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Queensland Revenue Office’s payroll tax prognosis for medical centre businesses using service entities – Healthcare


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The QRO has released public ruling PTAQ000.6.1 Relevant
contracts – medical centres,
setting out the State
Commissioner’s view of the application of the relevant contract
provisions to medical centres, including GP clinics, dental
clinics, physiotherapy practices, radiology centres and similar
health care providers.

The ruling comes after the decision in Thomas and Naaz,
which we have previously

Queensland medical centres should expect audit activity. Now is
the time to review how your practice operates and obtain advice
about whether you are at risk of being liable for payroll tax.

What is the issue?

For payroll tax purposes, payments to contractors are often made
under ‘relevant contracts’ and subject to payroll tax,
unless an exemption applies. Medical and allied health industry
businesses often fall within one of two types of business

  1. An employee or contractor model (or both). In this structure, a
    practice entity carries on the business and contracts with its
    patients. The practice entity then separately engages either
    employees or contractors (or both) to provide the services the
    practice entity needs to serve its patients.

  2. A service entity model. In this structure, practitioners carry
    on their own businesses and contract with their own patients
    directly. The practitioners pay a fee to a services entity for the
    provision of administration and other support services, and they
    often obtain the right to occupy the premises to carry on their

The two models have different PAYG withholding, superannuation
and payroll tax consequences.

Under the first model, the payments made to the practitioner may
be taxable wages and subject to payroll tax because:

  • the practitioner is employed by the practice entity, or

  • the practice entity engages the practitioner as a contractor
    under a ‘relevant contract’ and none of the exemptions

Under the second model, the question is whether the agreement
between the practice and practitioner is a relevant contract.

In Thomas and Naaz, the medical practice considered
that it operated under a service entity model. It asserted that the
patient fees the service entity collected on the doctor’s
behalf were not taxable wages for payroll tax purposes because they
were paid to the doctors on the basis that the doctors provided
their services to patients, rather than the medical practice. The
Tribunal disagreed.

The particular risk for medical practices is that their
agreements and practices may mean that practitioners are providing
services to the medical centre as well as their patients.

What does the QRO say?

The QRO’s position is that:

If a medical centre engages a
practitioner to practice from its medical centre, or holds out to
the public that it provides patients with access to medical
services of a practitioner, it is likely the relevant contract
provisions will apply to the contract with the practitioner unless
an exception (i.e. exemption) applies.

This is a broad statement that will not apply to every single
case. It is important for practitioners to keep in mind that
whether their arrangements fall within the relevant contract
provisions will depend on their specific circumstances.

The QRO considers that a contract between a medical centre and a
practitioner is a relevant contract if all the
following apply:

  1. the practitioner carries on a business or practice of providing
    medical-related services to patients

  2. in the course of conducting its business, the medical centre
    (a) provides members of the public with access to medical-related
    services (b) engages a practitioner to supply services to the
    medical centre by serving patients on its behalf

  1. the relevant contract exemptions do not apply.

A key issue is going to be whether a medical centre engages a
practitioner to supply services to it by serving patients
for or on behalf of the medical centre. This is a
finding of fact and may differ for each centre. Factors that may be
relevant to this analysis include:

  • the terms of any written contracts between the service entity
    and practitioner and whether these are consistent with the
    practical arrangements

  • whether the service entity has operational or administrative
    control over the practitioner

  • whether the medical centre operates a business as a medical
    centre, rather than a bare service entity

  • whether patients pay the practitioners or medical centre for
    the services

  • whether and how the practitioner operates their business
    providing services to patients.

What should you do?

Now is the time to check service agreements and the reality of
how the practice operates and obtain advice.

If you would like us to assist by reviewing your services
agreement and how your practice operates, or would otherwise like
to discuss any of these issues, please contact a member of our

Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based in

This publication is for information only and is not legal
advice. You should obtain advice that is specific to your
circumstances and not rely on this publication as legal advice. If
there are any issues you would like us to advise you on arising
from this publication, please contact Cooper Grace Ward

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