• 21 Sep 2020

Medical Centre Structures Under Focus – Payroll Tax

It is common knowledge that structure of a Medical Centre is important for various reasons such as risk management, tax, administration and productivity to name a few. Most recently, structure of a Medical Centre has been under scrutiny in a payroll tax case. In Homefront Nursing Pty Ltd v Chief Commissioner of State Revenue [2019] NSWCATAD 145 the New South Wales Civil and Administrative Tribunal (NCAT) has determined that Medicare and Department of Veterans Affairs (DVA) benefits collected by the medical centre operator on behalf of the contracted GPs and paid 71.5% of those benefits directly to them,  were not "wages". Therefore, they were not subjected to payroll tax within the meaning of S35(1) Payroll Tax Act 2007(NSW). The operator collecting the Medicare and DVA benefits was in fact, merely a collecting mechanism.  

However, it was determined that payroll tax could be payable by the operator on top up payments made to the contracted GPs. In this case, the income of $3,600 per week was guaranteed and was payable to GPs, irrespective of the patient billings/receipts during the first 13 weeks of the GPs being contracted by the operator. This had the effect of guaranteed income of a set amount to GPs each week and hence it was considered to fall under the definition of salary and wages.

NCAT remitted the matter to the NSW Chief Commissioner for reassessment.

"Medical Practices should consider if their structure
or minimum payment guarantees to any GP could incur
payroll tax liability even if their GP
is not an employee of the Medical Practice.

Author: Ash Agarwal