ACT Payroll Tax Catches Medical Practices


If your medical and healthcare practices carry on business in a manner where:

  • consultation fees (including Medicare rebates) are collected by the medical clinic into its operating account, and
  • remitted to the practitioner net of an “administration fee”.

then you are likely to fall within the ACT Governments broadened payroll tax provisions potentially treating net payments remitted to the practitioner as wages under the contractor provisions.

The reason broadened interpretation is due to a recent payroll tax decision handed down by the NSW Civil and Administrative Tribunal (NCAT). That decision involved the case of Thomas and Naaz Pty Limited v Chief Commissioner of State Revenue [2021] NSWCATAD 259.

In that case Thomas and Naaz ran three medical centers with an operating structure similar to that outlined above passing 70% of the collected income to the practitioners and retaining 30% as a service fee for the provision of administration and associated services.

NCAT found that the arrangement in Thomas and Naaz attracted payroll tax under the contractor provisions. Broadly the contractor provisions are said to apply because the medical service entity is supplied services of a practitioner (contractor), for or in connection with the performance of work by the practitioner notwithstanding the practitioner simultaneously providing services to others (for example patients).

The operating arrangement outlined above is typical of medical services provided by doctors to their patients and have in the past been considered a low risk of payroll tax application.

ACT Government announcement

The ACT Government is addressing the impact of payroll tax on general practice (GP) medical centers
by introducing a temporary payroll tax exemption by:

  • waiving payroll tax liabilities until 30 June 2023 for medical practices that have not previously paid payroll tax on GP payments. This announcement represents welcome certainty as GP businesses will not be subject to retrospective assessments and penalties.
  • Extended time for compliance: To provide further time for GP businesses with reasonable levels of bulk billing to review their taxation arrangements, seek advice and implement necessary changes to ensure future compliance with their payroll tax obligations through until 2025.
  • Two year exemptions for bulk billing: A payroll tax exemption on GP payments until 30 June 2025 for healthcare businesses making payments to GPs that:
    • Are bulk billing 65% of all patients
    • Have registered for MyMedicare, and
    • Register with the ACT Revenue office by 29 February 2024.


The terms of any contracting arrangements between the medical service entity and practitioners will need to be reviewed and likely require changes in order to avoid the application of payroll tax where net remitted payments exceed the payroll tax threshold.

Importantly any review would require the medical and healthcare service provider to relinquish some control. This might involve:

  • Reviewing any restraint of trade conditions
  • Reviewing how administration fees are set, for example, consider a per square meter basis or
    license fee akin to a landlord/tenant arrangement.
  • Alter the method of fee collection.
  • Ownership of records, give consideration to who owns the records and perhaps a storage fee
  • Certain payroll tax exemptions might apply.

The ACT Government announcement has provided a window of opportunity to make necessary changes and seek advice in circumstances where you might move from a low risk to a high risk of falling within the payroll tax net as a result of the recent decision in Thomas and Naaz.

If you would like to discuss any of the content outlined above, feel free to reach out to either Eugene Kalenjuk or Andrew Snaidero at Hardwickes on 02 6282 5999 or email: or

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