Practice viability on the line amid payroll tax continuation

Rising tax pressures, including the controversial payroll tax, are continuing to ‘undermine’ practice sustainability, and it must change, the RACGP is warning. 
 
It comes after the Victorian Government unveiled its 2026–27 health spend, delivering $3.9 billion in new investments going towards areas including hospitals and workforce.  
 
But RACGP Victoria Chair Dr Anita Muñoz said governments cannot ignore the financial reality facing the small businesses that deliver the majority of primary care. 
 
‘It’s giving with one hand and taking with the other,’ she said. 
 
‘The growing tax burden on general practice, especially payroll tax, is making it harder for practices to keep their doors open, employ staff and deliver care to their communities.  
 
‘That directly undermines the viability of general practice and impacts patients.’ 
 
Mounting concerns come at a time when general practice in Victoria is already under severe pressure, with rising costs, workforce shortages and inadequate Medicare funding pushing many to breaking point, Dr Muñoz said.  
 
‘Adding payroll tax on top of this does not strengthen the health system, it weakens it.’ 
 
And when practices become financially unviable, ‘patients don’t disappear, they end up in emergency departments and hospitals, which are far more expensive parts of the system’, she said.  
 
Dr Muñoz told newsGP that payroll tax has been an ongoing issue, with the college having successfully advocated for an amnesty period in recent years when the State Revenue Office was threatening many general practices with retrospective tax bills of five years, and even 10 years. 
 
‘But we’ve been explaining for many years that independent practitioners are not employees, and therefore their services should not incur payroll tax,’ she said.  
 
‘We’ve also been very careful to point out that on employees, if the tax applies, the tax gets paid.  
 
‘This is not about general practice tax-avoiding, it’s trying to get recognition for the fact that independent general practitioner contractors do not incur this tax.’ 
 
Dr Muñoz said the college continues to call on the Victorian Government to provide the same payroll tax measures as in Queensland, where general practices became immediately exempt after laws to permanently abolish it passed through the state’s Parliament in early 2025. 
 
‘Victoria should follow suit,’ she said. ‘Exempting GPs from payroll tax is a practical and immediate step the state can take to protect patient access to care and support the frontline of the health system.’ 
 
She added the amount generated from this tax is small in terms of the overall state budget yet has a big impact on practices. 
 
‘When you look at what the Revenue Office generates in this payroll tax from a general practice point of view, it is such a small number in terms of the overall state revenue – it is not going to change anything meaningfully in terms of the state’s budgeting,’ Dr Muñoz explained.  
 
‘But that amount, when you apply it practice by practice, is easy enough to make some practices unviable, such that they just have to pass the cost on to patients, or it makes the practices capacity to survive increasingly tenuous. 
 
‘If a tax like that threatens to close practices which then has an impact on communities and on the health system for such a small relative contribution to the overall revenue of the state, then the policy is illogical.’ 
 
Speaking of the State Government’s Budget, Dr Muñoz also warned fragmentation will continue until governments make stronger investments in general practice. 
 
‘Until all of the governments are prepared to look at and fund general practice more robustly and more equitably, we’re going to continue to have a fragmented system that is dysfunctional.’ 
 
And while ‘pop-up solutions can plug gaps’ the best investment that you can make is into general practice as a whole, she said. 
 
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