Services Australia and the odd software vendor have politely clarified a few things this week, but this has only served to confuse us a bit more.
PRODA, and what its new registration requirement might lead to in terms of tax structure compliance, has become such a popular topic we’re thinking of turning it into a weekly Saturday column.
We’ve had some good feedback this week from a couple of software vendors and a lot from Services Australia (previously the Department of Human Services – which, somewhat embarrassingly, I had not cottoned on to in the original article), which we have published in full below this article.
On Thursday night there was a somewhat explosive AMA webinar, attended by some 740 worried doctors and practice managers, and which featured a prominent lawyer, tax accountant and an NSW tax commissioner (which sounds a lot like good material for a “walked into a bar” joke).
We’ll be reporting on that separately, but from what we hear, doctors came away with the feeling they might be at risk of falling into the net of state revenue bodies for non-compliance on payroll tax, but without any clear advice on how to avoid it.
So you may be wondering how visible your practice finance data is to the powers that be – or indeed what this has to do with PRODA.
Services Australia told us: “No personal information provided as part of the PRODA registration is transferred outside Services Australia, and information held by PRODA is governed by the Privacy Act 1988 and also not accessible by an external party.”
In other words, “don’t panic, we aren’t passing any of the information you provide us on to anyone else, be it sister government department, or some other evildoing outsider … PRODA re-registration doesn’t change anything (much)”:
This was a relief of sorts, until we read two points forward:
“e-Invoice is not used by health professionals for claiming. It is used by other government agencies to access Services Australia services.”
Put these two statements together, and try to work out for yourself if the ATO isn’t perhaps setting up in some way to one day reach straight into your detailed financial transactions, via the e-invoicing tab in your PRODA account.
We can see why SA thinks that the first statement remains valid here.
SA isn’t holding the information and it isn’t going to pass on any information it gets to outside groups, even related government departments.
But if you tick the e-invoicing box in PRODA, something you will almost certainly have to do some day, then it looks a lot like PRODA is, among other things, a distribution point, for other important data to travel through, to separate government departments – one of which is surely the ATO.
SA doesn’t hold any financial data and strictly it isn’t passing any on.
It’s on its own direct journey, via the e-invoicing tab, in PRODA, to the ATO.
Once the ATO has that data, it’s an algorithm away from working out if you’re compliant or not as far as federal taxes are concerned, and it has hard data to prove its case now.
In the past, hard data in volume, the analysis of which could be automated, was not available to the ATO. Things were always a lot less clear cut, and if cases did ever arise, lawyers always jumped in to muddy the waters even more on behalf of their doctor client.
Once this data exists, can a state revenue body easily access it, which would lead to evidence in state payroll tax cases?
No, probably not. Not directly at least.
But would a state revenue body involved in a payroll tax case be able to subpoena such data for a case?
Yes, it probably can. Probably from the practice itself.
The point here is, the detailed data providing a complete picture of the financial set-up of a practice once did not exist anywhere.
But soon that data probably will at the ATO and within the bowels of a practice itself in its Xero accounts, and this is going to help state revenue bodies make their payroll tax cases, should the data not align in the right manner.
Governments legislate from time to time to facilitate data sharing between agencies and departments, and you can imagine that by the time they do this, the horse has usually bolted in terms of any privacy concerns of downstream parties.
So even if they can’t share now, they might be able to later.
It has happened already in health at the federal government level, with the Department of Health (DoH) – so far in the name of Medicare compliance – but it will probably happen again (and again) as all governments start marching to the sweet tune of digital auditing.
It’s an increasingly common tune for all governments across the world and some, such as India and Denmark, have gone even as far as legislating that business must provide their finances digitally to their government’s tax regulator.
In May last year, 1106 GP practices that were paid Practice Incentives Program e-Health Incentives (ePiP) for loading My Health Record data in the prior quarter were denied the payment, going forward, after the DoH data matched records with the Australian Digital Health Agency (ADHA) and found that these practices had “not met the shared health summary upload requirements for a payment quarter under the [ePIP]”.
The National Health Act enables data matching between groups such as the MBS, PBS, TGA, DoH, SA, the Department of Veterans Affairs and the Department of Home Affairs.
The Act allows the DoH to go outwards to other sources, if it falls into the remit of managing government resources better by assisting Medicare compliance.
It doesn’t seem like much of a stretch to think that tax compliance and the ATO will be travelling the same path in time, via e-invoicing, which is in the PRODA list of services provided.
The ATO is reasonably gung ho, and even publicly excited, about where digital tax auditing is heading, so no one should be surprised that, in time, it will go to using digital data trails like those that e-invoicing will generate, and algorithms, to automate auditing.
Of course, it isn’t targeting just doctors with this strategy. It is targeting all the professions that run businesses with similar financial structures, and in the end, it is going to have a good go at all small business.
So, no one should feel unfairly singled out here.
And, as SA is strongly hinting, but maybe for the wrong reasons, there is no need to panic.
You have to re-register for PRODA. There is no getting away from it. You can’t put it off.
SA also, technically points out that by re-registering for PRODA, it isn’t secretly getting more data from you to use at some future unspecified time.
Technically.
Practically, that e-invoice tab probably means otherwise.
But even if you accept that with “new PRODA” you have a tab that will hook to the ATO at some point, if you tick it, and that one day not ticking it will probably not be an option, you don’t have to panic.
Nothing is going to happen straight away. Per last week’s instalment of PRODA Weekly, you are likely to have between 18 and 36 months before any of these systems, and any new legislation that go with them, align in any way that will enable much tighter financial monitoring of doctors and their practices.
That amount of time might be enough to restructure how you do things, along the lines of what PRODA Weekly suggested might be fully compliant (remember too, we aren’t experts, we are just talking to experts, so check). Key among the potential changes you could make, which are repeated here largely from last week (for good reason we hope) would be:
For practices (landlords):
- Arrange for every contract (“renter”) doctor you have on your books to get their own ABN-linked bank account and arrange for them to transact their Medicare claims to that account.
- Get, through revised contracts, permission to operate on that account to be able to reconcile the transactions, work out commissions and deduct commission to your practice account.
- Somehow get that automated (stories to come).
- Review all your contractors’ contracts to make sure money flows, et al, are all aligned with other processes and have understandings that make it clear your doctors is a “tenant” not an employee.
For contractor “tenant” doctors:
- Get your own ABN-linked bank account and run all your claims to that account first.
- Declare all your income, not just your net income after your “landlord” (practice) deducts its rent (commission).
In case you’re thinking you might now understand the basics, we were contacted by a major provider of Xero integration services for doctors’ payroll management this week – Surgical Partners – and told that solutions to many of the accounting issues raised by potential e-invoicing surveillance were already addressed for many GPs in the market with solutions that have been available for years.
According to its director and founder, Marcus Wilson, its product will have all these processes automated for GPs via its unique Xero integration processes. They are working on a solution to the “flow of money” payroll tax problem, such that separate contractor bank accounts won’t be necessary, and such that accounting entries would allow for tax compliance for both state and federal tax jurisdictions.
Surgical Partners’s product currently sells itself as being able to manage reconciliations and real-time pay processing and reporting for practices and their contractor doctors
According to Wilson, Surgical Partners is responding to recent payroll tax rulings on how the money should flow in a practice/landlord-doctor, contractor/renter relationship by working on an automated solution with a partner “big four” bank that would meet appropriate standards for state and federal tax bodies, and not involve practices having to operate off separate physical bank accounts for all of their contractors.
When asked if it would be seeking a tax ruling on its solution with all the tax jurisdictions that are involved, Wilson was appropriately annoyed with our question.
But he did say it would be unlikely that one of the big four banks would back a financial arrangement that wasn’t tax compliant for its clients and neither would its major clients.
Surgical Partners has a current contract for its software to run payroll and reporting for one of the country’s biggest corporate GP providers.
Wilson has promised us an article explaining the technology and the processes, but you can contact Surgical Partners, if you can’t wait for that.
Meanwhile, one of the country’s two major PMS vendors, Medical Director, contacted us this week and said that it would be managing “the PRODA authentication process on behalf of MedicalDirector software users [for] MedicalDirector Helix, Clinical and Pracsoft”.
MedicalDirector Helix is MedicalDirector’s cloud-based version of the product, so that gels with the idea that only cloud providers will be able to do this for clients.
Best Practice does not have a cloud version to market yet, but it is understood that the vast majority of MedicalDirector instances in use are the older, server-bound versions of the product, not the cloud version (Helix). So it feels likely that most GP practices and GPs in the country will still be needing to re-register for PRODA.
As we also pointed out last week, and as SA points out in its information below, “individual [doctor] access to Health Professional Online Services (HPOS) for health professionals or their delegates, is only permitted via PRODA”.
Which means, all GPs, and practices, need a PRODA account regardless of their software vendors using PRODA to claim on their behalf, as HPOS has so much practices and individual doctors need, over and above just Medicare claiming and Eclipse.
Confused still?
We are.
While PRODA is not the devil itself, as SA is pointing out, and it is going to create great new efficiencies in how practices and individual doctors operate and communicate with key government departments, it is also, in part at least, offering all doctors a door to where the devil (the ATO) surely lives.
The full clarification from Services Australia:
The info below hopefully clarifies how PRODA works, what practices need to do, and why e-invoicing appears in PRODA.
Key points:
- The Department of Human Services is now known as Services Australia [ok, that one’s just for us].
- These improvements are part of Services Australia’s implementation of recommendations from the Shergold Review, and Health Modernisation to depreciate some ageing technology. The purpose is to upgrade from legacy technology and strengthen the protection of patient and practice information.
- The upgrade to web services via PRODA will benefit practices by moving to more modern technology that does not require additional hardware or software to be installed. The upgrade does not impact the practice’s organisational structure or tax affairs. Practices can continue to make claims and do their business accounting as they do now.
- Once PRODA is set up and linked to their service, most practices are unlikely to need to do anything else.
- Web services uses PRODA for secure authentication and to identify individual users and organisations. Once practices upgrade to web services, they’ll use PRODA to access our Digital Health and Aged Care channels.
- Individual access to HPOS for health professionals or their delegates, is only permitted via PRODA. This has been in place since 2020.
- Organisation access to HPOS, regardless of their need for web services through their desktop software, is also being transitioned to PRODA.
- No personal information provided as part of the PRODA registration is transferred outside Services Australia, and information held by PRODA is governed by the Privacy Act 1988 and also not accessible by an external party.
- PRODA is used to access a wide range of government services including, but not limited to, HPOS.
- eInvoice is not used by health professionals for claiming. It is used by other government agencies to access Services Australia services.
Additional information:
- Individual PRODA registration is a simple, real-time, online self-service process:
- Step 1 requires the user to create their account profile and login details,
- Step 2 is to verify their identity using a minimum of three accepted identity documents. We match these documents against the issuing agency using the Document Verification Service (DVS).
- Organisation registration is also a two-step process where an authorised person for the organisation, as listed on the ATO’s Australian Business Register (ABR), will enter their organisation name and Australian Business Number (ABN), then answer proof of record ownership questions.
- What you need to do to prepare for web services – Health professionals – Services Australia
- What is PRODA for web services – Health professionals – Services Australia
