ACT exempts handful of practices from payroll tax

Not even 10 practices will benefit, according to the ACT government, as they must have $2m in wage costs and bulk bill 65% of patients.

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The ACT has hit pause on payroll tax, but only for the vanishingly small number of practices that bulk bill at least 65% of patients and exceed its $2 million tax free threshold. 

Fewer than 10 practices in Australia’s tiniest jurisdiction even clear the $2m tax free threshold, meaning the majority are not actually liable for payroll tax, regardless of recent precedents.  

The new exemption, announced by Chief Minister Andrew Barr at the weekend, will allow those few practices that do have a yearly turnover of $2m or more to waive their payroll tax liability for two years providing that they register with ACT Revenue, register for MyMedicare and bulk bill 65% of patients. 

It’s unclear what proportion of the 10 high-earning practices – if any – will be willing or able to meet those conditions, especially given that only an estimated 5.5% of practices in Canberra offer bulk billing to all patients.  

It appears unlikely that all 10 practices will be able to meet the 65% bulk billing threshold.  

Canberra GP Dr Felicity Donaghy said the current inflationary pressures made it impossible to bulk bill 65% of patients at her practice and remain financially viable, even with the incoming tripled bulk billing incentives.  

“The ACT Government’s policy is out of step with other jurisdictions and will not encourage GPs to work in the ACT, it will have quite the opposite effect,” she said. 

AMA ACT president elect Dr Kerrie Aust said that general practice in Canberra was already in a “precarious state”, with the lowest number of GPs per head of any capital city and a long history of vacant GP training places. 

“Canberra is one of the most expensive places to run a practice, and we have already seen practices forced to close because they simply can’t afford to keep the lights on,” RACGP president Dr Nicole Higgins said.  

“It will be absolutely devastating for the community if more of their local practices are forced to close, and GPs leave town.”  

Both the RACGP and AMA ACT called for territory leadership to come back to the negotiating table.  

I’m urging the ACT Govt to find a real solution on payroll tax instead of a temporary exemption for practices that bulk bill at least 65% of patients. Most practices operate on thin margins. If they face an extra payroll tax bill, they’ll be forced to hike fees or close. #SickTax

— Royal Australian College of GPs (RACGP) President (@RACGPPresident) August 27, 2023

The territory has already committed to a no-retrospectivity clause, meaning that practices will only receive tax bills backdated to 30 June 2023, thus avoiding what is often cited as the main existential threat posed by payroll tax.  

Mr Barr said the current offerings from the government ensure “that medical practices have ample time to adapt, seek advice, and align with payroll tax obligations”.  

Canberra’s payroll tax rate is 6.85% of total turnover, the highest of any Australian jurisdiction. 

This is offset by the fact that it also has the highest tax-free threshold, meaning fewer businesses are eligible for payroll tax than in other parts of the country.  

Clinics that want to take the ACT up on its two-year exemption offer have until the end of February 2024 to register with the ACT Revenue Office.  

If you work at one of the 10 practices in the ACT with an annual turnover of $2m or more, contact holly@medicalrepublic.com.au.