Uber Series Part 3: Next steps for medical practices amid payroll tax confusion

Medical practice owners are carefully considering their next steps following the implications of a recent court case  involving the Chief Commissioner of State Revenue for NSW and rideshare platform Uber Australia, along with heightened scrutiny over contractor engagements in general. 

Practices have historically used tenant GPs in arm’s-length arrangements, classifying them as contractors and reasonably assuming that payroll tax does not apply. 

With all such arrangements now under the spotlight, healthcare businesses have two options:

1. review their contractor arrangements and adjust as needed; or
2. examine the effect of potential payroll tax on the business.

Let’s consider both of these in more detail…

Review and adjust contractor arrangements

In light of the Uber ruling, it now takes a very specific set of circumstances to legitimately classify doctors (or other health and allied health professionals) as contractors in a practice.

Some of these circumstances would include:

• Where the arrangement is short term and for a specific outcome.
• Where the contractor genuinely offers services elsewhere.
• Where the contractor is simply renting the space.

Even if these conditions appear to be met, it’s important to talk to a lawyer who is experienced in payroll tax and employment law. They can help verify that your arrangements are compliant, or explain the steps you will need to take to make them so.

Consider the implications of payroll tax on the business

The more likely scenario is that medical practices will need to assess payroll tax as a potential liability. 

The first step is to familiarise yourself with the tax rates and thresholds that apply in your state, as well as available exemptions surrounding bulk-billed services. 

Next, scenario forecasting will be crucial in helping to determine the best path forward so your practice remains financially viable. This would involve:

• mapping payments for every contractor to understand payroll tax exposure
• contrasting bulk billing incentives with increased private billing
• assessing cash flow implications based on these different scenarios
• forecasting future payroll tax obligations based on potential outcomes

Remember, this is about keeping your medical practice sustainable so it can continue to serve the people in its community. Traditionally, this has been near impossible to do with a 100% bulk billing model. However, some of the new bulk billing incentives could make it more viable – particularly for practices in regional or rural areas where overheads are lower and rebates higher. 

To ensure your GPs are bulk billing correctly and claiming everything they’re entitled to, keep in mind that Business for Doctors offers valuable training that’s certainly worth exploring. 

For those practices that simply cannot make a bulk billing model work without running at a loss, devising a fair and appropriate pricing strategy will allow you to offset the added payroll tax liability and keep the practice afloat. 

Also keep in mind that you don’t have to navigate this alone. RSM’s National Health Services team can assist with everything from scenario forecasting to cashflow reviews, pricing strategies, benchmarking, compliance assurance, and more. We offer friendly, expert guidance that’s designed to simplify the complexity and make forward planning easier for you and your team. 

For a free and confidential discussion, contact RSM’s National Director of Medical, Peter Nicol on (02) 6057 3000. 

Curious for more? This article is one chapter in a series— head over to Part 1 and Part 2 to continue the journey.