Queensland’s latest take on payroll tax flouts the law, is misleading for doctors elsewhere and doesn’t offer any new protection at all.
On Thursday we found ourselves with a new and even more tortured interpretation of payroll tax in Queensland which bizarrely flouts the law on several fronts and despite claims otherwise, offers no new protections at all for service entity owners.
Now Queensland says that if you simply make sure that payments for services are made directly to the doctors of a practice first by the patient, you won’t ever be up for payroll tax.
The RACGP and the AMA of course put out press releases claiming a big win based on their excellent lobbying efforts, something they seem to do after every Queensland Revenue Office change of mind.
But if you push through the political smoke and PR being generated and concentrate on just a few clear existing facts you should see just how bizarre the position of the QRO is.
If you are following the law and fixing your practice up the way the basic precedent cases indicate you need to, payment flows is one of the key things you always needed to look at.
So any practice that has fixed that already or always had it the right way doesn’t gain a thing from this apparently new (but old, really) position of the QRO.
These practices were always compliant in terms of payment flows, at least.
Anyone else who hasn’t fixed this problem always needed to fix it if they wanted to be compliant.
So what exactly new is QRO offering and how did the RACGP and AMA win big for their members here?
Nothing, as far as the QRO is concerned, and they haven’t won anything.
If you were watching the law and working on how to meet it you knew you had to do all this anyway and if you have done it, you’re already there.
Notably the peak bodies seem to be retreating a little from their position that state governments need to drop payroll tax for doctors altogether, and are attaching themselves (increasingly desperately, it looks) to a theme of “look how easy we’ve made it for everyone though with all our lobbying”.
By lobbying state governments so publicly and making claims that most practices are non-compliant, when there is no way they know this, the RACGP and AMA have arguably stoked the fire in the belly of some revenue offices to pursue the tax far more vigorously, the profession having self-identified (incorrectly in a lot of cases) as a key and easy target for more tax revenue.
Payment flows are just one of a big checklist of things a practice needs to get right in order to ensure they are truly, in law, not liable for payroll tax in the future if they are running a services entity model.
That list of things includes tightly nailed down services contracts with tenant doctors that covers all sorts of services being made available to them under the tenant doctor arrangement (and which have to be constantly updated for things like MyMedicare payments); the advertising of services by the entity to doctors, not patients; ideally, the advertising of tenant doctors of their services directly to their patients, and so on (there’s a few other things).
By stating that if GP practices fix up direct payment flows then they won’t be levied payroll tax, the QRO is essentially making a new law without actually formally making one.
It is saying you don’t have to worry about anything else in the law created by cases like Optical Superstore and Thomas and Naaz.
Which to be frank is bizarre, and very probably misleading and dangerous for existing service entity owners.
It’s bizarre because in order to ignore existing law, which this ruling does, the Queensland government would need to have a new law passed by parliament and gazetted.
But all we have is a statement from an SRO.
Essentially a pinkie promise.
As things stand, the Queensland government has not even gazetted the amnesties for doctors it claims are valid.
These amnesties may not even be legal according to some tax and legal experts who are now looking into the matter.
So essentially, every service entity owner in Queensland is going to need to take it on good faith that a new government or a new taxation commissioner or treasurer will not one day in the future decide to flip back to the perfectly reasonably position that the law is the law, and any practice which only has payment flows right but any of the rest of the requirements in law wrong will be able to be audited for payroll tax and stung for back payroll tax.
Or do we trust that the Queensland government’s pinkie promise will hold and they will never actually apply the law in the future?
If you followed the black horse to zebra story a few weeks back on payroll tax, what the Queensland government has done here is said that it’s fine to keep all those illegal zebra stripes you spray painted on your original service entity black horse, just wash one off please – the payment flows one.
It’s dangerous for the additional confusion it will likely cause in a now long running episode of evolving and complex tax changes that are already thoroughly confusing for practice owners (sorry, service entity landlords).
For one thing, if your contracts with your tenant doctors aren’t right you could easily have the ATO on your back soon claiming they are employees anyway.
No one is watching the federal cases on deemed employees but they are there and hanging over everyone’s head.
It’s not just the state governments that service entity owners need to watch out for in making sure their structures meet the whims of tax authorities.
If you are still confused here, ask yourself, how could it somehow be OK in Queensland to fix your payment flows and nothing else and be protected, but in every other state it’s not OK?
To be clear, there is no law being made here in Queensland so there is no ongoing protection for anyone if the government ever wants to change its mind.
You might easily get a twist in the tale here where another profession takes the Queensland government to court annoyed at their selective protection of doctors (the pharmacy lobby perhaps?) which is not based in case law as established by cases like Thomas and Naaz and Optical Superstore, and knocks out that selective protection anyway.
Queensland is making stuff up as it goes here.
Does anyone think any of the other states are going to follow suit here and do the same thing?
If they did, that might end up working out as some form of protection, even though again, it would be bizarre, because it wouldn’t be following now established law – and if the peak bodies managed to get all the states over the line on a similar ruling, then maybe we could be impressed.
Is that their plan now? Get all the states to commit to what Queensland just did?
It does not seem very likely any other states will do what Queensland has just done – flout the law.
The law is the law.
Nothing has changed really from when the Optical Superstore decision started the ball rolling on payroll tax law interpretation more than five years ago now.
If you’d read that case and understood its implications way back then, and you were a forward thinker, you would have fixed payment flows as one of your first actions, and then, knocked off the other important things on that payroll tax checklist.
Broken record here and no one (especially the RACGP it seems) likes to hear it but:
- The only way to address payroll tax issues is to look at the law created by the various cases, look at your own business structure, and fix what might be wrong in the context of this law. Despite what the college is pushing a lot of service entity owners have fixed their structures and many more have already won against their local SROs who came after them.
- Not even the Queensland government can get around the simple premise of “the law” in our system of government, surprisingly. If the Queensland government has not gone to the trouble of creating its own law through an act of parliament, backing up what it is promising here, their promise is hollow and any time it wants to change their mind it can. By the way, imagine the Queensland Labor government trying to get such an awkward law across the line against the small business lobby, especially given how powerful the pharmacy lobby is in Queensland. And imagine what that might do the reputation of doctors.
- Probably the only way to ever get the payroll tax monkey off doctors’ backs is to scrap the tax altogether in every state for all businesses. It’s ridiculous to tax employers for creating more employment and always has been. But this is very unlikely to ever happen given the position of the states.
If you’re going to clean one zebra stripe off your horse, you may as well keep going with the scrubbing brush and cleaner fluid and scrub them all off.
It’s not going to be cheap, fast or easy. Payment flow is a very complex problem in itself.
But if you do, you’ll be able to sleep at night knowing that at no point can a government randomly reverse its hastily cobbled together and politically expedient promise on you and hit you up for the odd million in back taxes by simply applying the law.
