This webpage provides guidance on navigating payroll tax for those in the medical industry. Businesses in the medical industry provide a broad range of services to the community, therefore it is important to understand the different payroll tax obligations that may exist.
The industry includes medical practices that engage general practitioners (doctors), dental clinics, physiotherapists, podiatrists, osteopaths, psychologists and other allied health professionals.
On 22 May 2024, changes were announced in relation to the application of payroll tax for Victorian general practice (GP) businesses. Detailed arrangements are yet to be confirmed. Monitor this webpage for updates. In the meantime, GP businesses are encouraged to exclude contractor GP wages from their wage disclosures in their Annual Reconciliations for the 2023-24 year.
Engagement of practitioners
If practitioners are engaged as employees under common law principles, their wages are subject to payroll tax.
If practitioners are not engaged as employees under common law principles, the ‘relevant contract’ provisions contained in Division 7 of Part 3 of the Payroll Tax Act 2007 (Vic) (PTA) may apply to deem the practitioners to be employees. In this case, payments made to the practitioners are deemed to be wages subject to payroll tax.
Medical and healthcare practices sometimes overlook, or are not aware, that payments to practitioners who are not employees under common law principles may be deemed to be wages under the relevant contract provisions.
These 2 cases confirmed that the relevant contract provisions can apply to arrangements between medical and healthcare practices and practitioners, in situations where the practitioner provides services both to the principal (the medical or healthcare practice) and to patients:
- Commissioner of State Revenue (VIC) v The Optical Superstore Pty Ltd [2019] – VSCA 197
- Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue (NSW) [2023] – NSWCA 40
The Commissioner has also explained his position in relation to these matters in the following revenue rulings:
- Revenue Ruling PTA041: Relevant Contracts – Medical Centres – provides guidance about the application of relevant contract provisions in the PTA for an entity that conducts a medical centre business.
- Revenue Ruling PTA038: Determining whether a worker is an employee – provides guidance about employment relationships to help employers and advisors determine whether workers are common law employees.
Contractor exemptions
There are numerous exemptions available under the relevant contract provisions contained in the PTA. More information about these exemptions can be found on our Contractors webpage.
The 3 exemptions most likely to apply to a contract between a medical or healthcare practice and a practitioner are:
- services provided for less than 90 days
- contractor who ordinarily provides services to the public
- services are performed by 2 or more persons.
Medical practice structures
Revenue Ruling PTA041: Relevant Contracts – Medical Centres states that a contract between an entity that conducts a medical practice and a practitioner is a relevant contract under section 32 of the PTA if all the following apply:
- the practitioner carries on a business or practice of providing medical-related services to patients;
- in the course of conducting its business, the medical practice:
- provides members of the public with access to medical-related services;
- engages a practitioner to supply services to the medical centre by serving patients on its behalf;
- an exemption under section 32(2) of the PTA does not apply.
Revenue Ruling PTA-041 also states that if a medical practice engages a practitioner to practice from its medical centre, or holds out to the public that it provides patients with access to medical services of a practitioner, it is likely the relevant contract provisions will apply to the contract with the practitioner unless an exemption applies.
Under a typical medical practice structure, the totality of the performance by the practitioner of valuable contractual promises can amount to the performance of services to a medical practice, see paragraph 45 of Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40.
The practitioner’s attendance at a practice’s premises in order to provide medical services to patients is an important aspect of the practice’s business, and generates the practice’s income. The practitioners’ contractual promises to provide medical services to patients at the practice’s premises and to follow the practice’s protocols also add value to the practice’s business.
A typical medical practice structure that would be subject to the relevant contract provisions, whereby the practitioner provides services to both patients and to the practice, is as follows:
What you need to do
Victorian GP businesses referred to in the Government announcement should monitor this page for updates on what to do.
For other businesses, you should review your business to determine the correct payroll tax treatment of payments made to all workers.
Register for payroll tax
If you are liable for payroll tax, you must register with us. Registering is simple, although you will need your payroll records handy to help you. Penalties and interest may apply if you do not register.
Paying is easy
Once registered, use our secure online system Payroll Tax Express (PTX Express) to lodge monthly returns, pay your tax, complete your annual reconciliation, apply for a refund and update your records.
Private rulings
If you need further guidance on whether your business is liable for payroll tax, you can seek a private ruling. Learn more about private rulings.
We’re here to help
If you require more information, contact our Customer Education team for further assistance.
