Earlier this week the NSW Civil & Administrative Tribunal reaffirmed a previous decision relating to payroll tax ‘contractor provisions’. That is, arrangements between medical practices and healthcare practitioners are nearly always relevant contracts for payroll tax.
Medical practices often operate a ‘service entity’ model under whichhealthcare practitioners provide medical related services to their patients. In this structure, the practitioners receive a share of fees collected on their behalf, after a service fee is deducted.
Until this ruling, these payments could be transferred to a healthcare practitioner or their entities without usually being considered to be ‘wages’ (therefore they were excluded from payroll tax obligations).
This NCAT decision means that many general medical,dental and health practices may now be required to pay payroll tax in relation to the practitioner payments. It also affirms the position taken in Victoria in recent years (Optical Superstore 2019).
In this particular case, the impact of the decision amounted to a payroll tax liability for the medical practice of over $795,292.95. And penalties of 30 percent and interest were upheld.
With this ruling confirming the wide operation of the payroll tax ‘contractor provisions’ set to continue, simply amending existing service agreements to demonstrate the healthcare practitioner is not an employee will now no longer be likely to be enough to avoid payroll tax.
It is expected that Revenue NSW will release further guidance on its application of payroll tax to healthcare practices.
Let us know if you’d like to work through your current employee/contractor provisions and what possible structuring alternatives may suit your business – better to be on the front foot.
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