Tax liability warning on GP accreditation standards

4 minute read

The AMA has cautioned the RACGP about language in its accreditation standards which could imply that GPs are practice employees rather than contractors.

Accreditation requires GP practices to be assessed as a unit. Recent payroll tax audits compel GPs to assert their status as an independent contractor.

Oh dear.

The RACGP are in the midst of updating the definition of general practice for the purposes of accreditation and are now taking feedback on a draft.

The definition it came up with is as follows:

For a practice or health service to seek accreditation:

  • It must provide comprehensive, patient-centred, whole-person and continuous care; and
  • Its services must be predominantly* of general practice nature.

*more than 50% of the practice’s general practitioners’ clinical time (ie collectively), and more than 50% of services for which Medicare benefits are claimed or could be claimed (from that practice) are in general practice.

In its response to the draft, the AMA points out that the MBS itself does not define what items are general practice-specific, making it hard to prove services are of a “predominantly general practice nature”.

A more significant issue spotted by the association, though, is buried in the wording of the footnote.

“It is also preferable to remove the possessive language of ‘the practice’s general practitioners’ in the original RACGP draft definition, given that practices do not necessarily employ the GPs who contract their services to them,” the AMA said.

It suggested amending the footnote to read “more than 50% of income generated directly from services of general practitioners working in the practice”.

RACGP president Dr Nicole Higgins said that, as a practice owner herself, she understands the existential threat that payroll tax poses to clinics.

“The College is aware of the concerns about the wording of the definition of a general practice for our accreditation standards, and we are seeking legal advice,” she told The Medical Republic.

“We will consider all feedback from the sector as part of the consultation process for the Standards, including from the Australian Medical Association.”

Health accountant David Dahm, who has become something of an expert on payroll tax, said payroll tax and accreditation standards were on a collision course.

At the heart of the payroll tax issue is the question of who employs who – are GPs employing a practice to pool their resources and split the overhead costs of administration staff and supplies, or is a practice employing GPs as its workers.

Under the latter scenario, payroll tax applies.

“This is the bit that’s causing a sore point – a general practitioner does not take instructions from a practice, they should only give instructions,” he told TMR.

“This is, legally, what should happen.”

The way that accreditation is currently structured, Mr Dahm said, the opposite is happening.

“How accreditation is written – ‘you must chase up all your abnormal test results’, ‘you must make sure that you write your medical records in a certain way’ – this is not what a typical landlord-tenant relationship is,” he said.

“Westfield doesn’t go and tell Woolworths their tomatoes need to be presented in a certain way.”

Mr Dahm’s opinion is that the solution could be creating a definition of landlord-tenant doctor arrangements and building accreditation around that.

“It’s an absolutely critical issue, because this definition is either going to make or break general practice,” he said.

“They [the college] need to accommodate more modern structures in their language.”

The point of including a landlord-tenant structure is to create a clear distinction between practices that employ or contract doctors – thus being one commercial entity, subject to payroll tax – and situations where the practice and the doctors are different businesses, i.e. the “practice” exists as a separate entity with the purpose of providing management and support services.

It would be more accurate, according to Mr Dahm, to only refer to doctors themselves as the practice – practitioners are, after all, the ones that make it a practice – and start calling the reception staff, clinic nurses and other shared resources the “support facilities”.

“You’re not accrediting general practice, that’s where the confusion is,” he said.

“You’re accrediting a practice management support facility.”

It’s essential, he said, to be able to separate the non-clinical parts of the business from the clinical parts, and accreditation standards need to be separated to acknowledge that distinction.

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