New rulings on state revenue clarify that medical centres will be held accountable for the tax under service fee arrangements.
Unlike Queensland and South Australia, which have introduced temporary amnesties, medical centres in Victoria and NSW are now subject to payroll tax obligations.
The NSW and Victorian state revenue authorities simultaneously issued almost identical rulings on Friday. These acknowledge a pivotal court decision that altered the landscape for GPs practising in medical centres.
While Western Australia pursues its own course, the remaining four mainland states are aligned on the matter, with one crucial exception.
Unlike Queensland and South Australia, which have declared amnesties for practices, there has been no such announcement from Victoria or NSW. It is unlikely to occur as both states have previously expressed their aversion to this approach.
The tax obligation was confirmed by the case of Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021], focusing on the definitions of an employee and a “relevant contract.” The rulings in Victoria and NSW underscored the continuity of existing legislation and merely aim to provide clarity on their longstanding stance.
Historically, customary service fee arrangements, where medical centres collect patient fees and then deduct service fees for administrative purposes (billing, room usage, staffing costs, etc.) were generally considered outside the scope of payroll tax. However, after the outcomes of the Thomas & Naaz and Optical Superstores cases, both favouring state revenue bodies, these practices have been singled out for necessary adjustments.
Numerous practices have been anticipating this to institute alterations in their procedures and agreements.