All business structures in Victoria to incur payroll tax

7 minute read

One of the most important aspects of yesterday’s announcements didn’t make it into the Treasurer’s press release.

Both Victoria and South Australia announced separate plans to exempt bulk-billing income from payroll tax yesterday evening, but GPs aren’t out of the woods just yet.  

Across both states, any income generated from bulk billing will not count toward the total sum that payroll tax is assessed on. 

It’s set to be rolled out automatically in Victoria, but South Australian practices will need to register with their state revenue office in order to be eligible.  

Federal Health Minister Mark Butler congratulated both states on their respective announcements at a press conference in Adelaide today.  

“I recognise that payroll tax was a state responsibility, but obviously, as a government that was putting very substantial investment into general practice … I was hopeful that state treasurers and health ministers would sit down with doctor representatives … and work through this difficult issue in a constructive and mature way,” he said.  

“I think the evidence is there to see from yesterday’s announcement that that is exactly what the treasurer here in South Australia and Minister Picton did with the College and I think it’s a terrific outcome.” 

But like any gift horse, the scheme requires a thorough dental check.  


Victorian treasurer Tim Pallas technically made three announcements last night.  

The first and most immediately relevant for practices was that the SRO would not pursue backdated tax bills.  

“[Back tax] was the most dire threat in among all of this, because issuing five years’ worth of retrospective tax bills would, in about a third of cases, close down these businesses,” RACGP Victoria chair Dr Anita Munoz told The Medical Republic.  

“[A commitment to] no retrospective tax bills for practices means that threat of immediate closure has been removed.”  

Both Australian GP Alliance deputy chair Dr Mukesh Haikerwal and Primary Care Business Council member Dr Rod Aziz also told TMR they believed the commitment to no retrospective bills was the most important aspect of the announcement.  

“It made it very difficult for operators to keep their doors open with that uncertainty and black cloud over their head,” Dr Aziz said. 

The second part of Mr Pallas’ announcement was a payroll tax amnesty period through to July 2025.  

While all three Victorian GPs welcomed the year-long exemption, they said the negotiations to get to that point had been strained.  

“We were having ongoing conversations with the SRO and prior to the announcement yesterday they were rather fruitless, to the degree that we informed the government we would not be engaging with them any further,” Dr Haikerwal said.  

According to both Dr Haikerwal and Dr Munoz, the SRO had informed GPs involved in the discussion that it was not aware of a single GP contract in Victoria that would not be eligible for payroll tax.  

“The reason that this amnesty was granted is that there was an acknowledgement that [we needed time] to educate all general practices in the state,” Dr Munoz said.  

“Our state revenue office has given a very clear signal that it deems all general practices in the state, irrespective of any conceivable structure, to be liable for payroll tax on the income generated by contracted doctors.” 

This will apply even in cases where doctors are not employees in the true sense of the word – i.e. they don’t get paid leave or super. 

“If you are working regularly in the same environment and as part of a collective, even if you are your own business, the structure of that business is such that in the eyes of the state revenue office, payroll tax applies,” Dr Munoz said.  

Mr Pallas’ third announcement was that, from the end of the amnesty period in July 2025, income from bulk billing would not be payroll-tax assessable.  

At the end of each reporting period, practices will just report the income generated by private billing and the total sum they owe for payroll tax will be collected based on that figure.  

The catch is that the government’s definition of “private billing” includes any service where a fee is generated. 

“Even if you charge a private fee for one item and a rebate only for the second item in the same visit, the entire income will be taxable,” Dr Munoz said.  

“We tried very hard to convince them not to do that … but our suggestion was rejected.”  

The necessary legislative changes for the bulk billing exemption will be included in the Spring Tax Bill, to be tabled later this year.

“Bulk-billing plays a critical role in getting patients early care, and rates have been declining due to a decade of neglect by the former Federal Liberal National Government,” a Victorian government spokesman told TMR.

“That’s why we are providing an exemption to GPs who provide bulk-billed consults – to create an incentive for them to do so.”

South Australia 

By the time the bulk-billing exemption has been implemented in Victoria it will have been running for 12 months over the border in SA, albeit in a slightly different form.  

GPs in the state are fast approaching the end of their amnesty period, which will wind up on 1 July.  

Unlike in Victoria, GPs in SA will be required to report earnings from both bulk-billed services and privately billed services.  

The SRO will then apply a percentage discount based on the individual practice’s bulk-billing rate.  

“The average bulk-billing rate in South Australia for the last quarter was 74%,” RACGP SA chair Dr Sian Goodson told TMR.  

“So, for example, if a GP’s ‘wages’ were $100,000, the SRO would remove $74,000 and you’d only be liable for payroll tax on the $26,000 that’s left.” 

It’s possible that some clinics will fall under the state’s $1.7 million payroll tax threshold once they receive the bulk-billing discount, opening up the potential that some will not owe money at all. 

“If [practices] think they’ll meet the threshold or they’re going to be close to the threshold … they do need to register for payroll tax, if they haven’t already done so, by the end of June,” Dr Goodson said.  

“But then the calculations will come later. Many practices actually will now fall under the threshold because of this [measure].” 

While the same is technically true for Victorian GPs, it’s much more unlikely that practices will qualify given the state’s lower payroll tax threshold of $700,000.  

With the start of the program fast approaching, Dr Goodson said the college would be working to bring further detail to SA members via webinars.  

The necessary amendments to SA payroll tax law will be included in the state budget bill, to be tabled on 6 June.  

This story was updated following confirmation from SA that practices would need to register for the scheme.

We will be exploring the implications of payroll tax on the way different practice models operate at our upcoming event Burning GP, on 14 and 15 June at the Mantra on Salt Beach, Kingscliff NSW. Only a handful of tickets are still available – see program and tickets here

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