Impact of QRO’s New Public Ruling on Medical Centre Contracts
Following the Thomas and Naaz decision, the Queensland Revenue Office (QRO) has issued public ruling PTAQ000.6.1, outlining how relevant contract provisions apply to medical centres. GP clinics, dental clinics, physiotherapy practices, radiology centres, and similar healthcare providers should review their practitioner contracts immediately.
How Medical Centres Engage Practitioners: Medical centres typically engage practitioners, such as doctors, nurses, and allied health professionals, as either employees or contractors. The QRO provides guidance on payroll tax treatment for wages paid to these practitioners. Payroll tax may apply depending on the nature of the engagement and the practitioner’s individual circumstances.
Common Engagement Models:
- Employee or Contractor: The practitioner is directly engaged by the medical centre.
- Service Entity Model: The medical centre provides administrative support while the practitioner runs their own practice under the centre’s umbrella. In this setup, the centre collects patient payments and deducts a service fee before passing the rest to the practitioner.
In both cases, payroll tax generally applies unless an exemption is met.
QRO’s Stance: If a medical centre hires a practitioner or advertises access to a practitioner’s services, the contract likely falls under payroll tax rules unless an exemption applies.
Recent Ruling Updates: In response to industry lobbying, QRO issued an updated ruling (PTAQ000.6.2) on 18 September 2023, addressing alternative payment arrangements. The ruling clarifies:
- No Payroll Tax: where a Medicare benefit assigned by the patient to the practitioner and/or any additional out-of-pocket patient fees, are paid directly to the practitioner, there will be no deemed wages which are subject to payroll tax;
- Payroll Tax Applies: where a Medicare benefit assigned by the patient to the practitioner and/or any additional out-of-pocket patient fees, are paid to the medical centre, the payment from the medical centre to the practitioner (net of an administration/service fee) will be deemed wages which are subject to payroll tax; and
- Third-Party Payments: if patient revenue is paid to a third-party entity, the payment from the third party to the practitioner will be deemed wages subject to payroll tax.
These payment arrangements, in particular where money is received directly by a practitioner, deal with the payroll tax risk, and there will be commercial considerations that affected medical centres will need to consider to decide whether rearranging the ‘flow of funds’ in this way is viable.
GPs Amnesty Scheme: Queensland has announced an amnesty, exempting payroll tax on payments to GPs from 1 July 2018 to 30 June 2025. Medical centres must express interest by 10 November 2023 and provide necessary information for payroll tax assessment.
Action Required: Medical centres should review their contracts for the fiscal year 2022 onwards to understand payroll tax risks and explore possible exemptions. Consulting a payroll tax specialist is recommended to navigate these changes.
The Small Business Lawyer is well equipped to review your current practitioner agreements and provide advice on how the flow of funds might require restructuring to avoid being caught by these payroll tax obligations. Contact us today.
