RACGP flags concerns around payroll tax ruling, pushes for exemptions

General practices may soon have increased payroll tax liability, following the release of a Queensland Revenue Office (QRO) public ruling that could end up having nationwide implications.
 
According to the ruling, which is essentially a new interpretation of existing legislation, practices may soon need to pay payroll tax for tenant doctors who provide general practice services on the premises once they meet certain criteria, such as practising more than 90 days per year or being on a weekend roster.
 
Example scenarios contained in the ruling also indicate that practices engaging the services of two or more full time equivalent tenant doctors at any one time would also subject to payroll tax.
 
RACGP Vice President and Queensland Chair Dr Bruce Willett told newsGP the college is concerned about the ruling’s potential implications and is seeking further clarification and expert advice – as well as exemptions for tenant doctors within general practices.
 
‘I spoke with the Treasurer’s adviser this morning and we’ve also got a meeting lined up with the QRO for Friday to try to negotiate a more reasonable approach to this issue,’ he said.
 
‘We’re also in the process of receiving additional advice from accountancy firms in relation to the ruling.
 
‘Members should know that negotiations between the RACGP and the QRO are still in progress, and while it’s difficult to say how long they will take, the [Queensland] Government is quite motivated to settle this quickly.’
 
Ongoing practice viability and the resultant impact on patient out-of-pocket costs, as well as access to general practice care, are high among the college’s concerns, he said.
 
The RACGP has been working behind the scenes for more than a year to seek concessions for general practices and tenant doctors in an effort to avoid the more serious implications associated with a stricter interpretation of payroll tax liability.
 
This advocacy has already resulted in an exemption for Queensland practices that were hit with backdated tax bills when the QRO initially changed its interpretation of payroll tax law following a New South Wales tribunal ruling, and Dr Willett said the college remains hopeful of a positive outcome.
 
‘We’ve got an ongoing commitment from QRO to continue to work with us to develop a meaningful solution, and we will continue to work with expert accountants and others to develop solutions that are workable for practices,’ he said.
 
However, RACGP President Dr Nicole Higgins has warned that should government push ahead with the new interpretation, the wider healthcare system – and patients – will ultimately be among those who suffer the most.
 
‘GPs usually work under service agreements with practices and if practices are suddenly slugged with payroll tax costs, which can be tens of thousands of dollars, they will be forced to pass the costs on to patients,’ she said.
 
‘If patients can’t afford the higher out-of-pocket costs, practices will be forced to close their doors.
 
‘This will have a devastating impact on communities across Queensland and will result in worsening health conditions, and more strain on our already overburdened hospital system and emergency departments.’
 
The new interpretation will also likely have implications outside of general practice, with medical industry specialist and Director of Business Advisory at William Buck, Paul Copeland, telling newsGP that the ruling applies to any entity that conducts a medical centre business.
 
‘The ruling clearly notes that the concept of a medical centre extends to dental clinics, physiotherapy practices, radiology centres and similar healthcare providers,’ he said.
 
‘Where a practice is providing services to a doctor under an agreement, the [QRO] is still likely to take the position that the arrangement is subject to payroll tax.
 
‘The onus will then be on the medical centre to dispute that payroll tax does not apply to the arrangement.
 
‘All practice owners operating within the medical industry need to be aware of this recent ruling and the highly detrimental impact this could have on the operation of their practices.’
 
Mr Copeland also pointed to the importance of paragraph 13 in the ruling, which states that payroll tax will likely apply if ‘a medical centre engages a practitioner to practice from its medical centre or holds out to the public that it provides patients with access to medical services of a practitioner’, unless they hold an exemption.
 
‘Of concern in this paragraph is the use of the word “or”,’ he said.
 
‘The [Commissioner of State Revenue] is making the assertion that where a medical centre holds out that it is providing patients with access to medical services that the agreements with the doctors working from the medical centre will be subject to payroll tax.
 
‘The only exclusion will be where an exemption applies. This is a significant departure from the current understanding on the application and operation of service agreements between doctors and medical centres.’   
 
However, he notes the QRO has said there is scope for a revised ruling, so the current interpretation ‘may not be the final position adopted’ in relation to the application of payroll tax to the medical industry.
 
With the prospect of higher out-of-pocket fees on the horizon, Dr Willett has encouraged members to explain to patients that fees may soon increase, and that bulk billing is likely to decrease ‘substantially’ due to the new state government interpretation.
 
‘Practices need to be transparent that this is the cause of the increase,’ he said.
 
‘Because I think that’s one of the only ways that we will get the attention of the state government – if their voters understand they’re paying these fees because of this additional tax.
 
‘At the end of the day, it’s likely that patients are going to be the real losers out of all this.’
 
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business sustainability out-of-pocket costs payroll tax