RELATIONS WORKPLACE

application of penalties and interest. The contracts were relevant contracts under the meaning of s32 of the Act, and no exemptions applied, noting that the evidence provided was not sufficient to negate findings that the practitioner’s earnings were relevant for payroll tax.

Appeal

Thomas and Naaz again appealed the decision, contending that NCAT incorrectly applied section 32 and 35 of the Act. However, the NCAT Appeal Panel reaffirmed the decision (Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAP 220).

The decision of the NCAT Appeal Panel was then appealed to the Court of Appeal. The Court of Appeal handed down their decision in the matter on 14 March 2023, Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40: the Court of Appeal upheld NCAT’s decision. Importantly, the Court held it was correct that the practitioners were providing services to the practice as well as the patients, noting that the medical services provided were an integral part of the practice running its business, and that the contracts were clearly ‘for or in relation to the performance of work’, noting that there was a clear relationship where the practitioners had a contract and were paid to treat patients.

The Court observed that the practitioners who processed their own claims for Medicare benefits and did not receive the 70% paid to them by the applicant, but instead received the funds directly into their own accounts and paid 30% to the applicant as a service fee, were not included in the calculation for assessable wages. The Court noted that the Act extended the scope of concept of employer, employee, and wages. One element in which the deemed provisions operate is the making of a payment by the deemed employer to the deemed employee, and the approach taken by these practitioners to process their own claims meant that there was no payment from employer to employee and the deeming provisions were not engaged.

What does this mean?

The NSW Court of Appeal decision is applicable and enforceable law. If a medical practice cannot establish that the contracts of the practitioners working at their practice are not ‘relevant contracts’, the money paid or remitted to them may be considered deemed wages for payroll tax purposes and will contribute to the practice’s overall liability. In the 2022/2023 financial year if a practice exceeds the threshold of $1.2 million in payroll for a financial year, they will be liable to pay 5.45% in payroll tax for all monies exceeding that threshold.

It remains important to be aware of the provisions in service agreements and whether those provisions indicate a practitioner may be an employee for the purposes of the Act. If attempting to rely on legislated exemptions to payroll tax, particularly the 90-day exemption or providing services to the public exemptions, clear records should be kept that indicate the number of days a practitioner has worked in a financial year, and written evidence should be kept showing they also work elsewhere.

All agreements with contracting practitioners (and other allied health) should be reviewed and advice sought from accountants and / or lawyers. While it is unclear at this stage what the Government may do in response to the decision, the Court of Appeal decision indicates that measures including banking fees into separate accounts will be relevant when assessing the nature of the agreements or arrangements in place in your medical practice, and whether amounts remitted will be included for the purposes of payroll tax calculations. dr.

1 Payroll Tax Act s 32(2)(b)(iii).

2 Payroll Tax Act, s 32(2)(b)(iv).

Contributed by Romy Sirtes, Associate, and Scott Chapman, Partner HWL Ebsworth Lawyers