Payroll Tax in South Australia – An Essential Update for Your Medical Practice
If you’re a medical practice owner or manager in Australia, we have no doubt you have been keeping a keen eye on developments in the payroll tax space. After all, there have been a lot of changes over the past few years. In this article, we explore the current position in South Australia (SA) and the circumstances in which medical practices are liable to pay payroll tax on payments made to contractor GPs.
The South Australian Stance
Payroll tax is payable on payments made under the ‘relevant contract’ provisions in the Payroll Tax Act 2009 (the Act). The South Australian State Revenue Office (Revenue SA) issued a public ruling in November 2023 detailing their interpretation of the application of these provisions to medical centres in South Australia. This was to ‘ensure harmony with Victoria and New South Wales’ and to outline the developments since the Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue decision. As a refresher, Thomas & Naaz demonstrated how these provisions can apply to arrangements between medical centres and practitioners and result in an almost $800,000 retrospective payroll tax bill
The SA ruling essentially stated 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’, then it will likely apply and payments to these GPs will be taxable unless an exception applies. *Important to note here is that practitioners are serving patients for or on behalf of the medical centre. This will be determined on a case-by-case basis. The most relevant exemptions may be where the practitioner is providing services to the public generally they are working for no more than 90 days in a financial year, or two or more persons perform the services.
The ruling also discussed circumstances where the practitioner’s services are obtained under a contract between a medical centre and an entity (e.g. a company) created by the practitioner. This was also considered by RevenueSA to be an arrangement which ‘in the course of its business’ supplies services ‘in relation to the performance of work’. RevenueSA’s ruling also outlines other arrangements which may or may not satisfy the relevant contract provisions.
The Amnesty
In June 2023, RevenueSA introduced a statewide amnesty for General Practices. If a GP practice successfully applied for the amnesty and met the criteria, the terms of the amnesty suggest that they will not have to pay payroll tax on payments to contracted GPs between 1 July 2018 and 30 June 2024. This requires a ‘voluntary disclosure’, which contains ‘sufficient information for the Commissioner of State Taxation to assess the practice’s eligibility for the amnesty and determine its payroll tax obligations’. If the practice successfully qualifies for the amnesty however, from the 30th of June 2024 they must begin paying payroll tax.
Why are we talking about this now?
Whilst the registration period closed in November 2023, the true impact of the amnesty is not known. Recently, RevenueSA confirmed with many medical practices who applied for the payroll tax amnesty that they are, in the RevenueSA’s view, liable for payroll tax. This required the practices to supply further information for RevenueSA to make further assessments. These letters have led South Australian medical practices to be concerned that they may not only be liable to pay payroll tax, but in some cases, that they may potentially not qualify for the amnesty at all.
A deeper dive into the amnesty’s terms
This payroll tax amnesty is not an ‘exemption’. Instead, it reprieves practices from paying the tax for the amnesty period, whilst potentially still finding them liable for the tax from the start of July 2024. The amnesty is not available for payments to:
“contracted general practitioners where an exemption applies (because no payroll tax liability would arise if the payment is exempt)
general practitioners who are common law employees
other medical doctors or allied health professionals
other types of contractors”
There is uncertainty as to whether RevenueSA is referring to GP employees who are currently declared as such, or whether they are going to make that determination themselves. This is causing great concern for GP practices. Similarly, many medical practices in South Australia are unsure of the extent to which they must legally provide the documents to RevenueSA.
As stated by RevenueSA, ‘the amnesty does not alter the operation of interest or penalty tax for any assessments made as part of administering the amnesty’. Whilst it has not been confirmed by RevenueSA, this could leave room for RevenueSA to do a back-audit, potentially leaving some practices in the position that they are liable to pay payroll tax, but are not eligible for the amnesty.
The flow-on-effect on Medical Practices, their Patients and the Public
In practical terms, the current SA ‘stance’ means many medical practices in South Australia will be liable to pay payroll tax on their payments to GPs. If nothing changes, this will have a flow on effect of increasing costs to patients. It has also been argued that ultimately, this will result in more presentations at emergency departments and/or closures of medical practices. Consequently, the Royal Australian College of General Practitioners is encouraging patients and the public to speak out and is arming clinics with posters and petitions to help fight, what they call a “tax grab”.
What can Practice Managers or Owners do in the meantime?
If you are part of a medical practice that engages doctors as independent contractors or tenant doctors, we recommend seeking advice on your arrangements and potential exposure to payroll tax. If you signed up for the payroll tax amnesty, you may have received a letter by now. If you are looking for help with the next steps after receiving this letter, don’t hesitate to reach out –we can help. You can also sign up to the You Legal newsletter to keep updated with the latest developments.