Payroll Tax Essentials for Medical Practices: Key Insights and Exemptions
Introduction
Payroll tax can be a challenging area for medical practices, especially regarding payments to independent contractor practitioners. In Victoria, payroll tax is governed by the Payroll Tax Act 2007 (PTA), which may apply to contractor payments in certain circumstances.
This article explores key payroll tax considerations for medical practices, highlighting ways to reduce tax exposure through strategic structuring and an understanding of available exemptions.
Payroll Tax Basics for Medical Practices
The PTA mandates payroll tax on wages paid to employees and, in some cases, payments made to contractors. For medical practices, if contractors predominantly provide labour services and work primarily for one clinic, payroll tax may apply.
A recent Revenue Ruling (PTA-041) clarified those medical practices using a traditional structure—where doctors bill patients but funds go through the practice before payment—are typically subject to payroll tax unless exemptions are applicable.
Key Payroll Tax Exemptions for Contractors
Several exemptions under the PTA can shield contractor payments from payroll tax. Here are the main ones:
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Public Services Exemption
If doctors regularly provide services to the public outside of the primary clinic, they may qualify for this exemption. Key indicators include practising at multiple clinics and having non-exclusive agreements. Medical Practices should track these relationships by requesting copies of service agreements and work schedules from practitioners. -
90-Day Rule
If a practitioner works fewer than 90 days in a financial year at a clinic, that contract is exempt from payroll tax. Medical Practices should monitor each practitioner’s workdays to ensure compliance with this limit. -
Services by Additional Staff
If a doctor hires another individual to assist with medical services (e.g., a nurse or specialist), the payments made by the clinic to this doctor may also be exempt. The additional staff member must directly contribute to medical services—not administrative or business functions.
Recent developments in SRO
On 22 May 2024, the Victorian Government announced changes regarding payroll tax application for Victorian general practice (GP) businesses. These updates will provide relief for outstanding assessments for eligible general practices. Stay tuned for our next article, where we will explore the implications of these changes in detail.
Conclusion
Navigating payroll tax for medical practices requires careful planning and a solid understanding of available exemptions.
At Hicks Oakley Chessell Williams, our experienced employment law team can help assess your practice’s structure, providing customised advice to establish a setup that aligns with your practice's goals while minimising tax exposure. If you're considering restructuring or exploring payroll tax options, reach out to our team for expert guidance tailored to your needs.
Disclaimer: The content provided in this publication is intended for general informational purposes only and should not be construed as tailored advice to address specific individual or organisational circumstances. While we strive to offer accurate and up-to-date information, we cannot guarantee its accuracy at the time of receipt or its continued accuracy in the future. Readers are encouraged to seek professional advice or consult relevant authorities regarding their unique situations.
