QLD Revenue Office (QRO) is the first Australian State Revenue Authority to fully commit to a compliance position on the application of payroll tax to the complex area of medical centres. In a largely unpublicised move, it has issued a ruling on how it will apply the law to payments made by medical centres to health practitioners.
A link to the ruling, PTAQ000.6.1 is QLD Payroll Tax Ruling for Medical Centres
Revenue NSW and Victorian SRO are yet to issue such a ruling despite each having carriage of four separate stages of litigation in respect of medical centres over the past four years. QRO’s ruling only applies to medical centres in Queensland but it is of national relevance as most states and territories have almost identical legislation.
A surprising but highly welcome feature of the QRO ruling is that it expressly states that its date of effect is the date of issue – 22 December 2022. While QRO has not otherwise publicly confirmed it, that statement suggests that QRO will not seek to collect payroll tax on payments made by medical centres to non-employee health practitioners before that date.
The general position taken in the ruling is consistent with the Victorian Optical Superstore and NSW Thomas and Naaz decisions. In summary, the ruling clarifies that:
- The medical centre is treated for payroll tax as an "employer”;
- The health practitioner is treated for payroll tax as an employee even if they are not an employee under employment law;
- The payments made by the medical centres to the health practitioner are treated as wages (to the extent they are payments for work related services);
- The general payroll tax exemptions available for contractor arrangements can apply; and
- Where exemptions are not available, the medical centre’s payment will be taxable subject to payroll tax thresholds.
Given the consistency of the interstate judicial decisions at appeal level, our view is that this general position will not be overturned in further litigation.
As foreshadowed in a NSW Revenue draft ruling on its equivalent provisions, the provisions could apply even where:
- The payments are made by the medical centre to the health practitioner’s personal practice entity instead of the health practitioner themselves; or
- The health practitioner receives payments directly from patients and Medicare in respect of services provided at the medical centre.
The latter treatment will be most unwelcome by the medical profession. Many health professionals restructured their affairs so that they would not be receiving payments from the medical centres. The ruling, in effect, imposes a payroll tax liability on the medical centre for the payment made by the health practitioner’s personal practice entity to the health practitioner themself. Not only is this a payment that the medical centre does not make but, in most cases, it will be one which the medical centre does not have details on, nor can it necessarily obtain such details. None of the litigation so far has examined this type of payment structure. It is Mazar’s’ view that litigation will be inevitable once a Revenue Authority attempts to enforce liability on these payments. We think there is a possibility that the challenges to liability on the payments made by the health practitioner’s entity will succeed in some cases.
The ruling does recognise that not all health practitioner arrangements will be caught by the provisions. There are arrangements where a centre does not provide members of the public with access to medical related services. Rather, the centre is merely a provider of rooms, facilities, equipment and in some cases services to the health practitioner only. The centre itself does not receive services from the health practitioners nor does it offer services to the public. Medical centres need to be very careful before relying on this distinction. While many may think this is the reality, their website and health practitioner contracts may present a very different picture. For example, the medical centre may in fact attract the custom and have control over the health practitioner’s patient services.
All Queensland medical centres need to consider their position in the light of the ruling. Given the new position appears to first apply not only mid-year but mid-month, the transition to the new regime for the 2022-23 payroll tax year may be complex and it appears that no guidance has been given by QRO for that yet.
If medical centres require assistance with this new ruling, please contact your usual Mazars advisor or alternately one of our experts via the form below or on:
Author: Stephen Baxter
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