Payroll tax concerns ‘biggest priority’ for practice owners

Planned payroll tax changes are the biggest issue among general practice owners in Australia, a recent survey suggests.
 
Asked to assess the current hot topics in general practice, attendees at the RACGP’s Practice Owners National Conference (PONC) in Adelaide ranked the payroll tax concern as the most pressing.
 
GP workforce issues and billing were also among the most serious challenges, the results of the survey suggested – but concerns over payroll out-ranked them all.
 
For RACGP President Dr Nicole Higgins, the findings are ‘not surprising’ given the scale of the potential disruption to patients and GPs.
 
‘The new “sick tax” is a big concern because it’s beyond the margins of most practices – they will be forced to pass the costs on to patients, or they’ll have to close,’ she said.
 
‘This is an extra state payroll tax on GPs who rent rooms from a practice owner; practice owners already pay payroll tax on our employees, including nurses, receptionists, and GP registrars.’
 
While Dr Higgins welcomes the recent Federal Government support for general practice as outlined in this month’s Budget announcements, she said the payroll issue could erode any progress that could be made.
 
‘It undermines the Government’s Medicare reforms and recent significant investment in general practice care in the Budget,’ she said. ‘The RACGP is continuing to urge state and territory governments to put a stop to it.’
 
The issue of payroll tax has come after a significant reinterpretation of existing laws administered by state governments, making practices potentially liable for payroll tax on the work of tenant GPs.
 
A dedicated session at the conference involved Dr Higgins and RACGP Vice President Dr Bruce Willett discussing the topic, alongside CEO Paul Wappett and a panel of regulatory and tax experts.
 
They discussed why payroll tax is an emerging issue for general practice, as well as specific areas of risk for practice owners and tenant doctors.
 
Dr Willett, who is also a practice owner in Brisbane, describes the topic as a ‘burning issue for all practice owners at the moment’.
 
He said the issue was a focus at several sessions in Adelaide.
 
‘It is very much on practice owners’ minds,’ he told newsGP.
 
‘Practices do pay payroll taxes, it’s just the reinterpretation and expansion of it that there’s a problem.
 
‘It is more than the profit margin, or as much as the profit margin, for most practices so it means that it makes practices unprofitable.
 
‘If it’s retrospective it makes practices unviable, and practices are going have no choice but to pass on the charges to patients.’
 
Of the state governments, only Queensland has provided a ruling on payroll tax, although the state revenue office has said it will defer changes in implementation until July 2025 following RACGP advocacy.
 
A previous poll of 1297 newsGP readers found that only around 3% said they could absorb the costs of tenant doctors becoming liable for payroll tax, while most (78%) said they will be forced to raise fees. Almost one in five (18%) said their practice is likely to close as a result of the changes in their current form.
 
Dr Willett says there is ‘no silver bullet’ for an issue that affects different practices in different ways.
 
‘On one hand, don’t feel despondent about it, but on the other hand, you can’t afford to ignore it,’ he said.
 
‘Every practice needs to look at it and get some professional advice, and it is by its very nature different for every practice what the best way through is going to be.’
 
While the college has spoken with administrators across Australia about the potential impact a new payroll tax interpretation could have, the RACGP Vice President also urged GPs to raise the issue with their local state or territory MPs.
 
‘I don’t think that as GPs we know how much of a powerful voice it is to go in and talk to a local state member and explain the impact of the payroll tax on practices,’ he said.
 
‘Your state member is really unlikely to be across this issue, so unless you go in as a GP and explain it to them, they won’t be.
 
‘While the payroll tax is only payable by the practice owners, 6% out of the whole Medicare pie is huge … and has an impact on tenant doctors.’
 
The issue is likely to be a live one for years, Dr Willett believes, and he urged practice owners to ‘be alert, but not alarmed’.
 
The most widely cited ruling for payroll tax is the Thomas and Naaz case, for which the NSW Court of Appeal recently rejected an attempted appeal.
 
However, Dr Willett says the case is not necessarily relevant for all practices.
 
‘Thomas and Naaz probably doesn’t reflect the state of play of most contracts for most practices,’ he said.
 
‘Ultimately, this only will be tested in the courts so we won’t have certainty until there’s a couple of test cases because circumstances vary from practice to practice.
 
‘Even one test case is not going to be enough to provide the certainty that we need.’
 
Despite the concern, discussions at PONC were positive according to Dr Willett.  
 
‘There’s a number of different approaches to solving it, so I think we’ll get through this,’ he said.
 
‘Neither state nor Federal governments can afford practices to go broke, so at the end of the day they have to find a solution.’
 
Advocacy resources about the payroll tax for the public and general practices are available on the RACGP website.
 
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