In the healthcare industry, arrangements between healthcare professionals and medical centres have been a source of ongoing uncertainty and debate. Recent court decisions have further compounded this uncertainty, prompting the industry to eagerly await guidance from Revenue Offices on the application of ‘relevant contract’ provisions under Payroll Tax laws.
Since early 2023, several developments have occurred in different regions of Australia. These developments include the release of payroll tax revenue rulings and the introduction of amnesties and other measures aimed at clarifying and addressing payroll tax issues in the healthcare sector.
One significant development is the issuance of payroll tax revenue rulings in New South Wales (NSW) and Victoria (VIC) by Revenue NSW and the Victorian State Revenue Office. These rulings provide insights into how the ‘relevant contract’ provisions apply to medical centre’s engaging healthcare professionals, particularly following the decisions in Optical Superstore case and Thomas and Naaz case.
The key takeaways from these rulings include:
The differences between contracts
A ‘relevant contract’ generally exists when a practitioner operates a business providing medical-related services, the medical centre offers access to these services to the public, and a practitioner is engaged to provide services to the centre’s patients.
‘Tenancy contracts’ may be exempt from ‘relevant contract’ provisions if the practitioner does not provide services to the landlord’s patients. In such cases, the practitioner assumes responsibility for advertising, patient appointments, and administrative tasks.
Regardless of contract labels, if the medical centre provides only administrative services to the practitioner, it could still be considered a ‘relevant contract.’ The determination depends on whether the medical centre can exercise operational or administrative control.
These rulings seem to take a broader stance on the scope of ‘relevant contracts’ compared to previous decisions, potentially encompassing more arrangements under this category.
The rulings also address the treatment of third-party payments made directly to a ‘deemed employee.’ Payments related to services provided under a ‘relevant contract’ could be considered wages. An example cited is Medicare rebates paid directly to the nominated entity of the medical practitioner, which are viewed as ‘wages’ from a third party due to their link to the ‘relevant contract.’
The commentary in the Thomas and Naaz decision suggests that Medicare rebates paid directly to practitioners by Medicare may not attract payroll tax. However, the rulings indicate that revenue authorities may analyse such cases considering ‘third party’ payment provisions.
In Queensland (QLD), an amnesty has been introduced for eligible medical practices. This amnesty provides relief from payroll tax on payments made to contracted General Practitioners (GPs) until June 30, 2024. To be eligible, medical practices must meet specific criteria, including registering by September 30, 2023. This amnesty offers temporary respite, but after the amnesty period ends, payroll tax will apply unless an exemption from ‘relevant contract’ provisions is applicable.
Temporary halt in New South Wales
In New South Wales (NSW), there has been a temporary halt on Revenue NSW performing payroll tax audit activities and the imposition of interest/penalties on GPs and medical practices. This pause, introduced to allow for consultation, provide a 12-month period during which payroll tax audits will not be conducted, and penalties and interest will not accrue. However, this pause is limited to GPs and medical practices.
Temporary payroll tax exemption in the Australian Capital Territory
In the Australian Capital Territory (ACT), a temporary payroll tax exemption has been announced for certain GP medical centres. This exemption includes waiving payroll tax liabilities until June 30, 2023, for medical practices that haven’t previously paid payroll tax on GP payments. It also offers additional time for GPs who substantially bulk bill patients to review their tax arrangements. Furthermore, there’s a payroll tax exemption on GP payments until June 30, 2025, for healthcare businesses meeting specific criteria. However, it’s important to note that this announcement has not yet been drafted into law.
In summary, these developments in the healthcare industry’s payroll tax landscape aim to provide clarity and address ongoing uncertainties. Businesses are advised to review their arrangements with medical professionals, assess the potential applicability of ‘relevant contract’ provisions, and consider available exemptions. For medical centres engaging GPs in different regions, decisions regarding interest in or registration for amnesties should be made in a timely manner. These changes highlight the importance of staying informed and seeking professional advice to navigate the evolving payroll tax environment in the healthcare sector.
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Disclaimer: * The information contained in this site is general and is not intended to serve as advice, as your personal circumstances, needs and goals have not been considered. DPM Financial Services Group recommends you obtain professional advice concerning specific matters before making a decision.