What is the payroll tax ruling for medical practices?
According to the current regulations, it is relevant when the practitioners are compensated using funds gathered by the Medical Practice on their behalf, such as patient fees or Medicare payments. Accordingly, payroll tax will be applicable as long as payments to practitioners occur from medical practices.
It is therefore highly likely that a large number of medical practices could potentially be held accountable for paying payroll tax on payments made to independent contractor doctors, if they are assessed. The responsibility arises when the contractual agreements result in the independent doctors falling within the expanded definition of an employee as specified in the harmonised Payroll Tax Acts of New South Wales, Victoria, Tasmania, Northern Territory, and South Australia. And when the payments made to these doctors also conform to the expanded definition of ‘wages’ within those Acts.
How do you effectively handle the legal responsibility?
First, it’s important to understand what your responsibility is in terms of what is happening where you practice…
Payroll tax amnesties have been implemented in South Australia and Queensland with the objective of allowing practices some breathing room for adjustment and preparation prior to the legislative changes come in.
The Queensland Revenue (QRO) issued an updated public ruling regarding payroll tax for medical centres on 19 September 2023. This revised ruling offers clarity on matters concerning medical centres. This encompasses various healthcare providers, including general practitioners and medical specialists. Notably, the QRO has affirmed that payments made directly by patients to practitioners are exempt from payroll tax liability.
Revenue SA has introduced a payroll tax amnesty on payments made to contracted general practitioners until 30 June 2024. Medical practices that successfully apply for the amnesty will not be required to pay payroll tax on payments made to contracted GPs between 1 July 2018 to 30 June 2024. However, this does not equate to a complete exemption from payroll tax. Under such circumstances, the tax liability still exists, but certain tax-related amounts may not need to be paid.
In other states…
Western Australia has different legislation around the relationships between GPs and practices which can be identified by clear service agreements. With the $1million tax-free threshold in play, WA Government has stated majority of GPs aren’t subject to the payroll tax.
Tasmania has been quiet around the payroll tax for medical centres. While they are part of the Harmonisation Agreement, it’s likely legislation will be similar to other states. Tasmania currently has a tax-free threshold of $1.25 million meaning a lot of practices fall aren’t subject to the tax.
New South Wales released Payroll Tax Ruling on 11 August, and a 12-month pause on audits.
The ACT Government announced on 26 August a two-year amnesty for GP practices that bulk bill 65% of their patients.
There have been no details released from the Northern Territory. While Victoria hasn’t clearly mentioned what makes practice payroll tax compliant, unlike Queensland, there is hope that lobbying by industry bodies will provide further clarity here. Whatever the outcome, being able to easily track and report on payments is ideal.
What are the next steps?
While payroll tax amnesties have been put in place, it is still critical for all medical practices and general practitioners to be prepared for any possible changes and ensure practices are compliant with the latest ruling.
CMxPay is your solution to facilitate payment processes in accordance with the most recent regulations. This practitioner payment reporting component of Clinimetrix is currently the only software on the market of its kind.
How can CMxPay help your practice effectively manage the potential liability?
CMxPay allows medical practices to reconcile receipts and patient payments made through Tyro terminals, Medicare, HiCaps, and HotDoc online payments to accurately track and map payments and create reports.
CMxPay is the practitioner payment component of Clinimetrix, Australia’s complete analytics platform that allows medical practices to track clinical and financial data and delivers reporting relevant to your unique practice. Regardless of your medical practice’s location in Australia, tracking practitioner payments accurately will be the key to your medical practice’s compliance, as new regulations come into play, and well into the future.
Other CMxPay software features include:
- The ability to create complex payment profiles for each practitioner
- Payment reconciliation with one-click reports to Xero and other accounting software
- Auto-generated statements for GPs that include billing breakdown
CMxPay is available at $1000/year, with no transaction fees.
Interested in learning more about CMxPay? Simply book a demo or send our friendly team an email at info@clinimetrix.com.au