Your Quality Care: Taxed

Your Quality Care: Taxed

AMA (NSW)’s new campaign takes aim at payroll tax and the potential impact it could have on medical practices and patients.

AMA (NSW) launched a new campaign appealing to the State Government to exempt medical practices from payroll tax.

Your Quality Care – Taxed is a media campaign aimed at driving public awareness of the potential impact of payroll tax, which threatens the financial viability of medical practices across NSW and risks exacerbating the challenges patients already face, particularly in rural and regional NSW, in accessing healthcare services.

The campaign underscores the significance of this threat – highlighting that some practices will be forced to close their doors, while others will need to increase how much they charge independent contractors, which could result in a reduction in bulk billing.

AMA (NSW) has held discussions with Revenue NSW for almost two years in a bid to bring attention to the financial strain many practices already face and the potential this tax would have on their ongoing viability, as well as the ramifications for patients and healthcare access. 

We wrote to the Premier, drawing attention to the GP shortage in NSW and the damage this punitive tax would have, particularly in rural and regional areas, should practices close their doors. We also stressed the commitment and sacrifice medical practices made to be a part of the vaccine rollout to ensure Australians were protected in the COVID pandemic.

We also pointed out that over the last 20 years, regulatory bodies, professional and accreditation bodies, and governments have all encouraged medical practitioners to move away from models of solo medical practice to models where a number of medical practitioners practice from the same location. In general practice, practitioners are rewarded for doing so in the form of incentive payments paid by the Federal Government.

Practitioners conducting their medical practice from a common location is seen as beneficial for patients and for practitioners. Practising from the same location as others ensures there is professional support available to medical practitioners, and patients benefit from the opportunity for colleagues to confer with one another, and they also benefit by being able to readily access care from another practitioner at their regular practice if their regular practitioner is on leave or otherwise unavailable.

Government funding models reward general practitioners who practice from the same location. Practice Incentive Payments and other government funding is increasingly important to ensure the financial viability of general practices, given the failure of MBS rebates to keep pace with the actual costs of providing medical services. Some members have expressed the view that the requirement to pay payroll tax will effectively mean the reallocation of Federal Government payments to the State Government and have a negative effect on the viability of many practices.

The AMA held a Payroll Tax webinar in late February, facilitated by AMA President, Dr Omar Khorshid and featuring Commissioner of State Revenue, Cullen Smythe.

Around 740 people attended the webinar – testament to the depth of concern that exists about this issue.

Revenue NSW indicated that prior to COVID-19, the tax office had been doubling the number of medical payroll tax audits and had achieved a 75% medical liability strike rate on all medical related audits conducted in 2022.

Medical practices are strongly encouraged to seek professional advice regarding your arrangements. Members should speak with their accountant and seek review of your contracts. AMA (NSW) has arranged for members to access a one-hour consultation with HWL Ebsworth Lawyers to seek advice about existing contracts and / or obtain an updated agreement for $500 inclusive of GST.

Please contact our Workplace Relations team at workplace@amansw.com.au or call 02 9439 8822 (toll free 1800 813 423 outside metropolitan Sydney).

You can find AMA (NSW)’s campaign Your Quality Care -Taxed on our website: www.amansw.com.au/payroll_tax.

Payroll Tax FAQs – What is payroll tax?

Payroll tax is tax assessed on wages paid or payable by an employer to its employees, when the total wage bill of an employer exceeds a threshold amount. The current payroll tax threshold in New South Wales is $1.2 million.Under the provisions of the Payroll Tax Act 2007 (NSW) payments made under relevant contracts may be considered wages for the purposes of payroll tax. 

What constitutes a relevant contract?

A relevant contract is one under which a person:

•  supplies to another person services for, or in relation to, the performance of work; or

•  has supplied to him or her the services of persons for, or in relation to, the performance of work.

Are there any exemptions to the relevant contract provision?

There are some exemptions to the relevant contract provision, including:

• where the contract is a contract for services of a kind ordinarily required by the principal for less than 180 days in a financial year; 

•  where the contract is a contract for the provision of services by a person providing the same or similar services to a principal under the contract for no more than 90 days in a financial year.

How does this affect medical practices?

While there are and have always been some practices that operate on the basis that medical practitioners are engaged to provide services to the medical practice and the medical practice’s patients, other medical practices do not engage medical practitioners to provide services to the medical practice or the practice’s patients. In the latter circumstances, under the contract the practice provides services to the medical practitioner to support the medical practitioner providing services to his or her own patients. Given these contracts are not contracts for the performance of work, this arrangement has, until recently, been understood to be arrangements that do not fall within the relevant contract provisions of the Payroll Tax Act 2007.

Why should practices be concerned?

Revenue NSW has conveyed its view to AMA (NSW) that regardless of what the contract between a medical practice and medical practitioner may say, a medical practice cannot only be providing services to a medical practitioner but must necessarily be also in the business of providing services to patients, and in order to provide services to patients, it contracts with medical practitioners to provide those services.  

What triggers a payroll tax audit?

Medical Republic hosted a payroll tax webinar in late March featuring panellist David Dahm, CEO of chartered accounting firm Health and Life. Mr Dahm indicated that mandatory e-invoicing, which is due to commence with Medicare from 1 July 2022, will make it easier for the tax office to data match a medical practice’s taxation and payment arrangements, without having to contact the practice’s accountant. Mr Dahm also highlighted that practice websites can also signal what type of arrangement a practice has with its doctors, so its important to review the language used on external patient facing communication materials, including your website, letterhead, etc. 

What can practices do?

Seek comprehensive advice from qualified accountants and lawyers who specialise in medical practices.

Payroll Tax webinar

Free for AMA Members, the Payroll Tax webinar recording is now available as a self-paced online learning module from doctorportal Learning. A ‘Certificate of Completion’ will be automatically issued to your CPD Tracker upon completion of the module.

Never used doctorportal Learning?

1. Log in using your Federal AMA account credentials. Please email memberservices@ama.com.au if you need your password reset.

2. Set-up your ‘My Learning Profile’

3. Click here to start the module.

The full CPD Learning catalogue is available at https://www.dplearning.com.au/cpd-learning