If you run or manage a medical centre, there's one issue that might be flying under your radar but could have significant financial consequences: payroll tax on contractor doctors.
Across Australia, many medical practices are now facing large, unexpected tax bills. State revenue offices are increasing their focus on payroll tax obligations in medical centres, particularly where doctors are engaged as independent contractors. The question is no longer if this will impact your practice, but when.
In this article, we explain what’s changed, why it matters now, and how to assess your risk so you can move forward with clarity and confidence.
Why Medical Clinics Are Being Targeted
Medical clinics often engage doctors under service agreements. These agreements usually state that doctors are contractors, not employees, which traditionally meant no superannuation, leave entitlements or payroll tax.
However, recent legal rulings are challenging this model.
In several key cases, including Optical Superstore Pty Ltd v Commissioner of State Revenue, courts have determined that payments made to doctors may still attract payroll tax, even if the doctors are considered independent contractors. This has significant implications for how state revenue offices interpret these relationships.
The core issue lies in what constitutes an employment-like relationship – not just the terms of the contract, but how the arrangement works in practice.
Common Risk Factors for Medical Clinics
If you are a clinic owner or practice manager, it’s essential to review how your practice engages doctors. Here are some key indicators that could trigger payroll tax liabilities:
- Patients pay the clinic, not the doctor
Even when doctors are contractors, if the clinic collects the fees and then pays a portion to the doctor, this may be considered a relevant contract for payroll tax purposes.
- The clinic controls bookings or hours
If your clinic sets rosters, appointment times or working days, it may resemble an employment relationship.
- Shared staff or equipment
Providing access to nurses, receptionists or consulting rooms can indicate the clinic is doing more than simply providing administrative support.
- Long-term exclusive relationships
Where a doctor works only at your clinic for a long time, this may point to a relationship of dependency, which could increase the risk of a payroll tax assessment.
What the Recent Payroll Tax Cases Show
These rulings highlight one key principle: it’s not about what you call the arrangement – it’s about how it operates in practice.
In New South Wales, for example, the Commissioner of State Revenue has been reassessing medical centres and issuing retrospective payroll tax assessments, with some practices facing liabilities in the hundreds of thousands.
Other states such as Victoria, Queensland and South Australia are following closely, particularly as state governments look for ways to increase revenue.
What Medical Practices Should Do Now
The risk is real, but there are practical steps you can take.
- Review Your Contractor Agreements
Ensure your agreements reflect the true nature of the working arrangement and are consistent with current legal and tax advice. - Assess Your Operating Model
Consider whether your clinic’s operations resemble an employment structure. Think about who controls the workflow, hours and billing. - Seek Professional Advice
Now is the time to speak with accountants and legal professionals who understand both medical practice operations and payroll tax laws. - Stay Up to Date with Changes
Each state applies its own rules. Some may offer amnesties or transitional relief, so staying informed could help you make timely decisions.
How Rubiix Can Support You
At Rubiix Business Accountants, we work closely with medical professionals and clinics to provide clear, strategic advice. If you are unsure about your payroll tax exposure, or simply want to ensure your structure is sound, we can help you assess your risk and make informed decisions.
Final Thoughts
Navigating payroll tax obligations as a medical centre is becoming increasingly complex. With state revenue offices actively reassessing contractor arrangements, relying on outdated assumptions could expose your clinic to significant financial and reputational risk.
Taking a proactive approach now can help safeguard your practice, ensure compliance, and give you peace of mind. Whether you're reviewing your current contractor agreements or rethinking your operational model, it pays to get expert advice tailored to the medical industry.
At Rubiix Business Accountants, we specialise in helping medical practices like yours understand and manage payroll tax risk.
Book a confidential consultation with our team today to start the conversation, gain clarity on your obligations and move forward with confidence.
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Disclaimer: The information in this article is general in nature and does not constitute legal or medical advice. Please consult a qualified adviser for personalised guidance.