If you work as a GP or are involved in running a general medical practice you would be aware of the various state revenue offices reviewing the payment methods of GP practices and the application of payroll tax legislation regarding those payments.

A typical payment arrangement is as follows;

The doctor engages the medical practice to provide the infrastructure for the doctor to practice within the practice. The infrastructure includes rooms, medical supplies, equipment, nurses, and administration staff. The doctor agrees to pay the medical practice a portion of their fees for providing this service. The medical practice takes payment from the patient, deducts their service fee, and pays the balance to the doctor. It is the view of various state revenue offices that the payment to the doctor is captured under payroll tax legislation.

WILL PAYROLL TAX INCREASE MEDICAL FEES?

By applying payroll tax, it is likely that medical practices will be required to pass on the additional costs to the patients.

Accordingly, banks are looking to innovate in this area to remove the need for the payment to first be received by the medical practice and then paid to the doctor.

The new payment systems will utilise a smarter way of accepting and distributing payments whereby the payment is made by the patient and then instantly cleared to the medical practice and the doctor’s bank account in the agreed portions. The innovation is designed to reduce the payments which will be subject to payroll tax.

We don’t believe the offices of state revenue have provided any guidance on whether these payments systems will be successful in reducing the application of payroll tax on the industry, however it will be interesting to see how this technology may be applied.

We recommend medical practices to undertake due diligence on both payroll tax legislation and investigate whether these emerging payment systems may be suitable.

Authored by Chris Ganfield 

For more information – Queensland Revenue Office (QRO) published payroll tax ruling