Doctors’ contracts key to payroll tax

In the Autumn edition of medicSA, published in March, Norman Waterhouse discussed the implications of recent cases that have drastically shifted the widely held position on payroll tax in Australia’s medical profession. At the time, the South Australian Government had not indicated whether it would aggressively wield these interstate cases to impose significant payroll tax liabilities on private medical clinics – in line with the stance taken by eastern states – or take a more conservative approach in line with Tasmania and Western Australia.

Now, however, RevenueSA has started the new financial year by releasing its rulings and announcing a targeted payroll tax amnesty (amnesty) for payments made by medical clinic entities to contracted general practitioners (GPs).

How did we get here?

To distil the Optical Superstore and Thomas and Naaz cases into their key findings relevant to medical clinics, we note that:

1. Interstate courts and tribunals have viewed contractor arrangements commonly used in the medical profession as falling into ‘relevant contract’ provisions within payroll tax legislation, which may operate to deem a medical clinic as employer of a contracted doctor for payroll tax purposes

2. If a ‘relevant contract’ is deemed to exist (which, on the basis of the recent cases, is likely to be the case for most private medical clinics in South Australia), payments from a central clinic account to an individual doctor will be treated as wages for payroll tax purposes, irrespective of the clinic simply holding doctors’ fees in a central account on trust for each doctor.

These principles, and the relevant cases, are discussed in more detail in the previous edition of medicSA and on our website

The undertones of the ruling make it clear that RevenueSA intends to apply the recent case law as widely as possible.

The amnesty

Medical clinics that participate in the amnesty will not pay payroll tax on payments to contracted GPs during the period of 1 July 2018 to 30 June 2024. The amnesty intends to provide general medical clinics with time to review their arrangements, seek advice, and implement necessary changes to ensure future compliance with payroll tax obligations.

Upon expiry of the amnesty on 30 June 2024, all participants must begin complying with any payroll tax obligations.

The amnesty applies only to payments made to doctors registered as GPs with the Medical Board of Australia, meaning that payments made from a medical clinic to specialist doctors will not receive amnesty protection.

The amnesty also does not apply to payments to GPs who are employees or ‘common law employees’. This can be particularly important for medical clinics without written contracts with GPs, or where written contracts are so onerous that the contractor would be taken as an employee for purposes outside just payroll tax (such as superannuation and leave entitlements).

Eligibility requirements

To be eligible for the amnesty, a medical clinic must:

• be a ‘designated medical practice’, meaning an employer for payroll tax purposes established on 22 June 2023 that conducts a medical centre business that either:

» meets the criteria for payroll tax registration under section 86 of the Act but is not registered for payroll tax in South Australia and makes payments to contracted GPs (Section 86 of the Act requires employers to apply for payroll tax registration if that employer pays wages exceeding a ‘prescribed amount’ per week during a month. The prescribed amount is currently $28,846 per week from 1 January 2019); or

» is registered for payroll tax in South Australia but is not declaring payments to contracted GPs for payroll tax purpose (meaning that medical clinics which have been doing ‘the right thing’ are not eligible for the amnesty)

• submit an expression of interest to RevenueSA by 30 September 2023

• make voluntary disclosure and, if not already registered for payroll tax, register in South Australia by 30 June 2024; and

• comply with ongoing payroll tax obligations after making voluntary disclosure.

A medical clinic that does not satisfy each requirement listed above will not be eligible for the amnesty.

How to apply

As noted above, a medical clinic that wishes to participate in the amnesty must register their interest with RevenueSA by 30 September 2023. More information and relevant links is available on RevenueSA’s website

If a medical clinic is a member of a group for payroll tax purposes, each clinic within that group must separately apply for the amnesty if it wishes to participate.

After 30 September 2023, RevenueSA will contact each registered medical clinic with details about requirements for the amnesty.

Voluntary disclosure obligations

Valid voluntary disclosure will involve providing information ‘sufficient’ for RevenueSA to assess a medical clinic’s eligibility for the amnesty and payroll tax obligations. The exact level of detail required is still unclear. However, RevenueSA has noted that participating medical clinics will generally need to provide annual wage information (including payments to contracted GPs) for previous years of the amnesty period, as well as estimated wage information for the 2023-24 financial year.