Fix payroll situation, get on with life

5 minute read

We now know enough to make sensible decisions on the best, most sustainable business structure for GP services – hear more at our webinar.

It’s nearly five years since the first important payroll tax case in Victoria – Optical Superstore – set the ball rolling on years of second guessing and confusion around what business structure is or isn’t liable for payroll tax in each state.

But the comprehensive nature of the most recent Queensland Revenue Office update to its ruling on the tax – it added some 44 criteria in its update on 23 September – probably sets enough guardrails in place now for every practice owner to understand clearly what they need to do if they want to be seen as a proper services entity structure which will not attract payroll tax.

That’s according to medical practice advisory firm principal David Dahm, who in our webinar tonight (Tuesday 10 October) will go over these rules in detail to make it clear what a practice needs to do to pursue a true service entity landlord type arrangement and be confident it can run that model well into the future.

Dahm has copped a lot of criticism in this debate as it has unfolded over the past five years.

Originally he was described as Chicken Little for warning what the implications of the early cases were.

When it became clear that the various state revenue offices were lining up to move on practices that didn’t meet the criteria identified in these cases, and rulings started to emerge that reflected the fundamentals in the cases, the RACGP and the AMA came out and ran a political campaign to attempt to get the politicians to drop payroll tax for GPs.

Dahm pointed out that by running such highly visible campaigns the AMA and college were likely to escalate the entire situation – that campaigning for the states to change the law just for medical businesses was a highly risky strategy.

He got pilloried for this stance as well.

When the QRO announced its recent comprehensive payroll tax ruling update, somehow the RACGP came out and declared a win for its members based on its lobbying by saying that everything was now clear and simple and came down to how payments flowed from patients to the GPs.

Given the previous campaigning by both the AMA and the college to get state governments to drop the tax for GPs, the new stance felt like they were gaslighting their memberships somewhat.

The QRO ruling not only definitely put an end to the idea that state governments would give in to the arguments by the AMA and RACGP that payroll tax would bankrupt the sector because so many practices were not compliant (a fact that neither the AMA nor the RACGP could even know), it also outlined in intimate detail all the ways that a practice could be pinged and levied at some point for payroll tax.

The AMA and RACGP have stuck with the idea that practices only need now to change payment flows – which is not very easy, by the way – but even a simple analysis of the QRO ruling suggests that any practice only covering this one element of compliance would expose themselves significantly going forward.

And even if the QRO applied only its payment flow ruling – that if patients pay the GP first there’s no payroll tax incurred – that would only be Queensland.

What is most likely now is that the comprehensive QRO ruling will be adopted in various ways by the other states. And there is no indication that the other states will rule that if payments flow first from a patient to the GP all the other issues will be off the table. In fact cases already run in Victoria suggest otherwise.

Dahm’s position now is that we have all the information we need to understand in detail how to structure a business that provides services to GPs who then provide services to the public: the doctor tenant/landlord services entity model.

He says this model is and has always been the most efficient for the delivery of GP services in that it provides a business with important legal protections on malpractice and the best path to good recruitment, talent retention and through all these elements, the best path to higher business value for sale.

Notably he never talks about the structure as one that optimises a tax position.

But he admits that over the years many businesses have slipped on understanding the key elements of running the model, and some need to look at remodelling their business processes to some degree.

He also thinks there’s a cultural element that needs to shift in how medical practices are seen and present to the public.

Dahm has an intimate knowledge of case-based evidence and is an encyclopedia of relevant state and federal cases.

If you’re turning up tonight prepare for a lot of rapid-fire detail: he has around 84 slides to get through in an hour – under an hour, actually, as there’ll also be a short session with the legal expert Lukasz Wyszinski.

We are recording the session so you can come back at your leisure. I recommend just listening for the high points, then going back to the detail later if you think you need it.

If you haven’t registered yet you can do so here. Email with any questions. 

The webinar starts at 7.15pm and will conclude at 8.15pm precisely (promise).

Note: Despite what some kind folk on various practice management socials like to sometimes incorrectly assert or imply (not one has ever rung us to check), David Dahm has never paid TMR and TMR has never paid Dahm any stipend of any description in relation to content on tax, accounting and practice management. It’s all editorial comment folks, which is more than you can probably say for some presentations you’ll see at certain key conferences for owners and practice managers where often presenters and their sponsoring firms are paying a lot for the privilege.

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