Payroll tax cuts announced in VIC and SA - relief for GPs

Bartier Perry


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SA and Victoria have announced that GP wages for bulk-billed services will be exempt from payroll tax.
Australia Tax
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In welcome news for general practitioner practices and patients alike, on 22 May 2024 the South Australian and Victorian State governments announced a payroll tax exemption for bulk-billed general practitioner (GP) services. This will provide relief for medical centres that are being charged payroll tax on wages paid to their GPs who are engaged as independent contractors.

Payroll tax exemption for GPs

The South Australian and Victorian State governments have announced that all wages payable to GPs for bulk-billed services will be exempt from payroll tax from:

  • 1 July 2024 in South Australia; and
  • 1 July 2025 in Victoria.

Importantly, the exemption is set to apply regardless of whether the GP is classified as an employee or an independent contractor.

South Australian Exemption

The exemption in South Australia will build upon the payroll tax amnesty that was announced by the South Australian Government last year.1 The amnesty in South Australia is due to expire on 30 June 2024. The new payroll tax exemption for payments to employee and independent contractor GPs will be available from 1 July 2024 to all GP practices that are liable to payroll tax. This includes those that had applied for the previous amnesty and practices which have fully met existing payroll tax exemptions.

Victorian Exemption

While no amnesty was announced in Victoria last year, the Victorian Government has now announced payroll tax exemptions for GP practices that engage independent contractors, in two stages:

  • all Victorian GP practices will receive an exemption from any outstanding or future assessment issued for payroll tax on payments to their independent contractors for the period up to 30 June 2024; and
  • where the GP practice has not already received advice about their payroll tax obligations in respect of payments to their contractors and begun paying payroll tax on payments to their independent contractors on this basis, a further exemption from 1 July 2024 to 30 June 2025 will be available in respect of these payments.

The above exemptions are provided from the Victorian Treasurer's existing 'ex gratia' powers.

The payroll tax exemption for both independent contractor and employee GPs will commence in Victoria on 1 July 2025.

When is payroll tax payable?

Payroll tax is payable by employers who pay wages to their employees that exceed the relevant threshold. The relevant annual threshold for the 2024 income year for:

  • Victoria is $700,000;
  • South Australia is $1,500,000; and
  • New South Wales is $1,200,000.

Where an entity pays annual wages that exceed these threshold amounts, the entity will be liable to pay payroll tax on those wages at the relevant rates for each State above the threshold.

The harmonised payroll tax provisions provide that payroll tax applies where services are provided under a "relevant contract", which deem independent contractors to be "employees" for payroll tax purposes. The amounts paid to the independent contractors are brought within the relevant State revenue authorities.

Impact of Thomas and Naaz and Optical Superstore

In our previous article, we highlighted the decisions of:

  • Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 (Thomas and Naaz); and
  • State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197 (Optical Superstore).

The outcome of these two decisions is that payments made to medical practitioners under "relevant contracts" are to be classified as wages on which payroll tax may be payable. Many GP practices are unaware of their payroll tax obligations. A typical service fee arrangement, in which the medical practice collects fees from patients and subtracts a service fee to cover administrative costs, were previously regarded as outside the payroll tax regime. GP practices and medical centres that adopt these arrangements are now faced with increased payroll tax obligations. Some are now liable for payroll tax on amounts paid to independent contractors that work in their practice.

The Thomas and Naaz and Optical Superstore decisions sparked consultation between the Royal Australian College of General Practitioners and State Government authorities. A concern raised during these consultations was the continued viability of GP practices should the payroll tax contractor provisions apply. Practices would have limited options to either:

  • raise their fees to cover the increased payroll tax liability; or
  • reduce their bulk billing capacity and instead operating under a private billing model.

Both options would ultimately be borne by the patients of the practice.

What about New South Wales?

As for the status of GP practices in NSW, advisers and practitioners should watch this space. While an amnesty for payroll tax has yet to be announced in NSW, Minister for Finance Courtney Houssos announced on 24 August 2023 that the NSW Government would pause its payroll tax audits on GP practices for 12 months. This would also be a pause on penalties and interest charged in respect of any payroll tax debts incurred before and on 24 August 2023. The clock is expected to restart on or about 23 August 2024. Time will tell whether the Minns Labor Government will follow the example of South Australia and Victoria by introducing a payroll tax exemption for GPs, to bring some much-needed relief to our GP practices.

Next steps

GP practices in South Australia and Victoria should now take steps to assess their eligibility for the newly announced exemption. The exemption is available to all GP practices that provide bulk-billed services, regardless of whether their practitioners are engaged as employees or independent contractors. This exemption is only available for GP practices. Other practices, including allied health providers, will need to continue to carefully ensure they review their service arrangements where they engage independent contractors.

All GP practices Australia-wide should seek advice as to how payroll tax will be assessed on payments to their employees and contractors in their relevant State or Territory. Advisers should stay alert for any further announcements from other States and Territories that may follow suit with South Australia and Victoria.


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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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