General Practice and Payroll Tax –   another reason why you are unlikely to be bulk billed anytime soon



General Practices are being impacted by State Governments imposing Payroll Tax (PRT) on medical professional fees.  This will impact on the viability of General Practices (and your ability to see a GP) and how much it will cost you to see a GP.

What is Payroll Tax?

Payroll tax is a tax levied by State and Territory Governments on the wages and salaries paid to a company’s staff.

The percentage paid varies between states and in some cases within states (depending if you are classified as a metro or a regional business) and might also change if you are a larger of smaller business.

There is a threshold so that you only pay the tax on the amount that your wages and salaries go over the threshold. The threshold also varies between states.


Payroll Tax Rates
State Threshold PRT Urban Variation
ACT $2,000,000 6.85%
NSW $850,000 5.45%
NT $2,500,000 5.50%
QLD $1,300,000 4.75% 4.95% for employers greater than $6.5M
SA $1,700,000 4.95%
TAS (Low) $1,250,000 4.00% 6.1% for taxable incomes over $2,000,000
TAS ( High) $2,000,000 6.10%
VIC $700,000 4.85% 1.2125% for regional employer based in VIC
WA $1,000,000 5.50%

What has changed that makes paying Payroll Tax a problem for GP?

General Practices have always paid payroll tax on the salaries of reception staff, nurses and other allied health professionals and for other salaried staff such as GP Registrars (Doctors completing their GP specialist training).

The GP Doctors at a Practice are usually contractors, with about 65% of the fee you pay (or used to be bulk billed for) going to the GP and about 35% going to the Practice to pay for the receptionists, nurses, the building rent, furniture, computers, electricity, medical supplies and all of the other things which make it possible for doctors to work. So the Practice provides a service to the Doctor.

Until recently the payment made to a GP was not considered to be eligible for payroll tax. However a series of recent court cases have overturned that treatment so the payment made to a GP Contractor is now considered to be a payment for work done and therefore subject to inclusion in the payroll tax. Because the payment appears to come from the Practice, the Practice has to pay the payroll tax.

All of the eastern states and territories have decide to use these rulings to apply the tax. Western Australia has not done this yet.

There are two parts to the problem:

  1. The tax need to be paid from the proportion of the medical professional fee that is paid to the Practice so tax on 65% is paid from the 35% proportion.
  2. The tax is due retrospectively for up to 5 years. So although the rulings are recent they say that Payroll Tax can be charged on all medical professional fees going back for five years.


The Amount of Tax

Because of the way GP Practices are structured 65% of all income goes to the GP (and is treated as wages for payroll tax).  However as the tax is paid by the Practice from the 35% paid by the GP to the Practice for services the effective tax on income is almost doubled.

Payroll Tax Rates
State Threshold PRT Urban % of Practice Income
ACT $2,000,000 6.85% 12.75%
NSW $850,000 5.45% 10.12%
NT $2,500,000 5.50% 10.21%
QLD $1,300,000 4.75% 8.82%
SA $1,700,000 4.95% 9.19%
TAS (Low) $1,250,000 4.00% 7.43%
TAS ( High) $2,000,000 6.10% 11.33%
VIC $700,000 4.85% 9.01%
WA $1,000,000 5.50% 10.21%


Therefore unless the practice is returning more than proposed tax on income then the Practice loses money on all income above the threshold. Many Practices are already paying PRT just on the wages of and salaries of receptionists, nurses and GP Registrars, so for these Practices the PRT will apply to every dollar of income they receive. After many years of Medicare freezes most practices have very low profitability, the imposition of PRT means they will be losing money.

Most business don’t pay the majority of their income as wages and salaries. This treatment of PRT is in effect a tax on Practice income.


Retrospective taxes are when the State can go back and charge the taxes for previous years.

States have taken different approaches to the retrospectivity of PRT.

The ACT has said it won’t make it retrospective (so PRT only applies on income this financial year and in the future).

Queensland, and South Australia have offered a delay which they call a moratorium (but you have to agree that the PRT applies).

NSW and Victoria are so far not agreeing to forgo retrospectivity. If retrospectivity applies a Practice can receive a tax bill for around 10 % of their total income for the last five years. If they don’t have the money they will need to either borrow it or agree a payment arrangement with the State Government.

Where will the money come from?

If Practices have to pay the tax they will need to collect extra revenue from somewhere (there is not enough profit in a typical GP Practice to pay the tax from profits).

If they collect it from the GPs they are asking the GP to take an income cut equivalent to the payroll tax (5-7%), or they can ask the patient to pay extra. On the surface getting the patient to pay the PRT looks easy – its $2-$3 on a bulk billed consultation.

The catch is that if a co- payment is requested the patient cannot be bulk billed, so by asking the patient to pay $2-3 extra the federal government won’t pay the GP the bulk billing incentive of around $20.65 (urban), and the medicare rebate ($41.20 for a standard consult) must be paid by the patient and reclaimed from Medicare. So to collect $2-$3 in state taxes that patient needs to find around $65-$68 payment up front and get $41.20 back from Medicare after a couple of days.

If the Practice needs to make allowance for retrospective taxes, the amount they need to add is closer to $20.

What is the outcome?

If the tax is collected from patients Medicare will save $20.65 per consultation with that fee transferred to the patient, and the State will collect $2-$3 (also paid by the patient).

If patients can’t afford the upfront fee they will need to either not be treated or go to ED (if they leave seeing a GP for too long, some patients will arrive at ED eventually anyway). The cost of seeing a patient at ED is $500- $600, and is paid for by the State. So the State government will collect $2-$3 and risk spending $500 – $600. If only 1% of patients go to ED instead of seeing their GP the State will spend much more than it collects.

What is the solution?

  • Don’t tax health.
  • Change the State payroll tax laws to exempt medical professional fees.
  • Recognize that primary healthcare is the most cost-effective healthcare we have and work to strengthen it.