Levying a payroll fee ‘may do more harm than good’

4 minute read

Another proposal to circumvent the potential damage to practices has failed the sniff test.

An email is circulating among South Australian GPs advising them how to raise their fees to cover payroll tax without incurring extra payroll tax liability – but this is unlikely to be feasible or legal, according to an accountant and a lawyer.

The email recaps a discussion among a group of practices about responses to the expiry of the SA amnesty at the end of June and the round of audits expected to follow.

“This is not a cost that general practice can absorb – this means it will need to be passed on to patients,” it says.

As well as advising GPs and practice owners to sign a change.org petition and use promotional material provided by the RACGP to inform their patients, it proposes collecting money to pay for payroll tax separately from the main fee so as not to increase the payroll tax owed.

It says: “As of July 1st – passing on the cost to patients. Importantly – if you simply raise your fees, this will just add to your payroll tax liability. Cost recovery needs to be charged separately to the consult fee and needs to be retained by the practice in preparation for paying this tax.

  • This means – you can only raise an additional charge against those who have NOT been bulk billed.
  • To work out your estimated cost – you should ask your financial team to review your likely payroll tax liability for the 2024/25 tax year. From this, you can work out, the average additional cost per private consult that you will need to charge to recoup the cost of the tax.
  • Then from July 1st – practitioner charges usual fee, then the practice charges the State Govt payroll tax as a separate fee to be retained in preparation for the tax bill. Take care with naming the tax after any politicians – you may run into legal issues! Best call it what it is – a state based tax.
  • This will cause some discomfort and likely frustration from patients – please ask them to direct correspondence to the treasurer – Stephen Mulligan – treasurer.dtf@sa.gov.au
  • I would recommend educating patients in the lead up to July 1st to explain the new tax fee so that they are not blindsided. Again – patients can direct their frustrations to treasurer.dtf@sa.gov.au

Health and Life principal David Dahm said the proposal to pass on the tax to patients had a number of problems.

“It’s a bit of a red rag to the bull, because the only people who can charge the taxes generally are governments that have been duly elected by the people,” he told TMR.

“I don’t know where it says in our constitution that doctors are allowed to create their own taxes and levy them against the people – but I’m not a lawyer.”

Claiming that such a fee would not itself be payroll-taxable was “illogical”, he said.

“You’re just going to end up paying more payroll tax, because it’s all based on a percentage of what you bill the patient. So that doesn’t make sense.”

Further, charging such a fee ruled out bulk billing, raised the spectre of price fixing and was likely to generate patient complaints, he said.

“Some patients might be slightly offended and upset because you don’t want to pay your taxes and you expect them to pay them for you,” he said. “So I’m not sure even ethically this is a really good way to move forward. It might do more harm than good.”

Referring to an ABC story last month in which a practice owner estimated he would have to pay $140,000 per year in payroll tax for two practices, Mr Dahm said “it’s still a lot cheaper to become compliant”.

Lukasz Wyszynski, principal solicitor with Hamilton Bailey, said that “from a legal standpoint, it’s not legally possible for one individual to pay another individual’s tax”.

“I genuinely don’t think that they’re allowed to charge a payroll tax levy, because technically, that’s someone else paying your tax bills,” he told TMR.

He could not understand how the author of the email proposed collecting payroll tax – as though it were GST – without incurring tax on that payment itself.

He said he hoped the petition would achieve its aim, “but my observations would suggest it will be a very hard battle to win”.

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