Background
RevenueSA has recently extended the deadline for registrations under their ‘GP medical practice payroll tax amnesty’ until 30 November 2023. Whilst GP medical practices should seek advice soon regarding their eligibility for the amnesty, other practitioners in the healthcare sector are also urged to review their arrangements in light of the recently issued Revenue Ruling PTASA003.
The Ruling makes it clear that RevenueSA considers that GPs are not the only professionals that will experience increased scrutiny of their payroll tax obligations. The new Ruling confirms that RevenueSA will seek to levy payroll tax on payments made by healthcare practices to dentists, physiotherapists, radiologists and other healthcare providers in certain cases.
Until recently, some healthcare practices who contracted with specialised practitioners to provide services did not consider they were required to remit payroll tax on payments to those practitioners.
However, following the interstate payroll tax decisions in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259 and Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197, such practices are now at risk of underpaying payroll tax on such payments. This is because those decisions – whilst dealing with interstate legislation – likely have implications in South Australia given the harmonisation of payroll tax legislation across Australia.
Those implications are confirmed by the release of the Ruling, which outlines RevenueSA’s view on how the ‘relevant contract’ provisions apply to certain healthcare providers. The ruling applies from 1 July 2023.
Unlike GP medical centres, which may be eligible for the payroll tax amnesty announced in June 2023, there is currently no payroll tax amnesty for other healthcare centres who are caught by the terms of PTASA003.
When does the ruling apply?
The Ruling applies to entities that conduct a ‘medical centre’ business, who engage medical, dental and other health practitioners or entities to provide patients with access to the services of practitioners. A medical centre business includes dental clinics, physiotherapy services, radiology centres and similar healthcare providers.
Under the Ruling, payroll tax is potentially applicable where the contract between the medical centre and practitioner is a ‘relevant contract’. The Ruling indicates that a relevant contract exists where:
- the practitioner carries on a business or practice of providing medical-related services to patients;
- in the course of conducting its business, the medical centre:
- provides members of the public with access to medical-related services; and
- engages a practitioner to supply services to the medical centre by serving patients on its behalf;
- an exemption under Section 32(2) of the Payroll Tax Act 2009 (SA) does not apply.
[Note that ‘contract’ is broadly defined for payroll tax purposes, and includes express or implied contracts, and formal or informal agreements or arrangements.]
The Ruling states that each contract must be considered individually on a case-by-case basis to determine whether it is a relevant contract and whether the above conditions are satisfied.
However, 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, the Ruling indicates that it is likely the relevant contract provisions will apply to the contract unless an exemption applies.
What exemptions are potentially available?
Given the broad views adopted in the Ruling, it will be important for medical centres to seek advice whether any exemptions under section 32(2) apply.
There are a number of exemptions that may potentially apply. The Ruling states that the three most relevant exemptions are:
- The practitioner provides services to the public generally—Section 32(2)(b)(iv)
- The practitioner performs work for no more than 90 days in a financial year—Section 32(2)(b)(iii)
- Services are performed by two or more persons—Section 32(2)(c)(i)
What are the implications of there being a relevant contract?
If the contract between the practitioner and medical centre is a relevant contract, the Ruling indicates that the medical centre is taken to be the employer for payroll tax purposes, with the practitioner taken to be the employee.
Consequently, amounts paid or payable under the relevant contract by the medical centre will be treated as wages for payroll tax purposes, if they are in relation to the performance of work relating to the relevant contract by the deemed employee.
Recent cases have demonstrated that payments can satisfy these requirements even when the payments are fees from patients or Medicare, and even whether the practitioner is beneficially entitled to the money.
What should I do now?
Not all arrangements between a medical centre and a practitioner will be relevant contracts for payroll tax purposes. For example, the Ruling expressly acknowledges that tenancy contracts may not fall within the scope of the relevant contract provisions.
Accordingly, we strongly encourage providers in the healthcare sector to seek legal advice regarding their structures and payroll tax obligations.
This is especially given the release of the Ruling, and end to the medical centre amnesty, may result in an increased audit activity for entities in the healthcare sector.
We recommend medical practices with contracted GPs, who have not been paying payroll tax on payments to the GPs, urgently seek advice regarding payroll tax amnesty.
How can we help?
Our tax law experts have deep experience with state payroll tax and tax planning for practices in the healthcare sector. We can assist practices in understanding the implications of PTASA003 on their businesses and discuss strategies for minimising payroll tax going forward.
Please contact us today if you require assistance with any of these matters.
This article was written by Timothy Stokes, Partner, Jessica Pengelley, Special Counsel and Anthony Centofanti, Law Graduate.
