the employer and the medical practitioner the employee.

The current state of play

In September last year, the Office of State Revenue in Queensland released a revised ruling that medical centres weren't liable to pay payroll tax on direct payments to the practitioner.

Revenue offices in Queensland, ACT and South Australia have announced amnesties while NSW has paused payroll tax audits for GPs. Victoria has taken neither action, but earlier this month the Federal Health Minister, Mark Butler, urged the Allan Government to review the so-called 'GP Tax' as he fears the investments put into Medicare will be lost due to increased payroll tax obligations.

Medical and industry groups have slammed the approach as patients could face a 30 per cent increase in fees and clinics may close because of the GP tax.

The relevant contract provisions have also been applied to optical stores and can potentially be applied to other medical practitioners and healthcare providers.

Medical and healthcare centres should assess their arrangements with medical practitioners and their exposure to payroll tax, including available exemptions and whether an amnesty applies.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.