On 22 December 2022, the Queensland Revenue Office (QRO) published payroll tax ruling PTAQ000.6.1 - Relevant contracts - medical centres. The new ruling sets out how the Queensland Commissioner of State Revenue will apply the payroll tax contractor provisions to agreements between medical centres and medical practitioners, including doctors, dental, physiotherapy, radiology, and similar healthcare providers. The ruling is in response to recent tribunal and court cases in Victoria and NSW (Optical Superstore and Thomas and Naaz).
Based on discussions we are aware of between the Commissioner and industry bodies, the Commissioner has indicated the QRO will not carry out audit activity in this space for periods prior to FY22. Details of this limitation should be released shortly.
Payroll tax for medical centres and practitioners has been a focus area in recent years, following topical cases in Victoria and NSW. A refresher on the issue can be found in our previous article. Prior to the release of PTAQ000.6.1, the Queensland Commissioner had not confirmed how these cases would be applied in Queensland. The ruling gives us more certainty on the Commissioner’s approach.
Key takeaways from PTAQ000.6.1
Some of the key takeaways from the ruling are as follows:
- Based on the Commissioner’s broad approach, payroll tax is likely to be payable on payments from a medical centre to a practitioner under a service or facilities agreement (as contractor payments).
- This is likely to be the case even where the agreement is drafted so that the medical centre provides services to the practitioner (and not vice versa), if:
- The medical centre holds out to the public that it provides access to medical services
- The medical centre has operational or administrative control over the practitioners.
- It does not matter if payments to a practitioner are paid from money received by the medical centre on behalf of practitioners, even if the practitioner is beneficially entitled to that money.
- The contractor exemptions may be able to apply to some payments. The three exemptions most likely to apply to a contract between a medical centre and a practitioner are:
- The practitioner provides services to the public generally
- The practitioner performs work for no more than 90 days in a financial year
- Services are performed by two or more persons.
- Where patient fees/Medicare payments are paid to a third party which then pays a percentage to the medical centre and a percentage to the practitioner, the amount paid to the practitioner may still be taken to be taxable wages paid by the medical centre.
It is important to note that the Thomas and Naaz case is still currently under appeal. If the Court takes a different view in the appeal decision, the public ruling will no longer be valid and would need to be revised.
Medical and healthcare centres with service facility arrangements are at risk of exposure to payroll tax in respect to payments made under these agreements for FY22 onwards. In addition to consideration of the technical aspects, centres will need to consider the varying commercial implications and their own individual circumstances in light of the ruling. We recommend that all current service agreements are reviewed by a payroll tax specialist to assess and quantify the payroll tax risk and assess whether any exemptions are available.
Our indirect tax team has extensive experience in this area. If you would like to discuss the above further or think it is relevant to your client, please contact your local BDO tax adviser.