Healthcare and MedicalAccounting and Tax

Payroll tax ruling for medical practices

Adam Murray
4 September 2023
4 min read

With the recent release of PTA-041 relevant contracts – medical centres, it is extremely critical that medical practices are structured in a way that is not only commercial but tax efficient. This release follows the recent rulings in Commissioner of State Revenue v The Optical Superstore Pt Ltd and Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue as well as recent New South Wales, Queensland, and South Australian payroll tax amnesties.

A potential liability will arise where independent contract doctors are deemed as employees and, by association, payments to these independent doctors are taken to be remuneration under various payroll tax acts.

Whether or not an independent doctor is included in a medical practices payroll tax calculation is determined by several factors, including but not limited to:

  • Contracts between contract doctors and medical practices

  • Who the contract doctors offer their services to

  • The amount of time their services are provided to medical practice

  • What services the medical practice provides to the contract doctors

  • Who has control of patient relationships and records

The ruling may apply not only to medical practices but also to dental clinics, physiotherapy practices, radiology centres, and similar healthcare providers who contract with medical, dental, and other healthcare practitioners (or their entities) to provide patients with access to the services of the practitioners.

In  Optical Superstore, it was determined that ‘paid’ was broad enough in the payroll tax legislation to include the remittance of patient fees that are collected by the centre on the practitioners’ behalf and held on trust for them, with a deduction for the centre’s service fees. In addition, where a service entity is used to pay the practitioners amounts owed, the third-party payment provisions in the payroll tax Acts may assess the medical practice for payroll tax on those payments.

The Ruling has a retrospective effect from 1 July 2018.

Where a contract is deemed to be a ‘relevant contract’ the contract may be exempt from payroll tax in certain circumstances.

If a contract meets any of the following criteria, payments to the contractor are not subject to payroll tax:  

  • Contracts under which a contractor provides services up to 90 days in a financial year

  • Contracts under which the contractor engages additional labour to fulfil the terms of the contract

  • Contracts that do not meet any of the above criteria, but the Chief Commissioner is satisfied the contractor provides services of that kind to the public generally within a financial year

Importantly, this new ruling does not automatically apply to all arrangements involving a medical centre business and its practitioners. Not every medical practice and practitioner arrangement will be considered a relevant contract.

There have been reports that some practices, which have fallen foul of the legislation, ended up having payroll tax debts raised by hundreds of thousands of dollars. Furthermore, it is extremely important that doctor’s remuneration, service fees, patient billing, and gap fees be assessed on a practice-by-practice basis to make sure that not only is your practice compliant, but profitable.

Findex and our health industry experts can assist doctors and practices in reviewing their current structure and work alongside the medical practices’ lawyer to achieve the best possible outcomes.

One way we work with medical practices is through payroll management. There are proven benefits to outsourcing business operations which include providing more time and resources to focus on core functions so that you can provide value to your customers.

Book a complimentary review of your payroll needs by our qualified Australian payroll professionals and discover the ease of compliant, on-time payroll management. With no upfront fees* for a limited time, unlock the benefits of seamless payroll and contact our team today.

*T&Cs apply


This article contains general information and is not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the thought or position of Findex Group Limited.

Author: Adam Murray | Partner

Adam joined Findex in 2013 having previously worked in Melbourne for over nine years where he gained considerable experience in business advisory. Adam provides advice and guidance to businesses so that they can achieve their goals and full potential.