Corporates prepare to fight payroll tax in court

The Victorian government is seemingly immovable on payroll tax, but the Primary Care Business Council will go down swinging.

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Corporate practices in Victoria won’t be taking payroll tax bills lying down, with a number of clinics understood to be planning to challenge compliance notices in court.

Meanwhile in Tasmania, the Labor party has pledged to “guarantee” that no payroll tax will apply to GPs should they win the upcoming election.

Primary Care Business Council executive director Jeremy Stones confirmed to the Herald Sun earlier this week that multiple practices in the state had engaged lawyers to challenge their payroll tax bills and were prepared to take it to court if needed.

The council represents leaders from eight national corporate GP chains: Sonic, Better Medical, Partnered Health, ForHealth, MyHealth, Ochre Health, MedicalOne and Eastbrooke.

Industry sources who spoke to The Medical Republic on background said the contracts used in the Thomas and Naaz case were extremely specific to that business. There was a general sense among other medical centres, they said, that it would be possible to argue that the interpretation of relevant contracts as per Thomas and Naaz did not uniformly apply.

While it would be a costly exercise for an individual clinic to take the state revenue office to court, it may not pose the same problem for corporate owners.

Even within each corporate chain, TMR understands every clinic uses different contracts.

This means each clinic would take the SRO to court individually.

Even if some aren’t successful in their challenges, it would still take years for all the cases to work their way through the legal system.

This would not only be a major headache for Victoria’s legal system, but it also vanquishes any perception of GP payroll tax being easy money for the states.

The clinics would essentially be using bureaucracy as a weapon against the state tax office.

TMR’s resident tax expert David Dahm said that, in his experience, the vast majority of clinics had opted to pay their tax bill rather than risk the court battle.

“The SRO would use discovery to get more documentation [and] more contracts, as well as getting witness statements from doctors – whether it’s affidavits or interviews,” Mr Dahm said.

“The other side will have to produce more evidence and information … and if there’s multiple of these cases going on … it could take maybe one or two years.”

Mr Dahm, an accountant who has been through the legal process in Victoria with other medical clinics before, said he didn’t like their chances of success.

“What they’re really asking is to change the laws just for a certain group of people,” he said, referring to continuing pressure for states to exempt GP income from payroll tax.

“In this case it’s corporates at the expense of everyone else, who are non-corporate or non-medical.

“There’s a lot of laws and national precedents here that they’re seeking both the tax office and the courts to just turn a blind eye to.”

On the other side of the Bass Strait, where a state election is imminent, the Labor party has announced it will “act decisively in the first 100 days” to “guarantee that no payroll tax will apply to a general practitioner”.

The promise was dealt by opposition leader Rebecca White ahead of the Tasmanian election on 23 March.

“Labor will ensure that a ruling is provided to exempt GPs from payroll tax,” Ms White said.

“Hospitals are already exempt from paying additional payroll tax for their doctors and we want an even playing field for our GPs.”

Tasmania, like the Northern Territory, has not yet released a public ruling or enforced the clarified contractor rules but also has not introduced any amnesty programs.

The lack of action either way has left GPs like RACGP Tasmania chair Dr Toby Gardner in limbo.

He thanked Ms White and shadow health minister Anita Dow for the pledge.

“The commitment to a full exemption for payroll tax and no retrospective tax collection for independent GPs, who rent rooms from a practice owner, is exactly what Tasmania needs, and what we called for,” Dr Gardner said.

“This will ensure practices don’t have to increase patient fees, and it will prevent bankruptcies and practice closures – which Tasmania cannot afford.”

Australia’s rural GP workforce crisis has hit the island state particularly hard, and it has had some of the lowest bulk billing rates in the country over previous years.

AMA Tasmania president Dr John Saul also welcomed Labor’s commitment, calling the tax “devastating”.

“While the state government has not imposed payroll tax, the fear it could at any time has not gone away. General practice needs certainty, and this commitment from Labor provides that,” he said.

“With certainty, general practice can get back to concentrating on its core business – delivering healthcare to Tasmanians without shouldering unnecessary financial burdens.”

TMR contacted Tasmanian Health Minister Guy Barnett to ask whether Liberal would match Labor’s pledge, but did not hear back before deadline.