On August 11, 2023, Revenue NSW (RNSW) and the Victorian State Revenue Office (VIC SRO) finally addressed the issue of payroll tax for medical centres and other healthcare settings (healthcare providers) by releasing their respective rulings. These rulings are in line with similar decisions recently made in Queensland (QLD) and South Australia (SA).
This development marks a significant step in the harmonization of payroll tax rules for healthcare providers across four states. Western Australia had previously confirmed its divergence from this alignment.
These rulings primarily clarify the existing legislation rather than introducing new changes. Historically, many healthcare providers believed that typical service fee arrangements, where fees were collected and a service fee deducted for administrative purposes, fell outside the payroll tax regime. However, these assumptions have been challenged in legal cases resulting in the State Revenue offices determining that payroll tax should always have been paid.
Implications for your health practice
It is important to highlight that while QLD and SA have introduced amnesties for healthcare providers to rectify historical non-compliance, no such amnesty has been announced in VIC or NSW.
NSW, however, has announced a “pause” for 12 months to assess the impact that the payroll tax outcomes will have on bulk billing and the cost of healthcare generally. The pause is in respect of both audit activities, and penalties and interest. The NSW Government is not at this time, proposing to amend the law to prevent the application of payroll tax. It is only proposing to assess the impact and seek to better manage the impact and outcomes.
VIC has to date remained silent on providing any concessions or review.
Depending on the States in which they operate, this leaves healthcare providers potentially exposed to both historical and prospective payroll tax liabilities. This is a real and immediate risk that cannot be overlooked.
Now Is the Time for Action
Given the accelerated pace of transformation in the healthcare sector, passive waiting is not a viable strategy for medical practices. It is imperative to be proactive in reviewing your operational processes and contractual agreements.
As your trusted business advisors, we stand ready to offer our expertise and support. If you have any questions or wish to explore how the latest developments could impact your unique circumstances, we strongly encourage you to reach out to our team on (02) 9261 2177 at your earliest convenience.