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Payroll tax for medical practices

Stephen Schoninger, Partner, Head of Employment & Workplace, Avant Law

Sunday, 29 October 2023

Payroll tax for medical practices

Payroll tax has been in the headlines over the last year, following several legal decisions that raised concerns for practice owners about their payroll tax liability in relation to doctors’ incomes.

The key issue is around the proper classification of the relationship between an independent doctor and the medical practice, which has legal, tax and accounting implications.

Recent decisions have increased the risk of payroll tax liability for practices that provide facilities and services to health practitioners under a ‘relevant contract’. Legislation on this is largely harmonised across the states and territories, except for Western Australia.

Payroll tax public rulings In December 2022, the Queensland Revenue Office released a public ruling addressing payroll tax for medical practices, with which South Australia, Victoria and New South Wales revenue offices have generally aligned. The rulings are not law, but they reflect the revenue offices’ interpretations of the laws and their approach to audit activity.

The public rulings provide that a ‘relevant contract’ will generally exist where:

  • a practitioner carries on a business or practice of providing medical-related services to patients
  • in the course of conducting its business, the practice provides medical-related services and engages a practitioner to supply these services to the practice by serving patients on its behalf, and
  • a payroll tax exemption does not apply.

In September 2023, Queensland released an amended version of its initial public ruling, noting that where Medicare benefits and out-of-pocket fees are assigned and paid directly to a practitioner who is a sole trader, these payments will not be deemed wages for payroll tax purposes. To date, no other state or territory has followed suit.

Amnesties and audit activity

Queensland and South Australia have announced payroll tax amnesties that only apply to payments made to general practitioners and not to other medical or health professionals. The deadline to register for these amnesties is 10 November 2023 for Queensland and 30 November 2023 for South Australia.

Victoria and New South Wales have no payroll tax amnesty.

In New South Wales, amendments have been made to tax laws preventing Revenue NSW from conducting payroll tax audits for GPs for a period of 12 months. There will also be a 12-month pause on penalties and interest accrued on outstanding payroll tax debts incurred before, and at the commencement of, the 12-month period.

The ACT has proposed, but not yet legislated, that it will take the following steps:

  • waive some historic payroll tax liabilities for practices that have not previously paid payroll tax on GP payments, provided these practices register with the ACT Revenue Office by 29 February 2024
  • allow general practices that support the community with reasonable levels of bulk billing until 30 June 2025 to review their taxation arrangements, seek advice, and implement changes to ensure future compliance with their payroll tax obligations
  • offer a payroll tax exemption on GP payments until 30 June 2025 for medical practices making payments to GPs, where these practices are bulk billing 65% of all patients, the practice has registered for MyMedicare, and the practice has registered with the ACT Revenue Office by 29 February 2024.

The Northern Territory and Tasmania revenue offices have not, to date, issued public rulings or amnesties, but their payroll tax legislation is harmonised with the other eastern states and territories.

In Western Australia the payroll tax legislation is different, and payroll tax is generally only payable on wages paid to health practitioners where they are engaged as employees at common law.

Practices should seek legal, tax and accounting advice about their operating model and agreements with health practitioners, to ensure they meet their operational needs in light of these developments.

More information

Avant resource: Avant Law payroll tax checklist

This article was originally published in Connect  magazine issue 21.


Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.

The information in this article does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of its content. Information is only current at the date initially published.

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