Recent Changes in Payroll Tax for Medical Practices
Medical practices in Queensland, including general practitioners, physiotherapists, and dental clinics, have faced significant changes in payroll tax obligations and necessary amendments to their Facilities Agreements over the past year. Traditionally, many medical practices engage health practitioners as independent contractors rather than employees. Under this model, the practice collects the full patient fee and rebate, deducts a service fee, and then pays the remaining amount to the practitioner. Historically, this arrangement has not been classified as paying employee wages, but recent changes have sparked a shift in how these payments are treated for payroll tax purposes.
Impact of the Public Ruling PTAQ000.6.2
Under the Public Ruling PTAQ000.6.2 Relevant Contracts – Medical Centres, contracted medical practitioners are now classified under the ‘relevant contract’ definition. As a result, when patient fees are collected and paid to the practitioner, these payments are now included in the practice’s payroll records. This change plays a crucial role in determining whether the payroll tax threshold has been exceeded, potentially impacting the practice’s tax obligations. Medical practices in Queensland must now ensure they comply with these new regulations to avoid payroll tax liabilities.
Understanding the Payroll Tax Act 1971 (Qld)
According to the Payroll Tax Act 1971 (Qld), payroll tax is payable on employee wages exceeding certain thresholds. The Act specifies that certain types of arrangements are classified as employee-employer relationships for payroll tax purposes, making payments to those employees subject to payroll tax. The Public Ruling PTAQ000.6.2 highlights that typical facilities arrangements in medical practices are among these situations. Under this ruling, payments made to contracted medical practitioners are now considered wages, which must be included in payroll tax assessments if they exceed the prescribed thresholds. This shift underscores the need for medical practices to carefully review their payroll practices to ensure compliance with the updated payroll tax regulations.
Implications of Alternative Payment Arrangements
The Public Ruling PTAQ000.6.2 outlines the implications of different payment arrangements for medical centres and practitioners under the Payroll Tax Act 1971 (Qld):
- Direct Payment to Practitioner: When a Medicare benefit assigned by the patient and any additional out-of-pocket patient fees are paid directly to the practitioner, these payments are not classified as wages subject to payroll tax.
- Payment via Medical Centre: If the Medicare benefit and out-of-pocket fees are paid to the medical centre, and the medical centre subsequently pays the practitioner (after deducting an administration or service fee), the payment to the practitioner is deemed wages and is subject to payroll tax.
- Third-Party Payments: If patient revenue is paid to a third-party entity, and the payment from the third party to the practitioner is made, this payment is also considered wages subject to payroll tax.
As a result, direct payments to practitioners can help mitigate payroll tax risks. However, medical centres must weigh the commercial implications of restructuring their payment processes in this way to ensure compliance and optimize their financial operations.
Exemptions to the Ruling
Additionally, some exemptions to the Ruling also apply such as:
- When a medical practitioner provides a service solely to the patient without offering any service or value to the medical practice.
- A medical practitioner who works for 90 days or less for the practice.
- Services provided by two or more persons.
How We Can Help
Our NB Commercial Law team consists of experienced professionals ready to assist you and your medical practice with any queries to ensure your facilities agreements are up to date and compliant with the latest payroll tax regulations.
For further information or questions, please call 07 3876 5111 or email [email protected].