Payroll tax wave breaks over Queensland GPs

One GP-owner says his tax bill wipes out three years of profit, and came just days after a precedent was set in NSW.

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Two days after the NSW administrative tribunal confirmed that doctors are medical practice employees in the eyes of the taxman, a GP living and working in Queensland received a hefty bill.

This despite the state revenue office telling the RACGP that it would not be following NSW’s example.

“The RACGP’s Queensland Chair, Dr Bruce Willett, recently met with Mr Mark Jackson, the Commissioner of State Revenue at the Queensland Revenue Office who reassured us that there is no intention for any changes to current interpretations of the law,” college president Adjunct Professor Karen Price told The Medical Republic.

“The QRO has also provided us written confirmation of their position.”

The Queensland doctor who received the hefty payroll tax bill was Dr Aaron Chambers, who owns three GP clinics on Brisbane’s southside.

“We were handed a big bill that is retrospective in nature, and totally goes in the face of my personal knowledge of other practices who’ve gone through this audit process 12 or 15 years ago,” he said.

“We take our tax obligations very seriously, but this is genuinely a change in the way the law is being applied.”

Dr Chambers is referring to the NSW tribunal’s decision on Thomas and Naaz, which was handed down in September 2021.

Essentially, the court decided that even though doctors at the practice in question considered themselves to be co-located sole traders, their payment structure counted as a “relevant contract” that was subject to state payroll tax.

The appeal – along with any hope of a miraculous reversal – got thrown out in July this year.

It was only then that Dr Chambers received his tax bill.

“The Queensland Revenue Office gave us only two weeks to respond to their audit, which we did very, very thoroughly,” he said.

“And the response we got back was delivered only two days after the case in NSW was handed down.”

Speaking at an AMA Queensland press conference on Wednesday, Dr Chambers said he respected the right of state governments to raise revenue, but that the bill he received would set his business back years.

“It wiped out two or three years’ profit retrospectively from our practice,” he said.

“It wasn’t as big [a bill] as in some other cases, because we’re a relatively new business, but going forward, it’ll mean we have to stop bulk billing our patients in order to respond to this.”

The tax itself is 5% of revenue, which is not insignificant given that many practices run on a 3 or 4% profit margin, Dr Chambers said.

The AMAQ said around 80% of practices would be affected by a crackdown on payroll tax, and that one practice had received a retrospective payroll tax bill of $3 million.

So far, the association said, the QRO has not agreed to meet with individual practices to justify its actions.

Dr Chambers said that the QRO may regret coming after GP payroll tax.

“One dollar invested in general practice saves the state health system $10, so pulling $1 out of general practice and putting it into state revenue coffers is actually going to cost them 10 times as much downstream,” he said.

The RACGP said it has been proactively engaging with state and territory governments and is fighting for a fair and reasonable system that doesn’t leave practices struggling.

“Unfortunately, we can still expect some practices to face audits, which is why we fully encourage all members, whether they are practice owners or independent contractors, to act now by seeking guidance from appropriately qualified accounting and legal advisors to review their arrangements,” Professor Price said.