Payroll Tax, or no Payroll Tax – the ever changing tax rulings
Payroll tax has been a hot topic in the General Practice world over the last couple of years, but even more so recently due to the Queensland Revenue office publishing their tax ruling at the end of 2022. However, there have now been even more developments. Hopefully there are no more as I have rewritten this article about 3 times in the last fortnight!
The following article explains what has happened and how we have ended up with the Queensland Revenue Office announcing amnesty for medical practices until mid-2025.
The Background Info
Many GP and specialist clinics around the country would be aware of the payroll tax cases decided in Victoria and NSW in the past couple of years. The Victorian case concerns with a firm of optometrists while the NSW case was on a GP clinic. Although the facts were different for each case, the relevant courts both held the amounts paid by the clinics to the practitioners were “wages” under the respective payroll tax legislation and so subject to payroll tax. The rationale behind the decisions was also similar.
Since then, news about adverse payroll tax audits have emerged from various states and there were talks about Revenue NSW publishing additional guidance on the application of payroll tax to medical clinics.
At the end, it was the Queensland Revenue Office (QRO) that came out first and published Payroll Tax Ruling PTAQ000.6.1. This ruling explains the QRO’s view on the application of the relevant contract provisions in the Queensland Payroll Tax Act 1971 to medical centre operators and their practitioners. It is important to note that this ruling also covers other health centre operators including dental clinics, physiotherapy practices, radiology centres and similar healthcare providers.
In a nutshell, with very limited exceptions, the QRO’s view was that payroll tax is likely to be payable on amounts paid by a medical centre to a practitioner under a contract (called the “section 13B(1) relevant contracts”) who carries on a business or practice medical related services from the medical centre. This was the case even if the money paid by the medical centre to the practitioner were patient fees collected by the medical centre on behalf of the practitioner in the first instances (that is, the medical practitioner is beneficially entitled to that money).
In our observation, the majority of agreements between medical centres and practitioners would likely to fall within the definition of a section 13B(1) contract. This means payroll tax would be payable by the medical centre on patient fees it collected and held on behalf of practitioners when they are paid to the practitioner, even if the practitioner is not an employee or a subcontractor of the medical centre; and even if the practitioner has entered into a practice management and licence agreement(s) with the clinic for the use their premises, receptionist, patient management system provided by the clinic. Given the amount of gross patient fee generated by a health practitioner, the payroll tax exposure can be substantial.
It is not all bad news
Firstly, The QRO acknowledged that under some circumstances (called “the section 13B(2) exemptions”), no payroll tax may arise under a medical practice arrangement; broadly such as a practitioner practises in two or more unrelated medical centres, the practitioner working no more than 90 days at the medical centre in a year, and where a the medical service is performed by two or more practitioners. Understandably, the exemption requirements are highly specific and technical, and the exemptions are available on a very limited basis.
Secondly, AMA Queensland also announced that their advocacy efforts have been rewarded as the Queensland Government agreed to limit any backdated audits on GP practices which could have impacted at least 81% of clinics.
The best part
After this ruling was made, practice in Queensland started to flag to patients that there would be an increased cost for seeing a doctor due to a range a factors which had now been compounded by the QRO’s ruling. Since then, the QRO have now announced amnesty for medical practices for the next two and a half years. What happens after this time, who knows?
Where to from here?
Payroll tax is a state tax so technically this ruling only applies to medical centres operating in Queensland. However, given the similarity of payroll tax legislation across the country and the states’ hunger of revenue, one would only expect similar attitudes will be (if have not already been) adopted by the other states on medical and health centres. It is therefore a matter of priority for medical clinic operators to review its agreements with practitioners, to revisit the operation of their business models, to assess the financial impact of extra payroll tax on their financials and revisit the payment mechanisms to the practitioners to determine whether any changes should be implemented or the way to minimise the impact of this change. The complexity of payroll tax changes would also increase for medical centres that operates in more than one states.
Just like how you would advise your patients: If in doubt, seek professional advice.
About Alan Leung: A Registered Tax Agent, Alan has over 25 years experience in providing complex tax advice to corporate and high net worth taxpayers in Australian and overseas. Alan is a Fellow of Chartered Accountants Australia and New Zealand (CA ANZ) and a Fellow and Chartered Tax Adviser with The Tax Institute and a Fellow of CPA Australia. Having a Master of Taxation from the Melbourne Law School, Alan also holds the position of Senior Tax Trainer with CA ANZ and regularly presents at tax training sessions at a number of professional services firms. Alan may be contacted at
Disclaimer: The comments above have been prepared for informational and general purposes only and are not intended to provide, and should not be relied upon for, tax, legal or financial, or accounting advice. You should consult your own tax, legal, financial or accounting advisors before engaging in any transaction or making a claim on a tax return.