Yeah ….. I know payroll tax is now getting cumbersome.
You are at the point where you would rather have haemorrhoids than deal with payroll taxes. One of my clients just looked at me exacerbated, saying, “I have had enough. I am over it. I think I will just pay for it.”
Honestly, the whole thing is a disaster. The state governments are at fault. It’s as if two people got off their potties without wiping their bums and decided they were going to heap hell on a bunch of medical practices.
The medical associations are at fault because they went down the ‘we are providing a community service route” when discussing medical practices that the public sees as businesses making a profit. I know many practices see themselves as providing a service, but how many practices will continue for $NIL profit and do it happily? I have not met many.
Obviously, the legal advisors are at fault because we always blame the legal guys.
Even some accountants are at fault. Like the legal boffins, many are talking about a subject they don’t really know. In other words, they are talking bull**t.
We all know the world is full of misrepresentation and falsehoods, but honestly, these are dark times if you are a medical professional who owns a medical practice. How dark? It’s as dark as the Dark Side in Star Wars. That is because there are already significant cost pressures to running a practice. Add payroll taxes, and many will become loss-making.
But you are the ones stuck in the middle and have no idea who to believe or even what to believe. Some tell you that you will be fine and all will end well. Others, like me, will tell you there are pitfalls and would like you to be informed so you can decide what works for you.
So, a while ago, I wrote about payroll taxes and something related to “Services to the Public.” All hell broke loose. For many, this was something new.
Many have been told to ensure doctors get paid directly and clean up contracts, and hey presto, all is good. But as I explained a few weeks back, I don’t count on it.
So here is an explanation of ‘Services to the Public’.
In the Payroll tax legislation, there is a part that talks about ‘Services to the public.’ In summary
• Does the medical practice provide services to the public? If it does, payroll tax is payable EVEN IF you have changed the way you pay your doctors
• Does the doctor provide services to the public – if they do, then this gets the medical practice out of paying payroll taxes.
So now the question becomes how do you work out who provides services to the public?
And that is the sixty-four-million-dollar question.
A medical professional provides services to the public if:
– A patient finds explicitly them and makes an appointment with them
– The medical professional owns the patient (i.e. the goodwill belongs to the doctor)
– The medical professional owns the patient records.
– A medical practice does not control the medical professional, i.e., they operate independently of a medical practice.
In this case, no payroll taxes are payable.
But if a medical practice ‘employs’ a medical professional and the medical professional
– is providing services to the medical practice to look after the practice’s patients or
– the medical practice gets paid by the patients
Then payroll taxes are payable.
I will explain by example. I want to find a GP in Underwood and type this in my Google search. What comes up?
Let’s say the search results include ‘Underwood Family Medical Practice.’ I clicked on this, and the website told me many beautiful things about the practice. I then look at the doctors’ list and choose the one that suits my timetable and availability or the doctor I usually see.
This is a classic example of a medical practice offering services to the public, and it is almost 100% of how all medical practices are set up. According to state law, these practices will still be subject to payroll taxes.
The alternative? Well, each doctor needs to be set up like a specialist. So, if I were to search for a ‘renal specialist near me,’ it would not display a medical centre. It would display individual doctors’ websites. In my example, it came up with Dr Roshini. I have no idea who Dr Roshini is, and I have never met her.
Her site explains everything about her and her services, including her email address and contact details. There is no hint of a medical centre in operation anywhere. But that does not mean no service entity or medical centre is behind the scenes. It is possible that she employs a service company to operate her admin, provide staff, etc., and she may pay them 35% of her billings. The key, though, is that I, as a patient, have no idea this is happening in the background.
Then, we must examine any contract between the doctor and the medical practice. If the contract says
– the patient belongs to the practice
– have restrictions on trade
– states days and times the doctor will work
– talks about maintaining insurance and medical regulations
– notify the practice of breaches, etc.
These suggest that the practice controls the doctor and may become subject to payroll taxes.
If you want to know why there is so much talk about contracts and websites, now you know. They are all interlinked and need to be in sync. I was recently told by one of my clients that they had changed the way doctors were paid and asked me to check a contract prepared by their legal guys. They had also changed their website.
This is what I found:
The website changed the word “Our doctors’ to ‘Our contractor doctors’
The contract still had all the control clauses (because the legal guys did not understand the payroll tax legislation and were not specialist enough in the medical space).
Based on my review, I had to tell my client the changes would not, according to the law, make a jot of difference.
I know many of you will say that the Medical Associations have special agreements with states such as Queensland, which have said they will not collect payroll taxes. Err….. yes, but a state Government cannot agree on something they know to be against the law. They have not passed a notable exclusion into law (they cannot do that because it would be discriminatory, which is illegal). It is discriminatory because you cannot exclude people from taxes unless it is in the public or community interest AND written explicitly as law.
That is also why Victoria and NSW have stated that they will not collect payroll taxes if bulk billed. They can pass this exclusion because they can argue that it is in the public interest, and those practices are providing a community service, whereas mixed billing or private billings are not—they are in it as a business to make money.
There’s more grim news.
If you rely on what the states are saying and the State Government changes, there can be more issues. Because the law has not changed, the new Government can turn around and say they no longer accept the agreement, and because it is not written in law or passed through parliament means they can go back as many years as they want (except Queensland and SA, where there is a legal Amnesty in place).
Will a new government do that? I have no idea. It could be positive, and they continue the status quo. But then you are putting yourself at the mercy of a state Government. Do you trust them to do the right thing?
What should you do going forward?
I don’t have the foggiest. All I can do is inform you that you chose the best based on your circumstances.
Talk to real advisors who know what they are talking about, too. My first question should also be your first question if you plan to take advice: Have you read the legislation, and if you have, how many times? If the answer is less than 10 times, walk away. They do not really know the law.
The problem with payroll tax is that too many Chiefs should never have been appointed Chiefs, and all the Indians are confused. If you do not want to be confused, get advice from the right Chiefs.
Medisuccess will be running a Payroll Tax webinar shortly. We will be sending you an email with instructions.
Paying the least in taxes is step 2, and operating an efficient practice is a step of our 9 steps to working less, earning more and creating wealth. If you want more information about payroll taxes, contact Hitesh at hitesh@medisuccess.com.au or call 0372 0819.
