Guide
Contractors & Relevant Contracts
An ABN does not determine whether a payment is taxable wages. Under the relevant contract provisions, a contract for the supply of services to a business is deemed to create an employment relationship unless one of five harmonised exemptions applies, so the amounts paid under it become taxable wages. For a medical practice this is the provision that reaches contractor practitioners, and it is why the question is not whether someone is a contractor but whether the contract is exempt.
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:
- 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.
- Services performed by two or more persons. The practitioner engages others to perform the work (e.g. brings their own assistant or hygienist).
- 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.
- Services ordinarily required for fewer than 180 days a year. The service is episodic or seasonal rather than ongoing.
- 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.
An exemption is all or nothing, and it is per contract
Each of the five exemptions removes the payments under that contract from deemed wages entirely. None of them reduces the amount proportionally. A practitioner who attended on 120 days does not have the excess over 90 excluded; they fail the 90-day test and the whole amount stays in. The same applies to the other four: the test is satisfied or it is not, and a near miss is a miss.
That makes the day counting the substance of the question rather than an administrative detail, and it makes the exemptions worth documenting as the year runs. A practice that cannot show how many days a visiting specialist attended has no way to establish the exemption a year later, when the question is asked.
An unanswered exemption is not a neutral default
The medical practice worksheet asks about all five exemptions and withholds the total deemed wages figure until every one of them has been answered. That is deliberate. An exemption nobody has considered is not the same as one that does not apply, and treating silence as a no would produce a confident figure built on an assumption nobody checked. If the worksheet declines to give you a total, the answer is to answer the question rather than to assume the exemption fails.
Not a relevant contract is a different answer from exempt
There are two ways a payment escapes deemed wages, and they are not the same thing. The contract may not be a relevant contract at all, because the services were not supplied to the business or the arrangement falls outside the provisions. Or it may be a relevant contract that satisfies one of the exemptions. The first means there was never a deemed wage; the second means there was one, and it is exempt.
The distinction matters because exempt wages still have to be identified. Victoria requires the bulk-billed portion of GP wages to be reported separately as exempt GP wages at annual reconciliation, so claiming the exemption without that disclosure is not a complete claim. And where an arrangement changes partway through a year, the record of which answer applied to which period is what the revenue office will ask for.
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.
Where deemed wages go once they exist
A deemed wage is not a separate tax. It is added to the practice's other wages and tested against the same threshold, in the same jurisdiction, as the reception and nursing payroll the practice pays itself. That is why a practice with a modest staff payroll can be pushed over a threshold by its doctors alone, and why the deemed wage has to be estimated before the practice knows whether it is registered at all.
The other consequence is grouping. Deemed wages sit inside the wage base a payroll tax group is measured on, so an entity that would be below the threshold on its own can be over it because of a related entity's contractor payments. The grouping and DGE guide covers how groups form and how the Designated Group Employer is chosen.
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 non-GP practitioner comparison. If you engage general practitioners, the relief provisions are scoped to GPs alone; see GP payroll tax relief across Australia.
For the medical-practice side of this question (the service facility arrangement, the deemed wage, and the practitioner-specific relief), see our contractor doctors and payroll tax guide.
Frequently asked questions
What is a relevant contract for payroll tax?
A contract under which a person performs services for another's business, which the law deems to be employment so the payments become taxable wages. The provisions are harmonised across most jurisdictions, so the analysis is broadly the same outside Western Australia, which does not apply them to medical practices.
What are the five exemptions to the relevant contract provisions?
Services to the public generally; services performed by two or more persons; services for 90 days or fewer in a financial year; services ordinarily required for fewer than 180 days a year; and services ancillary to the supply of goods. Each is a factual test, and passing any one removes the payments from deemed wages.
Does having an ABN protect a contractor from payroll tax?
No. Holding an ABN does not change whether a relevant contract exists or whether payments are deemed wages. The test turns on the nature of the arrangement, not the contractor's registration status. An ABN is a tax administration detail, not a payroll tax shield.
What is the Thomas and Naaz decision?
It held that payments made by a medical practice to practitioner contractors under a Service Facility Agreement were taxable wages. Where the practice collects the billings and remits the balance to the practitioner, that remitted amount is the deemed wage. The ruling reset how medical practices are assessed nationally.
How does direct billing avoid deemed wages?
Where the practitioner bills patients directly and the practice charges only a service fee for rooms and administration, the practitioner's income never passes through the practice. That is the branch of the arrangement outside the relevant contract provisions. It is a genuinely different structure, not a documentation change.
Reviewed by eHealth Systems Pty Ltd