Payroll tax continues to be a significant concern for health practice owners across Australia, with many practices unsure of the path forward and cautious about participating in amnesties.
Our latest GrowthMD blog summarises key information on payroll tax in your state, a methodology for considering amnesty participation and discusses some proactive work we are doing with GrowthMD clients. We also have a dedicated Payroll Tax Resource Page to help you navigate this area.
Latest Information by state
Understanding that each Australian state has its own rules and thresholds around payroll tax is essential. The action you need to take will depend on the state/s in which your health practice operates.
The table below summarises current information by state and the amnesty or concessions available in your state (note that amnesties and concessions are limited to GPs currently).
State | Threshold | Rate | Recent Ruling | Amnesty or Concession |
Australian Capital Territory | $2,000,000 | 6.85% | No specific ruling regarding Medical Practices | No formal amnesty or concession. ACT Liberals (opposition) are pushing for change to legislation for payments to GPs; however, this is mentioned to be reliant on bulk billing levels. |
New South Wales | $1,200,000 | 5.45% | PTA 041 released 11 August 2023 | Pause on payroll tax audits for 12 months for General Practice or any entities that have an arrangement with General Practitioners. Audits post 12 month pause period may still find a historical liability for payroll tax however no interest or penalties will apply to period before or during the 12 month pause - Passed on 24 August 2023, Awaiting Royal Assent. |
Northern Territory | $1,500,000 | 5.50% | No specific ruling regarding Medical Practices | No formal announcements or concessions at this time |
QLD | $1,300,000 | 4.75%, 4.95% over $6.5M | PTAQ000.6.2. released on 19 Sept 2023 - providing clarity on banking arrangements and taxable wages | Amnesty for contracted General Practitioners until 30 June 2025, subject to the practice acknowledging it is making taxable payments to GPs. Practices must complete an Expression of Interest by 10 November 2023. |
South Australia | $1,500,000 | 0% - 4.95% up to $1.7M, then 4.95% | PTASA003 released 30 June 2023 | Amnesty for contracted General Practitioners until 30 June 2024, subject to the practice acknowledging it is making taxable payments to GPs. Practices must register by 30 September 2023. |
Tasmania | $1,250,000 | 4.00%, 6.1% over $2M | No specific ruling regarding Medical Practices | No formal announcements or concessions at this time |
Victoria | $700,000 | 4.85% or 1.2125% for regional employers | PTA 041 | There are no formal announcements or concessions at this time. PTA 041 may apply retrospectively. |
Western Australia | $1,000,000 | 5.5% - 6.5% | No specific ruling regarding Medical Practices | WA remains unaligned with the other states in not having 'relevant contract' provisions. The WA Government has expressed its intention to keep the legislation unchanged. Accordingly, payroll tax risk for GPs and medical practices in WA remains low. |
*Updated 19th September 2023
QLD Provides Clarity - Patient fee flow and taxable wages
On 19 September 2023, QLD released further information to clarify when certain payments to practitioners are considered deemed wages and taxable for payroll tax purposes. This is a welcome update for QLD practices as it provides certainty about operational changes that are being made or considered within medical centre businesses. The following table summarises the QLD interpretation:
Payment Arrangement | Deemed Wages? | Payroll Tax Impact |
Medicare benefit is assigned by the patient to the practitioner and paid directly to the practitioner from Medicare. | No | No payments are made and therefore cannot be counted toward taxable payments - no payroll tax will apply. |
Out of pocket or private fees paid directly to the practitioner from the patient. | No | No payments are made and therefore cannot be counted toward taxable payments - no payroll tax will apply. |
Medicare, out of pocket, private or other fees (patient fees) paid to the medical centre on behalf of the practitioner and then paid (net of service or admin fees) to the practitioner. *This has been the model many practices traditionally operated under . If your practice still uses this model please immediately seek advice. | Yes | Payments included in taxable wages calculation and payroll tax applies. |
Patient fees paid to a third-party entity, then paid from the third party to the practitioner. *This includes arrangements where a trust is established to collect patient fees on behalf of practitioners and the trust disburses a share of income to the practitioner as a trust distribution. | Yes | Payments included in taxable wages calculation and payroll tax applies. |
Our team are working with practices all over Australia, as well as leading technology and banking providers, to implement practical workflows to assist patient fee flow changes.
QLD and SA Amnesty - Should your business participate?
A strategic approach is essential for businesses contemplating the amnesty in Queensland or South Australia. Here's a methodology to guide your decision-making process:
Assessing relevant contracts: Determine if your arrangements with GPs are likely to be classified as relevant contracts and if you are considered to be "paying GPs" under PTAQ000.6.2 or PTASA003. This helps establish whether you fall within the scope of the amnesty.
Exploring exemptions: Investigate any exemptions that could apply to practitioners, such as those working fewer than 90 days per year. These exemptions might significantly impact your liability and, for some, mean that they fall under the taxable wages threshold in their state.
Financial exposure calculation: Calculate your potential financial exposure in the case of an audit. This generally involves assessing the period from July 1, 2018, to June 30, 2023, factoring in compounding interest and potential penalties up to 75% of the calculated liability.
Professional consultation: Once you have quantified your potential worst-case liability, seek advice from specialised accountants and lawyers who understand the intricacies of payroll tax risk for health practices. If your likelihood of passing a historical audit is low, combined with high worst-case liability, participating in the amnesty will likely be a preferred option.
Future planning & amnesty consideration: Consider the feasibility of making operational changes within your practice to avoid making payments that fall under the payroll tax purview in the future. This could involve redefining how you engage with GPs, ensuring GPs receive their own patient fees directly or altering your business structure.
Final decision - Consider not participating: If you operate your practice in a way that does not trigger payroll tax relating to practitioners in the future, you may wish to forgo amnesty participation. This may be preferred if your historical liability is low and/or you do not want to make any disclosures to the State Revenue Offices. Remember that not participating in the amnesty means you may be subjected to historical compliance activity. OR
Final decision - Consider participating: You may wish to participate in the amnesty to protect against a historical audit and large worst-case liability. You may use the amnesty period to make changes in your business, or you may consider paying payroll tax at the end of the amnesty period should your business model require or allow this. Remember that participating in the amnesty now acknowledges that you are currently "making payments" to contracted GPs. If you change your business, you will not be liable for payroll tax about GPs post-amnesty. In that case, you must opt-out and explain why payroll tax is no longer applicable.
Among our GrowthMD client base, we have advised practices to participate and not participate in the QLD Amnesty. Before a final decision is made, a business case detailing the risks, financial exposure and pros and cons of the amnesty should be made by a knowledgeable accountant or legal adviser for each individual practice.
Not eligible, or not taking the Amnesty? What you can be doing now.
GrowthMD is working with practices all over Australia to ensure their businesses are well-equipped to manage the payroll tax challenges. Our current work includes the following.
Patient fee flow & service fee arrangements: Many practices are moving away from collecting on behalf of practitioners and are transitioning patient fees directly to practitioner bank accounts. We expect more and more practices to follow this path post-release of QLD's v2 ruling released on 19 September 2023. We are assisting in coordinating the implementation of automated systems to collect service fees and implementing new financial workflows and reconciliation tools in place.
Forecasting for the future: Health practices recognise the need for future planning regarding payroll tax exposure. We have been engaged to prepare forecasts and projections that account for changing business models. This includes discussions around engagement models under Voluntary Patient Registration and other grant or bundled funding and running comparison scenarios of the cost of alternate models of doing business or practitioner engagement. By assessing these scenarios, practices can make informed decisions.
Business entity restructuring: The structure of your business plays a crucial role in determining your financial obligations and how you do business. We are working with practices in restructuring to ensure structures are fit for purposes and able to engage with practitioners in the intended manner.
Skilled legal partners & commercial agreements: Navigating the legal intricacies of agreements between health practices and practitioners requires specialised expertise. We are collaborating with professional legal advisors to help draft agreements that accurately reflect the arrangements between the practice and the practitioners. Simultaneously, these agreements provide essential commercial protections for the practice, safeguarding against potential disputes and uncertainties.
Take action With most Australian states aligned with how the payroll tax legislation will be applied to medical practices and the promise of future compliance activity, now is the time to address the risk for your practice.
We encourage all practices to seek medical-specific independent professional advice.
GrowthMD is working for your practice.
Our team of specialist Chartered Accountants work with medical practices and payroll tax risk daily.
If your current accountant is not offering proactive guidance on this important issue, now is the time to change.
We are taking a limited number of new clients; please contact us to express your interest.