Business advice
and accounting

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Fraud and Risk.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Fraud and Risk.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Medico Payroll Tax Ruling

7 November 2022

by David Prichard & Georgia Bell

Medico Payroll Tax Ruling

Revenue NSW has shone a spotlight on payroll tax implications for medico’s and other similarly structures professional practices due to a NSW Civil and Administrative Tribunal (NCAT) decision which has been confirmed on appeal.  The result of this appeal is set to be reflected in the audit practice of the relevant office’s of state revenue.

Payroll tax is levied on salary and wages, however, can is also levied on other payments made under “relevant contracts” that are considered to be wages.

Medical and other professional practices usually operate a ‘service entity’ model where the practice collects consultation income, on behalf of the doctor or professional then distributes to the doctor after deducting service fees.

In the NCAT Appeal Panel decision in Thomas and Naaz, who operated three bulk billing medical centres the structure of the arrangement was broadly as follows:

  • Doctors were engaged with these medical centres under written service agreements, that provided for a 30% service fee (plus GST) for room rental, shared administration and medical support; and
  • The medical centres undertook all of the paperwork to collect the Medicare Benefits from the patients on behalf of the doctors and (ignoring GST), remitted 70% to the doctors and retained the remaining 30% as service fees.

Revenue NSW held that the payments to the doctors were under a relevant contract and therefore the payments to the doctors were taxable wages for payroll tax purposes.  A key issue was the flow of funds between the practice and the doctors, however, Revenue NSW is of the view that this is not the sole determining factor.

Whilst there are limited exemptions to the inclusion of such payments as taxable wages for payroll tax purposes such that it is likely that payments from medico service entities to health care practitioners will attract payroll tax. If there is a payroll tax liability, penalties of 30% and interest may be charged upon review of authorities.  As such, this is likely to require practices to rethink the pricing structure of services.

We strongly suggest that Service Agreements and work practices are reviewed together with consideration of pricing of services. If you have any concerns or wish to seek expert advice regarding your current structure, Service Agreements and payroll tax risk please reach out to your ESV engagement partner.