RevenueSA prescribes payroll tax amnesty for ailing SA medical clinics
In our previous article in April 2023, we discussed the implications of recent cases which have drastically shifted the widely held position on payroll tax in the medical profession. At the time of that article, the South Australian government had not yet indicated whether it would aggressively wield these new cases to impose significant payroll tax liabilities on private medical clinics (consistently with the stance taken by eastern states), or take a more conservative approach in line with Tasmania and Western Australia.
However, RevenueSA have started the new financial year with a “win” for general practices, by announcing a targeted payroll tax amnesty (Amnesty) for payments made by medical clinic entities to contracted general practitioners (GPs).
How did we get here?
By now, many readers will be acutely aware of the revelations handed down in Chief Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197 (Optical Superstore) and Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAP 220 (Thomas and Naaz).
To distil these cases into their key findings relevant to medical clinics, we note that:
- interstate Courts and tribunals have viewed contractor arrangements commonly used in the medical profession as falling into “relevant contract” provisions within payroll tax legislation which may operate to deem a medical clinic as employer of a contracted doctor for payroll tax purposes;
- if a “relevant contract” is deemed to exist (which, on the basis of the recent cases, is likely to be the case for the majority of private medical clinics in SA), payments from a central clinic account to an individual doctor will be treated as wages for payroll tax purposes, irrespective of the clinic simply holding doctors’ fees in a central account on trust for each doctor.
These principles, and the relevant cases, are discussed in more detail in our previous article.
Concurrent with its announcement of the Amnesty, RevenueSA also released Revenue Ruling PTASA003 (Ruling), discussing the recent cases of Optical Superstore and Thomas and Naaz, as well as RevenueSA’s position on various provisions of the Payroll Tax Act 2009 (SA) (Act) (including “relevant contract” provisions and exemptions). The undertones of this Ruling (which can be accessed here), make it clear that RevenueSA intends to apply the recent case law as widely as possible.
The Amnesty
Medical clinics that participate in the Amnesty will not pay payroll tax on payments to contracted GPs during the period of 1 July 2018 to 30 June 2024 (Amnesty Period). The intent of the Amnesty is to provide general medical clinics with sufficient time to review their arrangements, seek advice and implement necessary changes to ensure future compliance with payroll tax obligations.
Upon expiry of the Amnesty on 30 June 2024, all participants will need to begin complying with any payroll tax obligations.
The Amnesty applies only to payments made to doctors registered as GPs with the Medical Board of Australia, meaning that payments made from a medical clinic to specialist doctors will not receive amnesty protection.
The Amnesty also does not apply to payments to GPs who are employees or “common law employees”. This can be particularly important for medical clinics without written contracts with GPs, or where written contracts are so onerous that the contractor would be taken as an employee for purposes outside of just payroll tax (such as superannuation and leave entitlements).
Eligibility requirements
To be eligible for the Amnesty, a medical clinic must:
- be a “designated medical practice”, meaning an employer for payroll tax purposes established for 22 June 2023 that conducts a medical centre business that either:
- meets the criteria for payroll tax registration under section 86 of the Act[1] but is not registered for payroll tax in South Australia and makes payments to contracted GPs; or
- is registered for payroll tax in South Australia but is not declaring payments to contracted GPs for payroll tax purpose (meaning that medical clinics which have been doing “the right thing” are not eligible for the Amnesty);
- submit an expression of interest to RevenueSA by
30 September 2023;
- make voluntary disclosure and, if not already registered for payroll tax, register in South Australia by 30 June 2024; and
- comply with ongoing payroll tax obligations after making voluntary disclosure.
A medical clinic that does not satisfy each requirement listed above will not be eligible for the amnesty.
How to apply
As noted above, a medical clinic which wishes to participate in the Amnesty must register their interest with RevenueSA by 30 September 2023. Further information and relevant links can be found on RevenueSA’s website.
Where a medical clinic is a member of a group for payroll tax purposes, each clinic within that group must separately apply for the Amnesty if it wishes to participate.
After 30 September 2023, RevenueSA will contact each registered medical clinic with details about requirements for the Amnesty.
Voluntary disclosure obligations
Valid voluntary disclosure will involve providing information “sufficient” for RevenueSA to assess a medical clinic’s eligibility for the Amnesty and payroll tax obligations. The exact level of detail required is still unclear, however RevenueSA has noted that participating medical clinics will generally need to provide annual wage information (including payments to contracted GPs) for previous years of the Amnesty Period, as well as estimated wage information for the 2023-24 financial year.
Medical clinics seeking certainty in relation to the payroll tax treatment of their contractor arrangements may also provide copies of agreement with contracted GPs to RevenueSA.
Practical considerations
With the registration deadline fast approaching, medical clinics should urgently consider their current contractor arrangements and eligibility for the Amnesty so that an expression of interest to participate in the Amnesty can be submitted to RevenueSA by 30 September 2023 (if suitable).
It is clear from position put forward by RevenueSA (both in the Ruling and in direct engagement with professional bodies such as the AMA and RACGP) that the medical profession should expect increased scrutiny and audit activity in relation to payroll tax obligations.
Our tax practitioners have had extensive involvement with the AMA(SA) and other professional bodies in tackling these issues, and are able to assist medical clinics with reviewing contractor arrangements, establishing sustainable operating models and navigating the effects of new payroll tax initiatives such as the Amnesty.
Should you wish to obtain further guidance with respect to your potential exposure, please contact Kale Rigano (Principal, 08 8210 1207 or krigano@normans.com.au), Marissa Mackie (Principal, 08 8217 1361 or mmackie@normans.com.au) or Alex Belperio (Solicitor, 08 8210 1230 or abelperio@normans.com.au).
[1] Section 86 of the Act requires employers to apply for payroll tax registration if that employer pays wages exceeding a ‘prescribed amount’ per week during a month. The prescribed amount is currently $28,846 per week (from 1 January 2019).
