PRODA, payroll tax and independent contractors

15 February 2022

It will be mandatory for doctors and medical practices to use a government Provider Digital Access account (PRODA) from 13 March 2022.

Medical practices should review practice arrangements and PRODA settings, to ensure doctors are correctly set up as independent contractors or employees. If independent contractor doctors are not set-up correctly, payroll tax liabilities and employer obligations may arise.

It will be mandatory for practices and doctors to transmit data to the Department of Human Services via their PRODA account from 13 March 2022, unless they have obtained an extension.

One of the services that can be linked to a PRODA account is e-invoicing. Although it is not currently mandatory to link e-invoicing, it may be mandated in the foreseeable future. If PRODA obtains access to e-invoicing, it could be used by the ATO and state revenue offices to audit practices about:

  • payroll tax compliance; and
  • whether doctors are properly independent contractors or employees.

Whilst it is common for medical practices to set up one PRODA account through their practice software (eg Medical Director/Best Practice) for all doctors to share, this is problematic. If there is only one PRODA account, the doctor’s invoice will have the medical practice’s ABN on it, not their own ABN. This will undermine the argument that a doctor is an independent contractor. It will also strengthen the argument that money paid to that contractor qualifies as ‘deemed wages’ for payroll tax.

If your medical practice retains independent contractor doctors, you should ensure each contractor:

  • has their own PRODA account (separate to the practice PRODA account); and
  • issues invoices with the doctor’s own ABN, not the practice ABN.

Employee doctors can issue invoices in the name of the medical practice, using the medical practice’s PRODA account and ABN.

If you would like more advice about PRODA, your payroll tax obligations or independent contractor arrangements, please contact Scott Chapman or Chelsea Gordon.

This article was written by Scott Chapman, Partner and Chelsea Gordon, Senior Associate. 

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