Medical and healthcare providers are currently in the spotlight of the State Revenue Offices (SRO) around Australia regarding their payroll tax obligations.
The revenue authorities are focusing on medical, dental and optometry clinics, and the way these clinics have structured their arrangements regarding the medical professionals at the clinic.
Often, medical practitioners are engaged by a practice owner as contractors to work in the clinics. Diligence is needed when composing Service and Facility Arrangements to avoid the risk of being penalised for unpaid payroll tax.
What does this mean for medical and healthcare practices?
It appears the revenue authorities are increasing their focus on healthcare providers after a couple of recent cases.
Winday International Pty Ltd
Winday provided fully operational radiology facilities to radiologists who then provided radiology services to the public. Each of the radiologists entered into a service agreement with Winday for the use of its facilities.
Winday collected all the patient fees on behalf of the practitioners and made a net payment to each practitioner after withholding the service fee.
Winday’s agreement with the medical professionals indicated that it was a typical arrangement that would not attract payroll tax, but the Tribunal thought otherwise and ruled that Winday should be liable for payroll tax.
There has now been a subsequent case in Victoria wherein the SRO claimed the Optical Superstore was paying wages to its employees and was therefore subject to payroll tax.
The tribunal found this was not the case as the store was simply returning the fees to the optometrists, as they were rightly entitled to the income under the trust arrangement that was in place.
The revenue authorities of various states have since started reviewing several arrangements involving medical and healthcare providers.
What do you need to do?
It is important for practice owners and managers to carefully choose the wording of any contractual arrangements between themselves and their associate practitioners, with all potential tax consequences carefully measured with an accountant and a lawyer. Doing so could help the practice to avoid potential payroll tax consequences.
If it has been a while since you have reviewed your service agreements, contact your local RSM Health Specialist.