Payroll Tax Contractor provisions for Medical Centres and Practitioners

Payroll Tax Contractor provisions for Medical Centres and Practitioners

As a result of the decision in the Thomas and Naaz case, the arrangements between medical/allied health centres and practitioners need to be reviewed to ascertain whether payroll tax will be applicable to the fees paid to practitioners.

On 11 August 2023 Revenue NSW and the State Revenue Office Victoria released public rulings in relation to the application of payroll tax to an entity that conducts a medical centre business who contracts with practitioners or their entities. This includes physiotherapy practices, dental clinics, radiology centres and other healthcare providers. These New South Wales and Victoria rulings were long awaited, particularly since Queensland and South Australia had already issued similar rulings previously.

Application – what do these provisions mean and what are the implications?

Where there is a contract by a medical centre for the performance of work, such as a service agreement or contracting agreement, a ‘relevant contract’ can exist that deems the parties involved to be employee and employer. Unless an exemption applies, this will cause the amounts paid or payable under the contract to qualify as wages for payroll tax purposes which will be subject to payroll tax.

Specifically, a contract between an entity that conducts a medical centre and a practitioner is a ‘relevant contract’ under section 32 of the Act if all the following apply:

  1. The practitioner carries on a business or practice of providing medical-related services to patients
  2. In the course of conducting its business, the medical centre provides: members of the public with access to medical-related services and engages a practitioner to supply services to the medical centre by serving patients on its behalf.
  3. An exemption under section 32(2) of the Act does not apply.

Exemptions from relevant contract provisions:

 If an exemption applies under section 32(2) of the Act, no payroll tax liability under the relevant contract provisions arises. Exemptions that are more likely to apply to medical practice arrangements are:

  1. The practitioner provides services to the public generally.
  2. The practitioner performs work for no more than 90 days in a financial year
  3. The services are performed by two or more persons.

The rulings set out detailed examples of the above exemptions, which medical practices should make themselves aware of. However, in practice, eligibility for these exemptions will depend on the actions of the practitioner and their arrangement with the Medical Practice. When claiming an exemption, a medical centre must be able to support the exemption with sufficient evidence.

Following the release of the ruling in NSW, the NSW Minister for Finance announced that payroll tax audits will be paused for 12 months to allow GPs and their practices time to consult the RACGP and AMA.


Given these recent developments, GPs should work with their medical practices to:

  • Review their arrangements/agreements and consider whether any changes need to be made. Seek professional advice if needed.
  • Ascertain whether any exemptions apply
  • Understand their potential payroll tax liabilities

If you would like to discuss how this may impact you, please contact our office.