Many medical practices and their advisers in Queensland were fatigued by payroll tax by the end of 2024. There were multiple versions of the QRO’s public ruling to consider, and decisions to be made on whether to apply for the amnesty, and whether to shift to a new business model.
The recent exemption will provide relief for some, but will leave others still navigating these issues.
The new amendments
The amendments add an exemption from payroll tax for wages paid or payable by a medical practice to a general practitioner.
There are then prescriptive definitions for both medical practice and general practitioner.
The effect is that a medical practice paying wages to an employed qualifying GP will be protected by the new exemption.
The payroll tax legislation defines wages to include payments under relevant contracts. The new exemption will therefore also apply where medical practices make payments to qualifying GPs carrying on their businesses as sole traders.
What about other medical practitioners?
There is no relief for medical practitioners that do not fall within the definition of GP.
Medical practices making payments to those medical practitioners will still need to navigate the QRO’s public ruling – which is now up to version 4.
In particular, those medical practices will need to decide whether:
- the medical centre provides members of the public with access to medical-related services; and
- the medical centre engages a medical practitioner to supply services to the medical centre by serving patients on its behalf.
Answering that second question will generally come down to an analysis of the practical circumstances of their arrangement, together with the terms of their contract. Those terms should be in writing.
Should a GP currently carrying on business through a company or trust restructure to become a sole trader?
This will need some careful thought.
Based on the current rules, only an individual can be a person covered by one of the definitions that would make them a GP that can be exempt from payroll tax.
However, one of the effects of GPs contracting through companies or trusts is that the Commissioner of Taxation accepts that those contracts cannot be ‘wholly or principally for their labour’ under section 12(3) of the Superannuation Guarantee (Administration) Act 1992.
Another effect of GPs contracting through companies or trusts is that, unless the arrangement is a sham, the Commissioner of Taxation generally accepts that this will not create a common law employment relationship.
For some medical practices, their common law employment and section 12(3) risks may be low, regardless of whether they contract with individuals or companies or trusts. However, other medical practices may want the protection of contracting with companies or trusts, rather than being exposed to potential claims in the future in relation to employee entitlements, including superannuation.
Each medical practice will need to weigh the benefits and risks to any change of structure carefully.
Need help?
If you would like assistance on navigating these issues, or understanding options to reduce the different tax and superannuation guarantee risks, please contact a member of our team or send us a confidential enquiry to discuss.
