Court rejects ‘sick tax’ appeal, politicians urged to step in

Jolyon Attwooll

14/03/2023 5:42:21 PM

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.

Someone doing payroll tax
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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Dr Bernd Lorenzen   15/03/2023 7:31:10 AM

As an independent contractor I have the inherent right to instruct if I will bulk bill any patient. As an employee that right is removed and I will direct the enquiry to management. Management has no obligation to the medical boards and can be as an amoral as they like, so turning away sick kids won’t be a problem.

Dr Bernd Lorenzen   15/03/2023 7:50:46 AM

And further it’s not the 5.5% - it’s the sick leave super holiday pay and long service which requires accrual accounting which requires forward investment. It requires increased back of house to manage on costs.

Dr Rupert Good   15/03/2023 8:24:34 AM

All rather frustrating when it's the doctor that employs the clinic and not the clinic that employs the doctor. Doubly frustrating as the clinic already adds GST for the clinic services provided to the doctor and is now being asked to pay a payroll tax on someone they don't employ. Sounds like double dipping to me.

Dr Sarath Ransiri Wimalaratne   15/03/2023 10:12:43 AM

SFP Is at present a "Fully Bulk Billing Practice.
However if this " SICK TAX IS IMPOSED" SFP will Change & pass on costs to all patients.
Hence it will become a Private billing Practice.
Those patients who were previously Bulk Billed will have find Bulk Billing Practices or Attend Local Hospitals for their Primary Care

Dr Oliver Ralph Frank   15/03/2023 10:39:44 AM

I make a plea for all of us to refer to our practices as such, rather than as "businesses". This is because the primary aim of business is to generate the maximum profit legally possible for the owners of the business, irrespective of any benefit to customers, which is the reason for the warning "buyer beware". A business operator has no obligation to satisfy themselves that what they are offering is suitable for the customer.

In contrast, as health professionals, our primary aim is to learn about our patients' needs, and then to advise and to do only what we believe to be in their best interests, irrespective of the any fee that we might charge or can charge. Our primary aim is to serve our patient's best interests, and in doing so we hope to earn a reasonable living.

Dr Bradley Arthur Olsen   15/03/2023 11:01:07 AM

A possible way around this is to have medicare benefits paid into the contactors bank account and private billing into a practice holding account.With a settling up every fortnight /monthly and adjustment either way ,I understand practice owners will need to trust thier contractors. This may convince the courts we are NOT employees

Dr C Lee   15/03/2023 11:09:31 AM

If we’re going to cut through the noise on this whole payroll tax issue, it stems from the restrictive contractual agreements “tenant doctors” have with their own practices. Just like Deliveroo riders, these “tenants” are basically treated as employees without entitlements due to an employee such as superannuation and sick leave. So, more of our membership fees spent on another union action on behalf of practice owners.

Dr Edward Thomas Wu   15/03/2023 11:35:52 AM

Is it not a good practice that doctors/physicians are individually responsible and rewarded directly by each patient he/she cares instead of hiding behind a "practice name" or Medical Centre owned by some investors (whether medical or not)?

Dr Christine Colson   15/03/2023 12:36:26 PM

I don't know anything about this stuff but if I'm an employee, I want my percentage back, either directly or a super.

Dr Dennis Grahame Berman   15/03/2023 2:50:54 PM

If this tax is enforced my consultation invoice will look like this

Item 23 X dollars
Govt payroll tax levy 6% of X

Sorry for levy which has been enforced by the State Government revenue department. Please show your pleasure/displeasure at the next election.

Mark Daykin   15/03/2023 4:31:41 PM

"I don't know anything about this stuff but if I'm an employee, I want my percentage back, either directly or a super."

Well Christine I can tell you that as very few practices are turning a profit and most are trying to stem ongoing losses, even mixed billing surgeries, then any 'double tax' has profound implications.

Do understand that "your percentage" may have to be renegotiated as it is a figure that reflects the costs of running the business to provide you with the ability to practice medicine. Receptionists, management, nurses, landlords, cleaners and soon the utility providers will all want CPI appropriate increases in their payments too.

In theory independent contractors will have more power, but in practice there will be nowhere for them to operate as practices close. Your percentage may not be sustainable!

Sad times, especially for my patients. Being asked by stealth to foot the bill for deliberate non-indexing over decades, but better than not getting ANY care!

Dr Bradley Arthur Olsen   15/03/2023 4:57:37 PM

Perhaps another way is for contactors to pay say $1000 plus GST in advance for a fortnight , then have this ranged up or down depending on their income. Perhaps as we pay in ADVANCE we can be seen as buying the services in Advance to our income and therfore NOT employees? ?? Maybe I should have studied creative accounting 40 yrs ago

Dr Tatiana Cimpoesu   15/03/2023 8:35:04 PM

When compared to hospital doctors, GPs are obviously underpaid and overtaxed!
The rebate is lower than a trades' pay, we have no salary package and meal entertainment or venue hire!
Do governments want to kill General Practice business???

Dr Gideon Johannes Gouws   16/03/2023 7:39:53 AM

When will GP's learn that for as long as you remain bound to Medicare, you will NEVER substantially improve the general practice business model. There are simply too many high priority budget pressures for the government to contend with. Paying doctors more money, is not even on the list. It is common cause that the bleeding heart of the duty-bound GP is just alive enough to ensure that there will always be those who for love, duty, pity or ignorance make peace with the status quo. Appreciate all the College is trying to do opposing this ruling, but unless you can get all GP's to agree on a common approach to solve the bigger issue, those who make the decisions have your ticket already clipped. Appreciate that Medicare was never meant to be fair - it was designed to see what the payor can get away with. #BreakFree