2 February 2023 the AGPA wrote to the NSW Premier, Health Minister and Treasurer and their Shadow counterparts.
We expressed our concerns regarding the potential impact of taxing medical professional payments under the payroll tax and the impact that this would have on bulk billing as Practices would need to suspend bulk billing to develop contingency funds, pointed out that because of the way GP is structured it is a tax exceeding 10% on Practice revenue and requested that the State consider amending the payroll tax act to exempt medical professional fees.
Today we have received an unsigned email from the NSW Treasury essentially advising that they consider that medical professional fees are taxable under the act, that they intend to pursue the collection of tax and that as a concession they will “only” pursue tax collection as far back as 2018/19.
It may be wise for Practices to consider developing contingency funds.
Dear Dr Deery,
Thank you for writing to the Minister for Health, the Hon Brad Hazzard MP, regarding state payroll tax. As the Treasurer is responsible for this issue, your correspondence was forwarded to him. NSW Treasury has been asked to reply.
We acknowledge the critical role that your members as general practice principals play in providing high quality primary health care in NSW.
Payroll tax remains an important source of revenue to fund essential infrastructure and community services across NSW such as roads, schools, emergency services, transport, and health care. However, the NSW Government understands the importance of lower taxes to better support job creation and give local businesses more freedom to grow. The NSW Government remains committed to reducing the tax burden and has reduced or abolished taxes by over $10 billion since 2016-17.
The court’s decision in Commissioner of State Revenue (Vic) v Optical Superstore Pty Ltd  VSCA 197 decided that payments made for the performance of work are deemed as taxable wages for the purposes of payroll tax legislation. This decision upholds Revenue NSW’s existing interpretation of the law in relation to medical practices.
Revenue NSW’s current application of the law to include medical practices ensures that the tax applies consistently across all industries. Industry specific exemptions would adversely impact the equity, fairness and consistency of the tax system. Similarly, a broad exemption for payments of this nature may encourage businesses across different industries to structure their business arrangements to avoid tax.
Payroll tax contractor provisions are also harmonised with six other jurisdictions. Revenue offices in other jurisdictions have also indicated that they accept the Victorian Court of Appeal decision made in Commissioner of State Revenue (Vic) v Optical Superstore Pty Ltd  and intend to apply it.
Although Revenue NSW’s application of the law is consistent with the Victorian court decision, Revenue NSW has procedures in place to support taxpayers impacted by the decision. The Chief Commissioner has made the decision to limit assessment of prior year payroll tax liabilities to the 2018-19 financial year onwards.
Revenue NSW is also working with medical practices to determine the extent to which the payments they make to medical practitioners attract payroll tax, and whether payments might qualify for other exemptions. The Chief Commissioner is also willing to consider extending payment terms for those businesses having difficulty making payments on time.
Thank you for writing to the NSW Government on this issue.