A rising state tax burden is pushing clinics to breaking point despite fresh health spending in Victorian budget says the RACGP.
The RACGP has warned the Victorian government it risks undermining its own healthcare investment agenda, saying mounting payroll tax pressures are pushing clinics towards closure.
The day after the state delivered its budget, the college’s Victorian chair Dr Anita Muñoz said that while continued investment in healthcare services was welcome, the government could not ignore the financial strain facing the small businesses delivering the lion’s share of primary care.
“We welcome investment in healthcare, but right now the Victorian government is giving with one hand and taking with the other,” she said.
“The growing tax burden on general practice, especially payroll tax, is making it harder for practices to keep their doors open, employ staff and deliver care to their communities. That directly undermines the viability of general practice and impacts patients.”
The RACGP has repeatedly called on the Victorian government to introduce a payroll tax exemption for GPs, similar to arrangements already in place in Queensland, to protect access to care and support the long-term sustainability of general practice.
Dr Muñoz said Victoria’s payroll tax settings continued to place significant pressure on clinics already grappling with rising operating costs, workforce shortages and years of inadequate Medicare indexation.
“General practice in Victoria is already under severe pressure,” she said.
“Adding payroll tax on top of this does not strengthen the health system, it weakens it.”
Dr Muñoz told The Medical Republic that many people – from government to the general public – still failed to recognise that general practice operated as a small business sector rather than part of the public health system.
“This is one of the single most important advocacy pieces for our modern times, to help not only government but also the public recognise that general practice is a small business,” she said.
“The public may believe general practice is part of the public health system because of the association with bulk billing and Medicare funding, but they are not.”
She said practices were carrying the same overheads as other small businesses while continuing to subsidise gaps in public funding.
“We have ridden a wave of general practice altruism in terms of subsidising the Medicare spend for decades now,” Dr Muñoz said.
“If your margins are between zero and three or 4%, you’ve got to ask yourself whether business owners are going to continue shouldering the responsibility of keeping those businesses afloat when doing so is so arduous.”
Dr Muñoz said the Victorian Government’s payroll tax amnesty, which shielded clinics from retrospective tax liabilities until July 2025, had prevented some practices from collapsing, but warned ongoing tax settings remained unsustainable.
“That actually was a huge achievement, because we’ve been told by a large number of practices that retrospective taxation would signal the end of their businesses and the services to the community,” she said.
Related
She also argued the amount raised through taxing contractor GPs was relatively minor in state revenue terms but could be devastating for individual clinics.
“For the small amount in terms of overall state revenue, continuing to demand that tax from practices that are really struggling to stay afloat doesn’t make any sense,” Dr Muñoz said.
“It’s not going to change the government’s bottom line, but it can result in the closure of practices.”
Dr Muñoz said the college had already received a commitment from the Liberal Party that it would support the exemption should it win government when Victoria goes to the polls in November and she believed the offer was “genuine”.
“I will continue to have this conversation with the incumbent government for as long as I’m still chair [of the RACGP Victoria], because I believe this is a way to secure a thriving general practice for the community, and it’s a way to prevent businesses from going under,” she told TMR.
“When a general practice closes, it’s not just the general practice owner that suffers, it’s the entire community and all of the GPs who work in that community.
“So I think we have to be prepared to think at a systems level and recognise that the entire health system is dependent on a thriving general practice, and it is entirely in the best interest of the community to make sure that that sector doesn’t fail.”
She warned failure to ease pressure on general practice would ultimately drive more patients into hospitals and emergency departments.
“When general practices become financially unviable, patients don’t disappear, they end up in emergency departments and hospitals, which are far more expensive parts of the system,” she said.
“If the Government is serious about delivering more care closer to home, it must ensure general practices are financially viable to provide that care.”
