State revenue offices have said plenty about how you will incur payroll tax, but they’ve been less forthcoming on how to stay exempt.
As talks break down between Victoria’s revenue office and the RACGP, accountants say states have not made it easy to define what business structures do not trigger payroll tax.
NSW and Victoria have released identical rulings in the past week laying out their respective revenue office’s perspectives on payroll tax. They largely match earlier rulings by Queensland and South Australia, but they do not offer an amnesty arrangement and make no promise not to audit practices retrospectively.
It’s the potential for retrospectivity – i.e. that practices get audited and receive a bill going back five years – that RACGP president Dr Nicole Higgins says is the biggest threat to general practice viability.
She told a William Buck-run payroll tax webinar on Thursday night that without an agreement not to apply the tax retrospectively, an amnesty period is essentially worthless.
“I’ve been speaking with the state Treasurer’s office, Health and opposition today in Victoria, and we’ve heard back that no retrospectivity is not on the table,” Dr Higgins said.
“And really, that’s not a position that we’re willing to even have discussions on.”
One large Victorian practice has reportedly already been served a payroll tax bill of nearly $800,000, effectively forcing it to shut down.
“It’s going to happen, not only to me,” the practice owner warned. “Unless there’s an exemption, we’ll see a catastrophic closure of medical centres, more than half will be wiped out.”
Last week, a practice in a flood-affected area of NSW received a bill for $450,000.
Nine newspapers reported today that Health Minister Mark Butler had raised concerns that this year’s Budget investment in general practice could be undermined by the fallout from payroll tax.
“We can’t raise a charge if we’re bulk billing, so effectively state payroll tax will kill off bulk billing for those who aren’t particularly targeted through this change on the first of November,” Dr Higgins said on Thursday night.
“And this is why we’re at an impasse between the federal government and the state governments.”
Dr Higgins called on any practices that had received an audit notice from a state revenue office to contact the RACGP.
“[Politicians] want to hear your stories, they want to know what the impact is,” she said.
“And I can’t advocate for you if I don’t know what the situation is for your individual practice.”
William Buck director Gil Abras and Ben Ryan, a senior associate with medical indemnifier Avant’s legal division, told webinar audiences that there was still a lack of guidance from state revenue offices on what scenarios did not make a business liable for payroll tax.
“The [rulings] haven’t really told us what is not a relevant contract because that sort of guidance or assistance would probably be too helpful for everyone,” Mr Ryan said.
The closest the rulings get to doing this, he said, is acknowledging that relevant contracts may exist where multiple medical practitioners conduct business from the same premises using the same entity that provides administration and support services, but that this will turn on the facts and circumstances of each contract.
“It comes down to the commercial relationship between the medical practitioner and the practice, and who is providing services to who,” Mr Abras said.
“If the medical practice exerts control and positions itself to the market through the commercial arrangements with the doctor, they are [the one] really providing services and they need the doctors to service their patients.”
Mr Abras also cautioned against having a setup where the practice collects funds “on behalf” of the doctors and puts them into a holding account, from which it transfers the doctors their share of the money.
“That payment will be considered as wages,” he said.
Another basic point to get right, Mr Ryan said, was to ensure that practice contracts and documentation are reflective of and consistent with what is actually going on in the practice.
“If the revenue office ever does knock on your door and you don’t have that agreement that’s reflective of what you’re doing to produce, it can be very hard to argue that you’re doing the right thing,” he said.
