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Your words matter - use of language and payroll tax for medical practices

Anthony Ha, Avant Law - Senior Associate, Commercial & Corporate

Ben Ryan, Avant Law - Senior Associate, Commercial & Corporate

Tuesday, 19 March 2024

Payroll tax

If you have read any of our other articles about payroll tax, then you will know that one of the most important aspects of protecting your medical practice against an unnecessary payroll tax exposure is ensuring that the relationship between the doctor and the practice is as clear as possible. One of the main ways to do this is to ensure that the language used when discussing that relationship is accurate and appropriate.

We have outlined below some of the fundamental areas where practices are unnecessarily exacerbating this confusion and creating payroll tax exposure on their websites and social media. While we have included some examples of where this language can be improved, this article is not intended to be exhaustive and we strongly recommend that you get in touch to arrange a consultation to discuss your specific practice circumstances.

Each of these examples are based on the practice structure we encounter most commonly, whereby a doctor engages a practice to provide various services to that doctor (e.g., administration, billing, reception, appointment booking).

Team language

Practices commonly create payroll tax exposures by inadvertently misrepresenting the relationship between the practice and the doctor, particularly by using overly collegiate marketing language.

For example, while it may be helpful from a marketing perspective to highlight the caring nature of the services the doctor provides and in assuring the doctor’s patients that they are in good hands, using collegiate language which implies that the doctor and the practice are a “team” or that they “work together” creates legal risk. The reality is that this is not the case, rather, the doctors and the practice are each operating separate and very distinct businesses. This can then create a payroll tax liability risk because the nature of that relationship is being publicly misstated.

Implication regarding provision of services and the relationship with patients

Another example of this collegiate marketing language that we encounter frequently is language that incorrectly implies that the practice is providing medical services to patients. While this, too, helps a website feel more approachable and friendly for readers, this could lead to confusion and an increased payroll tax liability risk. Practices should be careful to ensure that their marketing material makes clear that the patient does not have a relationship with the practice. Rather, all services the patient receives are provided by their doctor, with the practice simply providing administrative support services to the doctor.

Recruitment

Like any business, a medical centre often needs to advertise their offering to potential clients and customers. We have observed, though, that often these advertisements are framed as “recruitment” and use recruiting language.

Like with team language, recruitment language has the appeal of making the advertisement more readable and friendly. Unfortunately, this can also imply an employment relationship which would increase the likelihood of the relationship between the doctor and the practice being characterised to be subject to payroll tax.

Instead, these advertisements should be framed as an offer of facilities and services that are available to your key target market (whether that be allied health, general practitioners, medical specialists or a combination).

"Contractor doctors"

Many practices will (both informal written communication as well as general discussions) frequently refer to independent doctors as “contractor doctors”.

An “independent contractor agreement” is used by a business to engage someone to provide services to the business. When this document is used, the person providing the services is a “contractor”. Given the nature of an independent contractor agreement, they will often satisfy the criteria for a relevant contract and be subject to payroll tax.

This is a different model to what most medical practices will be operating under, namely where the practice is being engaged by the doctor to provide services to that doctor.  

The difficulty we have observed is that many practices are referring to doctors who engage their services as “contractor” doctors to try and emphasise the doctor’s independence. However, this could actually have the opposite effect of increasing the risk that the relationship between the doctor and practice is misinterpreted and a payroll tax liability being imposed.

We can help you

If you have any questions, or would like more information about how we can assist you or your practice, please call 1800 867 113, or to organise a confidential discussion at a time that suits you, please click here 

About the authors

Ben Ryan

Ben Ryan is a Senior Associate in the commercial and corporate law practice at Avant Law, based in Brisbane. Ben has been working with medical practices since 2013. Ben works primarily on commercial structuring and intellectual property matters to help clients achieve strategic and commercially sensible results. He pursued a career in law to provide reliable and honest support to those in need of legal assistance and enjoys working with clients to develop solutions-oriented legal strategy and advice.

Anthony Ha

Anthony Ha is a Senior Associate in Avant Law’s Commercial and Corporate law practice, based in Sydney. Anthony has over seven years’ experience advising clients in both the private and public sectors on all aspects of commercial and corporate law. His practice includes privacy, regulatory enforcement, governance, and risk and compliance matters. Before joining Avant Law, Anthony held the role of senior legal counsel in a major ASX-listed health company, whose operations covered medical and dental centres, allied health, pathology, diagnostic imaging, assisted reproductive technologies, day surgeries and hospitals. He has also worked as a senior lawyer within one of New South Wales’s largest primary and secondary education providers.

Disclaimers

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 this content. The information in this article is current to 10 April 2024. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme. © Avant Mutual Group Limited 2024.

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