The AMA says the payroll tax loss leaves most practices vulnerable, but a tax expert says the details matter.
The NSW Court of Appeal has dismissed the application by Thomas and Naaz to appeal the tribunal decision in their case, which left them liable for years’ worth of back-payroll tax.
Immediately following the decision, the AMA issued a press release claiming that the decision made plain “the state government’s ability and desire to charge general practices payroll tax”.
“We expect this decision to pave the way for the issuing of the Revenue NSW Practice Note and an increase in audit activity,” said AMA NSW President Dr Michael Bonning in the NSW AMA release late yesterday.
“The NSW government is asking the Commonwealth government for more money for general practice but at the same time imposing a sneaky tax which will directly contribute to the decline of general practice,” he said.
But longtime medical practice and tax advisor David Dahm said the AMA had either misread the situation or was playing politics, because the Thomas and Naaz decision only applied to that practice and it did not necessarily follow that most other practices were in the same situation.
“The AMA appears to have taken the appeal loss on Thomas and Naaz as an across-the-board finding on most practices, but it has been made very clear by most state revenue offices, and even in the Thomas and Naaz dismissal, that practices need to be assessed on a case by case basis, taking into account multiple factors,” Dahm told The Medical Republic.
“Thomas and Naaz unfortunately got too many things wrong and it all added up to an overall finding that the relationship between the practice doctors and the medical practice was more that of an employee-employer relationship not a tenant or contractor relationship,” he said.
“You might say they got three strikes: their contract agreements had problems like including restraints of trade, their payment flows were wrong because they used common bank accounts, and then the court looked at the optics of who seemed to be providing the services directly to the public and it felt that it was more the medical practice than the individual doctors.
“Not all practices have this problem, and many that do are working on fixing any structural issues that have been identified recently.”
Dahm said a key issue in the dismissal that the Court of Appeal looked at, after the contract agreements and payment flows, was what elements of the Thomas and Naaz practice were offering services to the public versus what the doctors were offering to the public.
“The Supreme Court looked carefully at the optics of how the practice was engaging with the patients versus the doctors and felt that the practice was doing most of the work, not the doctors,” he said.
“It’s critical for most practices to look at this issue and make sure that their tenanted doctors are engaging the public directly in some way and that each practice has its branding to the public right.
Dahm has previously said that a simple solution for individual tenanted doctors wanting to engage the public directly better is to create their own website.
TMR recently published a white paper HERE on easy ways to do this.
As to practices and branding Dahm told TMR that “practices should make sure that any online appointment system does not mention you are a medical centre, clinic or practice. Preferably practices should look at rebranding themselves as a ‘health complex’, ‘medical health suites’ or a ‘medical and health precinct’.”
Dr Bonning said the NSW AMA was calling on the next NSW government to exempt NSW doctors from payroll tax altogether.
A similar campaign waged in Queensland recently only resulted in the Queensland Revenue Office issuing a 2.5-year holiday for GPs in that state to get their tax structures in order – but in order to qualify for the holiday, practices had to register with the QRO, which some analysts believe would make a practice an audit target.
The AMA release warns that the latest Court of Appeal decision regarding Thomas and Naaz case provides no reprieve for general practice from the uncertainty surrounding payroll tax liability and predicts there will be pressure now on both governments in the lead up to the NSW election on 25 March.
