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Court rejects ‘sick tax’ appeal, politicians urged to step in
The NSW Court of Appeal has thrown out an attempt to overturn a controversial payroll tax ruling, but GPs are determined to ensure its likely impact on patients is understood.
Changes to the interpretation of payroll law are likely to impact patients across the country.
Politicians are being urged to step in after a legal challenge against a new interpretation of state payroll law with significant tax implications for general practice was dismissed in NSW on Tuesday.
Only days before NSW state elections due to be held on 25 March, the Supreme Court of NSW Court of Appeal rejected an attempt to appeal the controversial Thomas and Naaz tribunal ruling after a hearing took place on 3 March.
The tribunal found that tenant GPs, who have historically paid a proportion of their earnings to a clinic rather than receiving a wage, are classified as employees for the purposes of payroll tax.
RACGP Vice President Dr Bruce Willett has been at the forefront of advocacy against the changes, which have national implications.
He says if the changes are adopted, the tax will add significantly to the costs of many general practices – the majority of which will need to pass the extra expense on to patients.
‘The state treasurers and premiers need to understand that there is no capacity in general practice to absorb this additional tax burden after a decade of a Medicare freeze and 30 years of inadequate indexation,’ Dr Willett told newsGP.
‘Practices will have to pass on these payments to patients so any increases that may come from the Federal Government are likely to be revenue negative once these additional factors are taken into account.
‘This will in fact be just a de facto grant from the Federal Government to the state government.’
The payroll tax controversy is happening at a time when state politicians of different political persuasions have united to push for Medicare changes, alongside a drive to reform after-hours care to protect emergency departments from further overcrowding.
However, Dr Willett believes there is an irony to the rhetoric.
‘Premiers are saying that the hospital systems are failing because the Federal Government is taking money out of general practice and primary care,’ he said.
‘At the same time they’re all attempting to take an extra 5% out of primary care towards state government coffers.
‘It really does look like crocodile tears.’
In the lead up to the election, GP advocates in many different regions have been making sure the so-called ‘sick tax’ remains front of mind in NSW.
They have continued to raise the potential impact of the state-levied tax in interviews broadcast across the state on radio, television and online.
‘I call this a sick tax as it is the patients who are going to pay,’ Dr Ayman Shenouda told Seven Wagga Wagga last week.
Dr Debra King, who is the RACGP NSW&ACT Faculty’s mid-north coast representative, told the ABC that if the tax goes ahead it will be a ‘terrible situation for patients’ and reiterated that general practices will be unable to prevent costs from being passed on.
‘[Patients are] going to have to pay more out-of-pocket expenses for primary health and GP services,’ Dr King, who works as a GP in Port Macquarie, warned.
‘GP businesses will close down … less and less medical students will pick general practice as a specialty – and that flows on to the whole health system.’
A newsGP poll earlier this year with 1297 respondents found that almost four in five (78%) will respond to any new payroll tax applying to tenant doctors by passing costs on to patients.
Only 3% said they would absorb the cost, while 18% said their clinic would be forced to close.
The tax is a potential concern for general practices with tenant doctors across the country. While the new interpretation of payroll tax law was made in NSW, payroll tax is usually harmonised nationally – and Queensland has already set out updated guidelines in the wake of the Thomas and Naaz ruling.
Last month, after strong pressure from the RACGP, the Queensland treasurer said that state government would allow a grace period until July 2025, giving general practices more time to ensure they are tax compliant.
The NSW treasury has so far not offered any comment about whether there would be a parallel grace period in NSW.
NSW&ACT Chair Associate Professor Charlotte Hespe said that patient care needs to come first and that tenant GPs should be exempt of the extra payroll tax charges.
‘I’m not surprised that respondents to the survey are so alarmed and that more than three quarters of those surveyed said that they would be forced to raise patient fees if new payroll tax obligations are imposed on them,’ she said.
‘That includes some practices ending bulk billing and moving to a private billing model, and others substantially increasing their private billing fees.
‘It is also no shock to learn that so many practices would have to shut up shop at a time when we face a GP shortage in many communities, particularly outside of major cities.
‘In rural and remote areas, this will leave some communities with no practice to turn to. This is a disaster just waiting to happen and something that must be averted at all costs.’
The college recently took out full page ads in the Sydney Morning Herald and The Daily Telegraph, in the form of an open letter to current NSW Premier Dominic Perrottet which warned that he could ‘inadvertently wipe out bulk billing in general practice’.
The letter was signed by President Dr Nicole Higgins along with Associate Professor Hespe, and was published on 1 February.
Dr Higgins, who has described the payroll tax as ‘the biggest threat to Medicare reform’, previously told newsGP that the ads were designed to send a very public message to Premier Perrottet about the potential fallout a payroll tax could cause.
‘Queensland has generated the majority of headlines this year, but New South Wales has actually been one of the states leading the charge on this misguided tax grab,’ she said.
‘Make no mistake, this is a tax on patient care that will fundamentally change the way general practices operate and especially impact the most vulnerable members of society.’
‘The college is doing everything it can to raise public awareness about this issue, and will continue to fight for our members and patients.’
It is a message reiterated by Dr Willett following the news from the NSW Court of Appeal on Tuesday.
‘There’s just no choice,’ he said. ‘This is a tax on Medicare rebates and patients will pay.
‘This needs to be fought in all of the states together at the same time.’
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