Doctors prepare to challenge new ‘patient tax’

AMA(SA) has for some time been examining if and when a new payroll tax interpretation may be imposed on private practitioners, and the timing and scale of that tax.

There has not as yet been any indication, public or private, from the South Australian Treasurer about whether he and his team are planning to introduce the tax in this state. But increasing concern among AMA members in South Australia led us to begin our public advocacy with a webinar that would outline the efforts of the federal AMA and other states to challenge the tax, and the legal state of play here.

In the webinar on 6 March, Federal AMA Vice President Dr Danielle McMullen and policy director Warwick Hough and AMA Queensland President Dr Maria Boulton joined our President, Dr Michelle Atchison to explain to members how a new interpretation of existing legislation in NSW, Victoria and Queensland is bringing financial and psychological pain to doctors.

Norman Waterhouse tax law specialist Kale Rigano then outlined his team’s understanding of the new interpretation in those eastern states, and why national ‘harmonisation’ of state legislation across the country suggests South Australia will follow their lead. A summary of their views of the situation here, and what may come, begins on page 10.

More than 50 AMA members and practice managers heard Dr Boulton – a GP for 20 years and a GP practice owner for seven years – say that the looming imposition of payroll tax in Queensland is, according to AMA Qld members, the number one issue affecting them, ‘above the need for Medicare reform, and that is why AMA Qld has been advocating strongly on this issue.

‘The Queensland Revenue Office (QRO) released a new public ruling on the 22 December 2022 with further information on the interpretation of payroll tax law as it applies to GPs under service room agreements,’ Dr Boulton said.

‘This is yet to be challenged in the Queensland courts.

‘Even though GP tenants may not be employees for federal tax law purposes, it is the (new) interpretation of the QRO that under a relevant contract the income from GP tenants may be liable for payroll tax for state purposes.

‘With most practices unable to absorb the cost, payroll tax will be passed on to patients, thereby becoming a tax on patients accessing GP care. This will affect the most vulnerable in our community, including those with chronic disease and mental illness who visit their GPs more frequently.’

Dr Boulton said she had spoken with practice owners who were facing retrospective bills going back five years, who were facing closure and who didn’t want to leave their thousands of patients and aged care facility residents without a doctor.

Then, at National Cabinet on 3 March, Queensland Premier Annastacia Palaszczuk announced that Queensland GPs will be given a reprieve of 2.5 years from payroll tax – although the reprieve does not cover new practices.

‘We have requested further information from the QRO,’ Dr Boulton said, ‘but it seems that the retrospective period will also be waived together with the bills that have been sent to Qld GP practice owners.

‘The reprieve is a positive step. While we will continue fighting for an exemption this will give our GP members some breathing room – and make access to GPs more affordable for patients. AMA Qld is seeking further detail from the QRO on the amnesty proposal and have advised members to seek expert independent legal and accounting advice on their particular circumstances. New practices will not be covered by the amnesty.’

GP Dr McMullen said patients in the eastern states are concerned that the payroll tax inevitably will be a ‘patient tax’: every time patients go to see their GP or doctor, they will have this tax added to a bill already affected by an out-of-date Medicare system.

‘This is not something new for us – the AMA has been working on this since at least 2019,’ Dr McMullen said.

In recent talks with federal Health Minister Mark Butler, she said, the AMA had reinforced the pain the tax would cause, and the conflicting messages it sent about the value of team-based care within Australia’s general practices.

‘We have asked why, at a time we are talking about getting more funding to GPs (to alleviate the financial pressures on general practice and support the employment of nurses and allied health professionals in general practices) – why create a situation where that funding would be stripped back out by the states?

‘To impose a tax on that shared nature of practice flies in the face of everything we have been told to do over the past decade.’

As Dr Atchison told webinar participants, while we have not heard that the Treasurer has chosen to follow his interstate peers, the trend towards ‘harmonious’ law and interpretations across the country leads Norman Waterhouse experts, and us, to expect the worst. The webinar was not the first step in the AMA(SA) preparations for this challenge, and it won’t be the last. We will keep you informed as our campaign continues.