Payroll tax position for businesses operating medical practices clarified (Qld)

The Queensland Revenue Office has clarified the payroll tax position for businesses operating medical practices in Queensland in an updated public ruling.

Public Ruling PTAQ000.6.2 confirms that under normal business arrangements, patient fees, including the Medicare benefit and any out-of-pocket expenses paid directly by a patient to a general practitioner for their services, will not be subject to payroll tax.

In this blog, we will explore the key takeaways from this updated ruling and its implications for medical centres across the state.

Understanding the Updated Ruling

The updated ruling sets out a method for direct payments by patients to practitioners that will mean the practice is not liable for payroll tax on those transfers. 

The crux of this ruling is that under normal business arrangements, patient fees, including Medicare benefits and any out-of-pocket expenses directly paid by patients to a general practitioner for their services, will not be subjected to payroll tax. This is welcome news for medical practices and practitioners alike, as it provides much-needed clarity in a realm often mired in uncertainty.

Who Does It Apply To?

The scope of this updated ruling extends beyond general practitioners and medical specialists. It applies to a broad range of health providers encompassed by the term "medical centres." This includes doctors, dentists, physiotherapists, and other allied health professionals who operate within medical practices.

Direct Payments by Patients to Practitioners

One of the critical aspects of this ruling is the method it outlines for direct payments by patients to practitioners. This method serves as a safeguard against payroll tax liability for medical practices.

If patient fees, which include the Medicare benefit and any out-of-pocket expenses, are paid directly by the patient to a general practitioner, and the practitioner subsequently pays an administration fee to the medical centre, no payments are classified as wages for payroll tax purposes. This is a vital distinction and aligns with the QRO's stance on this arrangement.

Three Scenarios Explored

The Public Ruling addresses three primary scenarios in which payments may be considered as wages of the medical centre for payroll tax purposes. It's crucial to understand these scenarios to ensure compliance:

1. Payments Flowing Through the Medical Centre

• Patient fees, including the Medicare benefit and out-of-pocket expenses, are paid to the medical centre.

• The medical centre then pays the practitioner (either a sole trader or a practitioner's entity) net of an administration fee.

In this case, the payments by the medical centre to the practitioner or their entity are deemed wages for payroll tax purposes. This aligns with the previous Public Ruling.

2. Direct Payments to Practitioners

• Patient fees, including the Medicare benefit and out-of-pocket expenses, are paid directly to the practitioner (sole trader).

• The practitioner subsequently pays an administration fee to the medical centre.

In this scenario, no payments are considered wages for payroll tax purposes. While this wasn't explicitly outlined in the previous ruling, it corresponds with the views held by legal practitioners.

3. Payments Through Practitioner's Entity

• Patient fees, including the Medicare benefit and out-of-pocket expenses, are directed to the practitioner's entity.

• The practitioner's entity pays an administration fee to the medical centre and the balance to the practitioner.

In this case, the payment from the practitioner's entity to the practitioner is classified as wages for payroll tax purposes. This position needed to be more precisely detailed in the earlier Public Ruling, raising concerns, especially for practitioners using entities like companies or trusts.

Important Considerations Before Restructuring

Before contemplating a shift from a company or trust structure to a sole trader arrangement in response to the recent payroll tax ruling, it is imperative to weigh the potential implications that such a move may entail. These considerations go beyond payroll tax and delve into asset protection, transfer duty costs, and unintended income tax consequences.

Contact Us

The updated Public Ruling by the Queensland Revenue Office offers much-needed clarity regarding payroll tax for businesses operating medical practices. While it introduces a crucial distinction between payment methods; practitioners and practice owners must carefully evaluate their arrangements to ensure compliance with payroll tax regulations. The recent ruling on payroll tax presents an opportunity for certain medical centres and practitioners to update their current banking and operational arrangements; it is crucial to approach any structural changes with meticulous planning and expert advice.

As your trusted advisors, we can guide you in navigating these intricate tax considerations effectively to make well-informed decisions that comply with tax regulations and align with your long-term business and financial goals.