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An overview of common payroll tax errors made by businesses in the medical services industry.
Bulk Billing Support Initiative
The legislation in relation to the treatment of contractor payments made to general practitioners in medical centres has been given assent and is now law.
Revenue NSW is currently working through what this change will mean for our impacted payroll tax customers.
If the recent change impacts your business and you would like more information or have any questions relating to these legislative changes please contact us.
On this page
Employers in the medical services industry provide a broad range of services to the community.
The industry includes medical practices that engage general practitioners (doctors), as well as other medical and healthcare providers such as dental clinics, pathology and radiology centres.
12-month pause on audits
From 4 September 2023 there is a 12-month pause of payroll tax audits on medical practices who engage general practitioners. During the pause interest or penalty tax will not be applied to unpaid payroll tax.
Unregistered businesses who pay wages that exceed the payroll tax threshold during this period should register for payroll tax. Read more about the pause on audits that was applied by the Revenue, Fines and Other Legislation Amendment Act 2023.
Payroll tax audits show that some employers in this industry do not declare their contractor payments and group members.
The errors result in the employers underpaying their payroll tax by a significant amount.
If we conduct an audit on your business we will verify your evidence with third-party information, including information obtained from other government agencies.
Engagement of practitioners
If practitioners are engaged as employees under common law their wages are liable for payroll tax. Read more about the wages that need to be included in payroll tax calculations.
If practitioners are not engaged as employees payments made to them may still be subject to payroll tax under ‘relevant contract’ laws. See Division 7 of Part 3 of the Payroll Tax Act 2007 (PTA).
Many medical practices and healthcare providers overlook, or are not aware, that payments to contractors may be liable for payroll tax.
Several court cases have confirmed that the services of the practitioners are provided to the principal (the centre/clinic) and to patients. By serving the needs of patients the practitioners are serving the needs of the business, meaning they are providing the business with a service.
The following cases confirm that medical practices ordinarily require the services of medical practitioners to carry on their business:
If a general practitioner provides the same or similar services for 90 days or less in a financial year the payment is exempt from payroll tax. See section 32(2)(b)(iii) of the PTA.
Any amount of time worked in a day constitutes a full day.
You must maintain records to support your claim to this exemption. The evidence you should keep may include:
the contract
invoices
working papers
general ledgers
timesheets, and
any other evidence which supports the exemption claim.
If your general practitioner provides similar services to the public during a particular financial year you may be entitled to this exemption. See section 32(2)(b)(iv) of the PTA.
The general practitioner must prove they provide services of that kind to the public. Simply being available to provide them is not sufficient.
You must maintain records to support your claim to this exemption. The evidence you should keep may include:
the contract
advertising material
declarations, and
other evidence which substantiates the exemption claim.
You should conduct an internal review of your business to determine the correct payroll tax treatment of payments made to all workers.
Registered businesses
If you have identified an underpayment, or not declared liable amounts in your monthly payroll tax return for the current financial year, include these additional amounts in your next monthly return and/or annual return.
Unregistered businesses
If your taxable wages exceed the monthly payroll tax threshold in the current financial year, or the last four financial years, you must register for payroll tax.