Payroll Tax and Services Agreements: How the recent QRO ruling changes the game for Australian medical practices
In late December 2022, the Queensland Revenue Office issued a public ruling regarding relevant contracts under the Payroll Tax Act 1971 (Qld) (‘the Act’), specifically regarding medical centres. This broad ruling has increased the likelihood that a practice’s arrangements will be taken to be a ‘relevant contract’ and subject to payroll tax. This has understandably made practice owners and practice managers very worried as to what this means for their practices and reiterates that this issue is not going away. So… what does it mean? This article will explore what the ruling was and what it means for you, your practice and the wider community.
What was the ruling?
The PTAQ000.6.1 Relevant contracts – medical centres ruling explains how the Commissioner of State Revenue Queensland views the relevant contract provisions in the Act as they apply to entities conducting medical centre business. This includes healthcare providers engaging medical, dental or other allied health professionals (or their entities) to provide patients with access to that practitioner’s services.
You can find the full ruling here. Relevantly, however, paragraph 11 of the ruling states that the contract between a medical centre and a practitioner is a ‘relevant contract’ if:
(a) The practitioner carries on a business or practice of providing medical-related services to patients
(b) In the course of conducting its business, the medical centre
Provides members of the public with access to medical-related services
Engages a practitioner to supply services to the medical centre by serving patients on its behalf
(c) An exemption under s13B(2) does not apply.”
It also states in paragraph 13 that if “a medical centre engages a practitioner to practise from its medical centre or holds out to the public that it provides patients with access to medical services of a practitioner, it is likely the relevant contract provisions will apply to the contract with the practitioner.”
Whilst each contract will be considered on a case-by-case basis to ascertain whether it is a ‘relevant contract’, if “the contract provides, either expressly or by implication, that a practitioner is engaged to supply work-related services to the medical centre by serving patients for or on behalf of the medical centre, the contract is a relevant contract”.
This is an incredibly broad ruling and a strict interpretation of the law, which in practice, makes it increasingly likely that the various arrangements that medical practices currently use to contract with doctors are likely to fall within the definition of ‘relevant contract’.
What is the effect of the ruling?
This ruling represents the Commissioner of State Revenue’s view on this issue (that being the application of the relevant contract provisions to medical centres), which becomes the overarching authority over any existing private rulings, memoranda, manuals and Commissioner’s advice in respect of this issue. It’s important to note that this is the view based on the current state of the legislation and case law, meaning any changes to this law will be authoritative over the public ruling – i.e. liability for payroll tax or eligibility for a concession, grant or exemption, will be determined by the Commissioner in accordance with the law.
In particular, this ruling directly considers recent case law such as Optical Superstores and Thomas and Naaz, which we have covered in previous articles: Appeal Denied – Medical Clinics & Payroll Tax: The Thomas & Naaz Decision. However, we reiterate that this is a ruling – it has not changed the law - and we will only know how the law aligns with this ruling in the event that the law is challenged.
What effect will this have on my medical practice?
Whether your practice is liable to pay payroll tax or eligible for a concession, grant, or exemption will be determined on a case-by-case basis in accordance with the law. Although, this ruling is important because it strongly indicates the way the State Revenue Office will approach this issue. However, industry commentators have noted that this ruling may be revised in future.
In the coming weeks, we will be posting more articles that will help guide your next steps, including more information about different options for practices, including moving to a model to employ GPs, and what it means to seek a private ruling with respect to these issues. We will also keep you up to date with any additional clarifications from the State Revenue Office as it becomes available.
I’m not in Queensland. Does this still affect my practice?
Although payroll tax is administered by the Revenue Office in your respective Australian state or territory, key areas of payroll tax legislation have been harmonised and are consistent in most States. This means that what has been interpreted in Queensland is highly indicative of how these equivalent provisions will be interpreted across Australia.
How will this impact the broader community?
Concerns have been raised by the Royal Australian College of General Practitioners (RACGP) that this ruling may impact practice viability and out-of-pocket costs for patients. Indeed, a poll by newsGP found ‘only 3% of general practices would be in a position to absorb the costs associated with GPs becoming liable for payroll tax’. The RACGP President, Dr Nicole Higgins, has said ‘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 also said that this would have a flow-on effect on health conditions, with added strain on ‘already overburdened hospital system and emergency departments’. Consequently, RACGP is pushing for an Australia-wide payroll tax exemption for practices and is seeking expert advice. You Legal and the medical community will be keeping a keen eye out for any further developments in this space.
Where to from here?
This is a dynamic area, and as this ruling shows, a lot can change very quickly. This issue is not going anywhere, and it is increasingly important to assess and address any potential risk to your practice – the consequences of not doing so are only becoming more serious.
We urge you to get in touch with us today to discuss how this may affect your practice. To discuss your best next steps, contact our team here, and we will put you in touch with the best professional for your needs.
Disclaimer: This article has been prepared by You Legal. This article is for general information only and it is important to consult an expert to seek expert advice for your specific circumstances. All reasonable care has been taken to ensure the accuracy of this information; however, no warranties are provided. You Legal does not accept any “liability for errors or omissions or for any loss or damage suffered as a result of any person acting without such advice”. This information may be subject to change without notice.