Psychologists & Payroll Tax

Relevant contract exemptions that may apply

These are the harmonised exemptions under the relevant contract provisions. Each is a factual test on the specifics of your arrangement — verify with your adviser before relying on any of them.

• Services provided to the public generally — if the psychologist maintains a separate private practice or sees patients through other platforms.
• Services provided for 90 days or fewer — short-term engagements or locum cover.
• Services of a kind ordinarily required for fewer than 180 days a year — if the psychological service is episodic rather than ongoing.
• Commissioner satisfied the practitioner ordinarily provides services of that kind to the public generally — this is a discretionary exemption that requires a ruling application, not a self-assessment.

Psychology is outside the GP relief provisions

Psychological services are frequently delivered under arrangements that look identical to general practice — the practice bills, collects, retains a fee and remits the balance — but the practitioner is not a general practitioner, so none of the medical relief provisions applies.

This is a scope question rather than a policy judgement. The exemptions introduced across Queensland, Victoria, South Australia and the ACT were drafted to follow the GP bulk-billing structure, and a psychology practice simply does not sit inside that structure, however similar its billing model is.

The Medicare benefit pathway and why it does not help

Psychologists can deliver services under Medicare benefit arrangements, including through general practitioner mental health treatment plans, which makes the comparison with general practice tempting. But the relief provisions test the practitioner type, not the funding pathway — a psychologist delivering a Medicare-funded service is still not a general practitioner for payroll tax purposes.

The practical consequence is that a psychology practice has no exemption to claim in any jurisdiction, and its only structural levers are whether the arrangement creates a relevant contract, how the threshold is apportioned across the group, and which entity holds the Designated Group Employer nomination.

What a psychology practice should document

The arrangement itself is the first thing to establish: whether the practice bills and remits, or whether the psychologist bills in their own right. That single question usually determines whether deemed wages arise, and it should be documented rather than assumed from the way the parties describe the relationship.

Beyond that, the practice should be able to show its group structure and its DGE nomination, and it should keep practitioner payments separable by discipline if it operates a mixed clinical team. Where a practice is grouped with an entity that has already been assessed, the position should be established before any disclosure is considered.

Building the deemed wage in a psychology practice

The deemed wage in a psychology practice is the amount remitted to the psychologist: gross billings collected, less the service fee retained. A practice billing $160,000 for a contractor psychologist and retaining a 35% fee records a $104,000 deemed wage, calculated practitioner by practitioner and added to employed staff wages.

Because the relief provisions test the practitioner type rather than the funding pathway, a psychologist delivering Medicare-funded services is treated the same as any other contractor. Whether deemed wages arise turns on who bills the patient and who remits, not on how the service is funded.

A worked psychology scenario

Take a South Australian psychology practice with $600,000 of employed staff wages and $1,200,000 remitted to contractor psychologists. The combined taxable wages reach $1,800,000. South Australia's $600,000 deduction — not the $1,500,000 threshold, which is a different number — leaves $1,200,000 taxable at 4.95% — $59,400.

No exemption applies, because psychologists are not general practitioners. The practice's only reductions are the deduction, its apportionment across the group, and the four relevant-contract exemptions.

Telehealth and contractor psychology

Telehealth has made it easier for psychologists to serve patients across multiple practices and jurisdictions, which cuts both ways. It strengthens a claim that the psychologist provides services to the public generally — one of the relevant-contract exemptions — but it can also spread the practice's wage base across more than one jurisdiction, where each state's threshold applies separately and apportionment reduces the shelter available in each.

The practical consequence is that a psychology practice with a distributed contractor cohort should map which jurisdiction each practitioner's remittances fall into, and model each state's threshold and rate separately rather than treating the group as a single wage pool.

A second psychology scenario and the group lever

Take an NSW psychology practice with $500,000 of employed staff wages and $900,000 remitted to contractor psychologists, giving $1,400,000 of taxable wages. After the $1,200,000 threshold, $200,000 is taxed at 5.45% — $10,900. No rebate or exemption applies, because the NSW relief is limited to GP services.

The threshold is the only lever, and it is a group entitlement. If the practice is grouped with a related entity nominated as the Designated Group Employer, it may pay 5.45% on the whole $1,400,000 — $76,300 — rather than $10,900. The $65,400 difference is decided by the group structure alone.

Because no relief attaches to psychology in any jurisdiction, that group question is the highest-value exercise available to a psychology practice. The clinical arrangements can stay exactly as they are; the payroll tax outcome can still change materially.

A psychology practice can therefore spend its effort where it counts: confirming the billing structure, mapping the group, and ensuring a Designated Group Employer is nominated. None of those steps depends on the clinical model, and together they shape the payroll tax outcome more than any change to how services are delivered.

The one variable a psychology practice does control is the billing structure itself. Where the psychologist bills in their own right and pays the practice a room or service fee, no deemed wages arise in most jurisdictions; where the practice bills and remits, they do. That structural choice is worth more than any clinical or marketing decision when the payroll tax position is on the line.

Timing matters as much as the choice. Because the threshold is claimed by the Designated Group Employer for the whole group, a restructure done after a liability has accrued does not undo the earlier periods — the group that existed then is the group that is assessed. A practice contemplating a group change should establish its current position first and treat any restructuring as prospective.