It’s not always bad news in the world of GP payroll tax, but you wouldn’t know it.
The words “payroll tax” may strike fear into the hearts of GPs the country over, and there’s a reason – the cases where practices that do win against the state revenue offices generally don’t get spoken about.
In a recent HealthVue-run webinar, healthcare accountant David Dahm claimed that he had worked with multiple practices in states like Victoria where GPs were ultimately not deemed employees of a medical centre.
“The devil’s in the detail, it’s not about how famous your accountant or your lawyer is or what insurance company you use or which bank or which service fee calculator you use,” Mr Dahm said.
“It’s all about the intentions of your structures – what is the purpose? What are the systems, and what evidence can you provide to show that you’re compliant?
“It’s really that simple … and whether you think it’s ridiculous or not is not for debate.”
One of the common myths that Mr Dahm identified was an assumption that a separate bank account and proper flow of funds alone would help practices and GPs avoid payroll tax liabilities.
This sprang from a comment made by the judge in the landmark Thomas and Naaz payroll tax case.
“Some people have taken these words as literal and absolute, but it wasn’t a court decision,” Mr Dahm said.
“And if it wasn’t a court decision, you’re basically standing on shaky ground.”
What the judge did say, according to Mr Dahm, was that doctors could lend their money into a company account and still have centralised banking where there’s a pre-agreement included in the service agreement to split money in a certain way.
“The real problem people have is they hear this advice and they go and run off and set up a company,” he said.
“But these things don’t work unless you do it properly.
“You’re supposed to speak to your doctors, you’re supposed to show there’s intention.
“There needs to be a vibe that they actually understand what they’re doing and, sadly, why people are falling over in these audits is that they say ‘the accountant told me to sign it’ or ‘I did it for tax reasons’.
“It’s not enough just to set this up. You have to set it up properly, and it has to be done with appropriate consent.”
Doing it the “right way”, according to the accountant, includes signing service agreements and permissions to put money into certain bank accounts, but also ensuring that the separation between practice and practitioner is reflected in other wars.
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For instance, if the practice name – rather than the individual practitioners’ names – is the only thing displayed on the SMS recalls which go out to patients or on the Google Maps listing for the clinic, then it may fail an audit.
Basically, a medical practice entity should be able to show that it is in the business of supporting practitioners to provide healthcare, not providing healthcare itself.
Mr Dahm urged doctors to seek independent legal and accounting advice before agreeing to participate in state-led partial payroll tax exemptions.
Another myth about payroll tax compliance, Mr Dahm said, was that having doctors operating as independent tenants would impact team-based care.
“You can have a group of doctors co-located, sharing the back office, the nursing staff, the reception staff and you can actually have … a higher service fee-for-care plan, and it might be 90% because you’re still going to make more money because care plans attract more value,” he said.
“There are a lot of these sorts of rumours saying you can’t do that. That’s just rubbish – it’s a user-based system. “If you’re offering a system whereby you’re providing practice management support services to practitioners, there is no reason why this model can’t work for you. You might just want to more carefully articulate it in your service agreement.”
