GP payroll tax: guess who’s paying?

Article published 21 August 2023

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Payroll tax for GPs: guess who’s paying?

GPs running their own practice don't pay it, but medical centres employing GPs as contractors must now pay it: the GP payroll tax.

A NEW tax ruling on GP payroll tax by Revenue NSW published on 11 August 2023 but effective from 1 July 2018 is set to wipe out bulk billing, increase gaps fees by $20 and be the end of many medical centres, say doctors.

The ruling says that independent GPs and other health professionals working as contractors from medical centres are subject to payroll tax.

GPs estimate that the new ruling will add $20 per GP visit to the cost incurred by medical centres.

Who will pay?

The chair of the Royal Australian College of GPs NSW, who runs a practice in Glebe in Sydney’s inner west, is reported in the Sydney Morning Herald as saying her practice has already started paying payroll tax for GP contractors. Professor Hespe’s practice has increased its fees by $20 a visit.

“This is the nail in the coffin,” she said. “It will make accessing primary care inaccessible to many people on a standard wage, let alone those who are really poor.”

Many pensioners will also find it hard to pay for GP visits if the ruling stands.

You could say that medical centres should simply pay payroll tax on behalf of ‘independent’ GPs who work as contractors for them alongside GPs who are salaried employees of the medical centre.

Because isn’t this simply a tax loophole that has turned out to be an illegal tax dodge?

The problem for medical centres is that their contracts with ‘independent’ GPs do not provide for this. In other words, they can’t simply reduce what they pay GPs per visit to pay $20 per visit in payroll tax. Or rather, they can but this would really eat into the medical centre’s profit.

Conclusion: medical centres will increase the per-visit gap fee (the money they ask patients to pay over and above the Medicare rebate) by $20.

Bulk billing? So twentieth century!

It’s the patients who will be footing the bill for a primary medical care model that increasingly depends on medical centres, which are commercial businesses, just like any shop. And medical centres won’t be making a distinction between patients who can’t afford to pay $20 extra per visit.

Essentially, medical centres (and GPs, too, but indirectly) took a gamble by not paying payroll tax when it was introduced on 1 July 2018. It’s the patients who live  who will now pay for this gamble gone wrong.

They will pay $20 more unless they can find a GP who runs their own practice.

And as things stand, Revenue NSW will pursue medical centres for back (payroll) taxes from 1 July 2018. Medical centres may not survive if this really happens, which would be a tragedy particularly in regional areas. Let’s hope the NSW Government will deal with this issue sensibly and not pursue back taxes.

Other states and territories

The Revenue NSW ruling obviously applies in NSW only, but CPSA News understands a similar ruling has been issued in Victoria.

The ACT, South Australia and Queensland have made similar moves but are not pursuing back payroll taxes, a cue that should be taken by NSW.

Western Australia, Tasmania and the Northern Territory exempt all GPs from payroll tax.

GPs working independently from their own practice are not subject to payroll tax anywhere in Australia.

What can be done?

Again, it shows that the federal government not regulating medical fees, charged by GPs and other health professional, works to the detriment of patients.

GPs work hard and should be paid well. Medical centres represent an excellent way of GPs pooling resources to manage their administration and appointments. All this is fine, but by allowing medical centres to charge what the market will bear, a certain part of the market is going to miss out.

The federal Government should take on the medical profession in Australia and regulate their ability to charge fees as they see fit.

Also read:

Specialists still free to charge fees as they please

Medical specialists’ website turns out a failure as predicted


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