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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

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

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

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

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

Level 13, 68 York Street,
Sydney NSW 2000

Payroll tax for medical practices

18 October 2021

by David Prichard

A recent decision handed down by the NSW Civil and Administrative Tribunal (“NCAT”) in the Thomas and Naaz P/L v CCSR case (“Naaz’s case”) has increased concerns that service entities for medical practitioners may have a payroll tax liability.

NCAT ruled that the payments by a medical practice service entity to Doctors were wages for payroll tax purposes, despite the payments being sourced from Medicare claims, made on behalf of the Doctors.

The facts of Naaz’s case were broadly as follows:

  • The Doctors saw patients at the medical centres and “bulk billed” each patient;
  • The medical centre, on behalf of the Doctors, made claims on Medicare with the funds being paid into a central bank account of the medical centre;
  • The service entity provided a number of services to the Doctors as follows:
    • The provision of rooms at its medical centres;
    • Shared administrative and medical support services;
    • Administration staff recorded and reconciled the Medicare payments.
  • The service entity charged a fee to the Doctors of 30% of the claims paid by Medicare.
  • The service entity paid each Doctor the residual 70%, retaining 30%.

NCAT determined that the payments made to the Doctors were “for or in relation to the performance of work” and therefore wages for payroll tax purposes under the contractor provisions.

There are a number of aspects to this decision which may warrant further examination as they result in a different outcome being reached.  These include but are not limited to:

  • Utilising an exclusion to remove the payments from the contractor provisions. In the Naaz case this exclusion was put forward, however, insufficient evidence was put before NCAT to enable a ruling; and
  • Whether the Doctors receiving their patient’s Medicare benefits directly into their own bank accounts and then paying the service entity resolves the issue, as the service entity would then not be required to pay any amounts to the Doctors.

It is anticipated that this case, along with a number of other cases (eg Optical Superstore) along similar lines will provide the state revenue authorities further reason to review medical centres.

If you have any questions about the impact this ruling may have on your practice, please reach out to your Engagement Partner.