At last. The states of NSW & Victoria have shared their plans for GP Payroll Tax and as expected, it is not good if you have a practice in those states.
I do not need to tell you what I think about payroll taxes – you will already know from my previous blog articles on the subject. If there was anything good (and I’m not saying there is) but it could be argued that at least the rules were uniform amongst the states.
Not anymore.
In Queensland & South Australia you have an amnesty until 2025. WA in its desperation to attract medical professionals decided they do not need the money and have given a carve out for medical practices so that they do not have to pay payroll taxes (even though the legislation still states they should).
And now we have NSW and Victoria which has, basically, stuck up two fingers at the medical industry and have said payroll tax is payable effective immediately. To be fair NSW and Victoria had said they do not intend to offer an amnesty, but we all hoped. In many ways they just confirmed what the law says – that medical practices must pay payroll taxes if they are offering medical services to the public.
Here’s the problem.
It leaves practices in Victoria and NSW totally exposed.
RACGP have said that several practices in NSW & Victoria had already received retrospective payroll tax notices, which is a worry. Most practices run on low margins and may struggle to pay current payroll tax liabilities. To go back prior years will cause mayhem not only for medical businesses but in the provision of healthcare.
I have been speaking to those who have ears high up the chain in medical associations and state governments. They tell me so much pressure is being applied that the Sates will cave in and make an exception for Medical Practices.
I have been skeptical of such claims simply because I know Medical Associations have influence over Federal Government but almost none with the States. And if pressure is being applied it obviously has not worked because NSW and Victoria have ignored them.
Add to this that Queensland, NSW and Victoria believe they will raise over $100 million each (yes million) from medical practices begs the question why they would give this up.
I am having all kinds of conversations with practice owners. Most believe that their ability to trade will be significantly affected. They are right.
Technically, it is possible to reorganise so that medical practices are not subject to payroll tax. But the way practices get paid via MyMedicare and practice incentives causes all kinds of problems and issues. This has led many to say it simply is not worth trying to get around it because somewhere down the line an audit will show you missed something and be subject to the tax anyway.
That may be true. This is one thing I do know. If you have a practice in NSW or Victoria they expect you to register for Payroll Tax now. They have not stated if they will go back retrospectively for payroll taxes but my guess is they will not. Not because they are kind-hearted but because they know practices don’t have the money to pay retrospectively.
Here is what you need to understand about an amnesty.
With an amnesty in place a liability for tax still exists, but these amounts may not actually have to be paid.
Because technically the tax is payable, they will want to assess it. And that means you must provide records so that they can assess your liability, even though tax may not have to be paid under the amnesty.
Going Forward
Now that we know where all the states stand this is what you need to consider:
- If your practice is in WA you can jump for joy. There is no Payroll Tax to pay.
- If your practice is in Qld or South Australia, you need to consider if you take advantage of the amnesty (most I suspect will) and you have until June 2025 to:
– sit down with your advisors to see if you should restructure how the practice operates to try to get out of payroll taxes.
– decide it is all too hard and pay the tax.
- If your practice is in NSW or Victoria, you need to discuss with your advisor
– if you should register for payroll taxes now or wait for an audit (if it comes)
– restructure now and hope they do not raise an audit or
– register now and then consider a restructure later.
We do know that there is audit activity across all the states which increases the risk.
And I think in order to make the practice numbers balance there are only three things’ practices can do:
- Restructure the practice and try to avoid the payment of payroll tax.
- Increase prices to patients – although all that does is increase the amounts contractor doctors earn which just means more payroll tax.
- Reduce costs – and the only costs that will make the biggest difference is the rate paid to contractor doctors. And most practice owners know that will not be an easy discussion.
If you would like to discuss payroll taxes in more detail, please call 1800 281 038 or email hitesh@medisuccess.com.au.
