Reducing payroll tax

A medical practice reduces its payroll tax in four ways: by not including payments that were never taxable wages, by claiming the GP relief where the practice's jurisdiction offers one, by changing how much of its GP work is bulk billed where the relief is tied to that proportion, and by getting the group rules right so the threshold is claimed where it does the most good. Everything else that presents itself as a way to lower the bill is either a restatement of these, or a mislabelling that the revenue office will unwind.

Start with what should not be in the base

The most common way a practice overpays is not by missing a relief. It is by declaring more than the law requires, usually because someone treated every payment to every practitioner as wages and stopped there. Three things are worth checking before any relief is considered:

• Payments that are not wages at all. A reimbursement of a practice expense, a genuine equipment hire charge and a distribution to a shareholder are not wages. The test is what the payment is for, not which account it left.
• Contract payments that fall inside an exemption. The relevant contract provisions deem a services contract to create employment, but five harmonised exemptions can take the payments back out. The one that most often applies to a practitioner is services to the public generally, because a practitioner who also sees their own patients ordinarily provides services of that kind to others. See the contractors and relevant contracts guide.
• Payments that were never made by the practice. Where a practitioner bills patients and Medicare in their own right and separately pays the practice a service fee, the practice is not paying the practitioner. That is a different arrangement from the one Thomas and Naaz dealt with, and the contractor doctors guide sets out where the line falls.

A practice that gets this right has not found a loophole. It has stopped paying tax on amounts that were never taxable, which is the difference between a correct return and a generous one.

The GP relief, where your jurisdiction has one

GP wages are the one clinical category with dedicated payroll tax relief in Australia, and the relief takes four different shapes. A practice cannot choose which one applies to it; the jurisdiction decides.

Two limits are worth stating plainly. The relief is scoped to general practitioners, so dentists, physiotherapists, psychologists, specialists and other allied health practitioners get nothing from it. And it is relief on GP wages only, so the rest of the practice payroll is unaffected. The mechanics, commencement dates and conditions for each jurisdiction are in the GP payroll tax relief page, and the position for every other discipline is in the non-GP practitioner comparison.

Bulk billing is the lever inside the lever

In Victoria, South Australia and the ACT the exemption is proportional, which means it applies to the part of GP wages attributable to bulk-billed services. In New South Wales it is a rebate with a cliff: a practice at 79% bulk billed in metropolitan Sydney does not get a reduced rebate, it gets none. The relief page sets out each threshold.

The practical consequence is that the bulk-billing mix is not only a revenue decision. Where a practice sits close to a threshold, moving the mix can move the payroll tax figure, and the BBPIP loading changes the economics of that decision in the other direction. The bulk billing versus private billing calculator models the loading, the gap revenue, the deemed wages and the payroll tax relief together, so the two effects are not weighed separately by accident.

Get the group rules right

These are not reliefs, but they change the number more than most reliefs do, and they are the ones practices most often get wrong in the expensive direction.

• One threshold per group, per jurisdiction. A group operating in five states does not get five full thresholds. Each jurisdiction grants a single threshold, apportioned by the ratio of that jurisdiction's wages to the group's total Australian wages. See the multi-state apportionment guide.
• Only the nominated entity claims it. Within a group, the Designated Group Employer is the one entity that can claim the threshold in each jurisdiction. Every other member pays from the first dollar of wages. Nominating deliberately, rather than by default, is the single highest-value structural decision available. See the grouping and DGE guide.
• Grouping follows the facts, not the paperwork. Related entities with common ownership or control are grouped whether or not anyone intended it, so a restructure that does not change who controls what will not change the group.

What does not work

Most of what circulates as payroll tax advice for practices is one of these, and each has a reason it fails:

• Putting the practitioner on an ABN. An ABN does not determine whether a payment is taxable wages. The relevant contract provisions deem the arrangement to create employment regardless, unless an exemption applies.
• Splitting the practice across entities. Grouping rules are designed for exactly that, and they reach entities under common ownership or control without needing a stated intention to group.
• Calling a payment something else. Both the wages question and the common-law question turn on substance. A management fee that is really a share of billings is still a share of billings.
• Waiting for an amnesty. Every medical payroll tax amnesty window in Australia has closed, so a historical position corrected now attracts interest and potentially penalty. See the amnesties and audit pauses guide.

This page is general information about how the rules work, not advice on your practice. The facts that decide the answer are specific to your arrangements, and the figures change with each state's revenue office.

Work out where your practice stands

The medical practice worksheet steps through the framework, the relief and the practitioner type for your jurisdiction and financial year, and returns an exposure figure rather than a general answer. To price the whole position across jurisdictions, including the group threshold and any surcharges, use the multi-state payroll tax calculator. If you would rather start with a scored check than a number, the practice tax check asks the questions a revenue office would.