Contractors & Relevant Contracts

The relevant contract provisions

Under the harmonised relevant contract provisions (Payroll Tax Act 2007 (NSW) s 32 and its equivalents), a contract under which a person supplies services to a business is a “relevant contract” unless an exemption applies. Where it is a relevant contract, the person is deemed an employee and amounts paid under the contract are deemed wages.

The five harmonised exemptions

Where a relevant contract exists, these exemptions may remove the payments from deemed wages. Each is a factual test:

1. Services to the public generally. The practitioner ordinarily performs services of that kind for others in the financial year. If they have their own private practice or see patients through other platforms, this exemption may apply.
2. Services performed by two or more persons. The practitioner engages others to perform the work (e.g. brings their own assistant or hygienist).
3. Services for 90 days or fewer. Count any day on which any services were performed. A visiting specialist attending one day per week for 46 weeks totals 46 days (under the 90-day threshold). Verify the counting method against your jurisdiction's ruling.
4. Services ordinarily required for fewer than 180 days a year. The service is episodic or seasonal rather than ongoing.
5. Ancillary to the supply of goods. The services are incidental to a goods supply rather than the primary purpose of the contract.

There is also a discretionary Commissioner exemption (“the Commissioner is satisfied the practitioner ordinarily provides services of that kind to the public generally”). This requires a private ruling application, not a self-assessment.

The Thomas and Naaz precedent

Following Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue, payments to medical practitioners under a Service Facility Agreement — where the practice bills Medicare and patients, collects funds, retains a service fee, and remits the balance to the practitioner — are deemed wages. The deemed wage is the amount remitted (gross billings less the service fee), not the gross billings.

Direct billing — the hard branch

Where the practitioner bills patients and Medicare in their own right, receives those funds directly, and separately pays the practice a service fee, the practice is not paying the practitioner. There is generally no relevant contract wage. However, the substance of the arrangement matters more than the labelling — a nominal direct-billing arrangement where the practice still controls billing and banking has been found to be a payment by the practice.

WA is different

Western Australia does not apply the relevant contract provisions to medical practices. Assessment proceeds on the common-law totality of the relationship (control, integration, delegation, equipment, financial risk, ability to work for others). See the WA medical jurisdiction page.

Use the worksheet

The medical practice worksheet walks through these tests step by step. For non-GP practitioners (dentists, physiotherapists, psychologists, specialists, allied health), see our cohort pages.