T: +61-7-3221 5677 - Enquiries: enquiries@walshs.com.au - Mortgage Broking: lending@walshs.com.au

Walshs

Court decisions uncover payroll tax risks for medical practices

One of Queensland’s leading financial planning, accounting and lending firms for medical and private clients. Providing accounting, mortgage broking and strategic financial planning advice.

T: 61-7-3221 5677
Email: enquiries@walshs.com.au

Walshs
Level 24/10 Eagle Street, Brisbane QLD 4000

Open in Google Maps
  • Medical Clients
  • Private Clients
BOOK A MEETING

Walshs Insights

Court decisions uncover payroll tax risks for medical practices
Thursday, 04 November 2021 / Published in Walshs Blog

Court decisions uncover payroll tax risks for medical practices

Two recent court decisions have highlighted potential payroll tax risks for medical practices that operate under a shared services model.

In New South Wales and Victoria, doctors and optometrists practising as independent sole traders have been deemed employees, allowing the relevant state bodies to issue backdated payroll tax assessments for up to five years and impose fines for unpaid tax.

Medical centres where doctors practice as individual sole traders could face similar penalties if Queensland follows the interstate precedent.

When sole contractors are considered employees

Recently a tribunal upheld the NSW Chief Commissioner of State Revenue’s assessment that Thomas and Naaz Pty Ltd, a business that operated three medical centres under a shared services model, was required to pay nearly $800,000 in payroll tax, interest and penalties.

The Commissioner argued that despite the doctors working as contractors and individual sole traders co-located on the same premises, the doctors’ agreements with the medical centre and how money flowed to their accounts meant the business had to pay payroll tax.

The tribunal noted the terms of the medical centre’s agreement with contractors, the flow of funds and the interdependence of businesses were the most significant factors in its decision. It is that last point that is of greatest concern to other medical centre owners.

The tribunal determined that Thomas and Naaz operated a medical centre: the main business activity was a general medical practice, and the medical centre owner could not carry on its business without the services of the doctors. As such, the doctors were providing services to the patients, as well as the medical centre.

In reaching this decision, the tribunal considered the fact the practice:
• Imposed hours of work and set rosters;
• Placed obligations on doctors to comply with protocols and promote the medical centre;
• Handled the retention of ownership of records;
• Provided for a restrain covenant
• Implemented a leave policy
• Provided for payment of hourly rates in certain circumstances.

When disbursements are considered wages

Another consideration was whether the disbursement payments received by the medical centres’ doctors should be considered wages.

The NSW tribunal adopted the reasoning of Victoria’s Optical Superstore case. In both instances, it was determined the Act does not require consideration of whether the flow of money is beneficial to the recipient. Instead, it is a connection between the amount provided and the performance of work that determines whether or not a payment is to be taken as a wage.

In the Thomas and Naaz case, the practice collected billings on behalf of the individual doctors. The medical centre owner would then pass on 70 per cent of the billings to the doctors, keeping the remaining 30 per cent as a service fee. The medical centre was also reporting its contractors’ income in its financial statements and tax returns. This is not a good idea if you are trying to establish your shared services model as separate and independent businesses.

Where to from here?

Given the similarities in the legislation between states, we anticipate that Queensland may follow NSW and Victoria’s precedent. However, payroll tax laws are open to interpretation, and there are no definitive answers just yet. This is a politically charged issue in which many governing bodies, including the AMA, are in consultation with the respective State Revenue Offices. In the meantime, you should:

1. Avoid panic, but be aware. The only way we will see certainty is with legislative change. Once we have certainty we can then advise accordingly.

2. Review your service agreements, bank arrangements and the flow of funds to ensure separation between contractors and the practice. You may discover you need to implement new service agreements, banking or record-keeping arrangements. We can help you restructure or implement new procedures to minimise risk and your exposure to payroll tax.

For more information or to discuss your specific circumstances, please do not hesitate to contact a medical taxation specialist at Walshs by booking a meeting here.

 

By Hugh Walsh and Kaitlin Brock

  • Tweet
Tagged under: financial advice, medical tax, payroll, tax advice

What you can read next

Court decisions uncover payroll tax risks for medical practices
Can you claim the $20,000 instant asset write-off?
Court decisions uncover payroll tax risks for medical practices
Superannuation Update – Autumn 2022
Court decisions uncover payroll tax risks for medical practices
Time for a super health check

Recent Posts

  • Winners of Walshs Medical Bursary, Hannah Rienks and Fiona Edwards and their prize amounts

    Meet our 2025 Walshs Medical Bursary winners – changing lives near and far!

    We’re absolutely thrilled to announce the winne...
  • AOA and Bongiorno National Network partnership

    Empowering orthopaedic surgeons nationwide: The BNN becomes an official national alliance partner of AOA

    Walshs is delighted to announce that the Bongio...
  • Court decisions uncover payroll tax risks for medical practices

    Beyond Tax Time: What Year-Round Support Looks Like with Medical Accounting Services

    Medical accounting services shouldn’t just come...
  • student at desk working out loan debt with a clock and graduation cap on the desk

    What’s Happening with the Government’s Promised 20% HECS-HELP Reduction?

    You may have seen headlines about the Albanese ...
  • Busy Medical Centre reception area with a visiting family and two staff in scrubs

    Starting a Medical Practice in Queensland: How to set up for financial success

    Establishing your own medical practice is one o...

Contact

  • PHONE: 61-7-3221 5677
  • FACSIMILE: 61-7-3221 5744
  • EMAIL: enquiries@walshs.com.au
  • MORTGAGE BROKING: lending@walshs.com.au

Location

  • OFFICE: Level 24/10 Eagle Street, Brisbane City, QLD 4000
  • POSTAL ADDRESS: GPO Box 12, Brisbane QLD 4001
Court decisions uncover payroll tax risks for medical practices

Connect with us

MAKE AN ENQUIRY OR BOOK A MEETING HERE
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
Court decisions uncover payroll tax risks for medical practices
All advice on this site is general in nature and does not take into account your personal circumstances. Please do not hesitate to contact one of our adviser accountants or financial planning advisers if you have a query that is specific to your circumstances.
ABN 11 248 978 295 Walshs Financial Planning Pty Ltd AFSL 432636 ABN 82 122 293 912 Corporate Authorised Representative No. 463774 of Walshs Finance Australian Credit Licence 459119

Liability limited by a scheme approved under Professional Standards Legislation.
  • Privacy Policy
  • Financial Services Guide
  • Credit Guide
  • Complaints Policy
TOP
lending-15-min-ph

If the time you would like is not available, please contact our office on 07 3221 5677.

Make a booking with Darole Evans

If the time you would like is not available, please contact our office on 07 3221 5677.

GET IN TOUCH

If you would like a Walshs adviser to contact you or to receive marketing material from Walshs and/or be advised of upcoming seminars and events please provide your contact details.
[contact-form-7 id=”18018″ title=”Contact form 1″]

Book 15 minute lending call

If the time you would like is not available, please contact our office on<br>07 3221 5677.