An Australian Taxation Office ruling requires you to advertise your services to qualify for tax deductions and avoid a payroll tax audit.
If you do not have an independent medical and health contractor website, you risk losing your tax breaks – income splitting to spouses, rent, mortgage interest, rates and land tax and other deductions.
The ATO last week effectively ruled that contractors must set up their own websites, reinforcing a High Court finding from last year.
The idea of building and maintaining a website promoting your services as a GP may not appeal to you. I’ve already had a pushback from a senior GP who says they don’t want to advertise for more work and don’t use social media. We understand, but this has now become a significant tax issue that both the provider and the practice must address.
The practice may also be at risk of a payroll or income tax audit if its contractor GPs are not seen to be “making a public offer” of their services.
The ruling applies to all medical and health contractors, including those who work as general practitioners, specialists, surgeons, GPs, physiotherapists, chiropractors, and any other type of medical or health contractor. It applies to them regardless of whether they are self-employed or working for a company.
The ruling comes after a contractor taxpayer lost his High Court appeal on a case that examined who must “make the offer” of income-generating services. This ruling comes into effect immediately.
Technically, if you are a contractor, and you do not have a website, this ruling can be used against you to deny or limit important tax deductions. To quote from the ruling:
Direct result of making offers or invitations
99. To meet this condition, the offer or invitation must be the reason that the sole trader or PSE obtained the work from the client and there must be a direct causal effect between the offer or invitation and obtaining the work.
100. A wide variety of activities can constitute making offers or invitations (such as print advertising, printing posters, radio and television broadcasting, public tender, having a website and posting internet advertisements), but all require the involvement of making public announcements.
Who must make the ‘offer’
106. The offer must be made by the sole trader or PSE.
Contractor and practice arrangements are at risk
The contractor must, on their own account and not that of the practice, make a “public offer” for their own services. Failure to heed this part of the ruling may put at risk the practice and its contractor arrangements.
Every tenant doctor or contractor doctor needs their own separate website with their own separate domain name away from the practice (this may include a separate email address). There is no harm if it is linked to and from a practice website.
Failure to do so may limit your tax deductions because you will not be viewed as a genuine business.
Should the federal ATO or state payroll tax inspector come knocking on your door, your service agreements and service fee accounting and reporting systems must walk the talk.
The ATO’s new data-sharing and matching laws and tools will instantly pick up any reporting differences, e.g. income banked using the incorrect ABN. From 1 July this year, Services Australia is e-invoicing-compliant and can track and report all earnings in real time.
We are concerned this tax enabling legislation means the regulators can easily scrape data off the web about a contractor’s trading name, Australian Business Number, and the providers’ and practices’ websites.
Various state revenue authorities are already using a similar data surveillance technique.
This may all make it easier for non-compliant practices to be seen as employers for the purposes of Fair Work, ATO PAYG, Superannuation, Payroll Tax, and Workcover.
This is an edited version of an article published at healthandlife.com.au.
David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org).
Disclaimer: Please seek specialist medical accounting advice tailored to your case.