Queensland’s new tax ruling casts doubt on a commonly held belief that most non-GP specialist work is exempt from payroll tax.
Doctors who work across public hospitals and in private medical centre settings may have an unexpected payroll tax liability, as Queensland sheds further light on what counts as “providing services to the public generally”.
On Monday the Queensland Revenue Office released a fresh public ruling on payroll tax in the medical centre context, replacing the previous ruling from December.
As a public ruling, it’s just the view of the individual state payroll tax commissioner on a particular issue and is therefore not legally binding. In short, it’s a suggestion but not a promise.
It also only applies in Queensland, at least for now – virtually every other eastern state adopted Queensland’s December ruling, so it’s possible that the same will happen with this updated version.
The new document is almost double the size of the December ruling and goes into far more detail about how the tax office will judge whether a medical centre is acting as an employer toward its contractor doctors.
While the ruling is generally geared toward primary care-style medical centres – i.e. general practice – it does give detail on a particular scenario where a doctor is working for both a private medical centre as a contractor and for a public hospital as an employee.
The conventional wisdom has been that this doctor’s non-hospital work would likely qualify for a payroll tax exemption because they are providing services to the public generally as per section 13B(2)(b)(iv) of Queensland’s Payroll Tax Act 1971.
But example 3.4 flips this assumption on its head. The QRO found that a doctor in this scenario would be seen to be working as an employee for two employers and not to the public generally, thus making any payments that doctor receives from the medical centre liable for payroll tax.
Paul Copeland, head of health services at accountancy firm William Buck, said that the new example marked a big shift in the way the state viewed non-GP specialists.
“In the original ruling, it talked about when the doctor went to work for Queensland Health … and in that situation it was unclear as to whether or not that would then be seen as them holding their services out widely to the public,” he said.
“The commentary here is that they would be unlikely to be exempt.”
The reason non-GP specialists have largely been spared from the unfolding payroll tax mayhem is because they tend to work as employees for hospitals, where their position in relation to payroll tax is at least clear.
All public or non-profit hospitals are also regarded as payroll tax-exempt by the states, simplifying matters for a large chunk of the workforce.
“The initial interpretation was that potentially [working across public and private] would mean that [specialist doctors] are exempt from payroll tax,” Mr Copeland said.
“But this makes it clear that they probably aren’t.”
As Mr Copeland tells it, specialist group practices could end up in hot water unawares and unprotected.
“This here could open the door [for liability] because the pathway that a lot of specialists go on to move into private practice is to stay with one foot in public practice,” he said.
As for the various amnesties and audit pauses announced so far, the AMA and RACGP have primarily been advocating on behalf of general practice only, and it’s unclear whether they would cover non-GP specialist services.
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