NSW relief for medical centres - payroll tax exemption and rebate announced for GP wages

A version of this article was published in the Thomson Reuters’ Weekly Tax Bulletin on 15 November 2024.

In welcome relief for general practice medical centres in New South Wales, a payroll tax exemption and rebate is now available to provide some relief from payroll tax on wages paid to general practitioners (GPs) that are engaged as independent contractors under ‘relevant contracts’. Under the Chief Commissioner of State Revenue’s new practice note CPN 036 (Practice Note), medical centres who are liable to payroll tax on wages paid to contractor GPs are now able to access an exemption from payroll tax payable prior to 4 September 2024, and a rebate on all wages paid or payable from 4 September 2024, provided that certain conditions are met.

What is available?

The Practice Note sets out amendments made to the Payroll Tax Act 2007 (NSW) (PTA) that were introduced following announcements made in the NSW State Government Budget for the 2025 financial year.

The key announcements affecting medical centres in New South Wales were:

·       an exemption for any unpaid payroll tax that was payable on wages paid or payable to contractor GPs prior to 4 September 2024; and

·       an ongoing rebate for payroll tax paid or payable to contractor GPs on or after 4 September 2024, provided that certain conditions are met.

What are the conditions for the exemption?

An exemption for payroll tax payable on wages paid or payable prior to 4 September 2024 to GPs engaged as contractors under a ‘relevant contract’ is now available.

A ‘relevant contract’ includes a contract under which a designated person (the GP) provides services to another person (the medical centre) for or in relation to the performance of work in the course of carrying on a business (see section 32 of the PTA). For more information on the application of the ‘relevant contract’ provisions in a medical context, please refer to our previous article.

Where the payroll tax on these wages has not already been paid, the exemption will apply and the medical centre will not be required to declare those payments as taxable wages for the purposes of payroll tax.

However, if the medical centre has already paid the payroll tax associated with the wages paid to its contractor GPs, the medical centre will not be entitled to any refund. Where some, but not all, payroll tax has been paid in connection with wages paid to a contractor GP, then the exemption will be available for the amounts of payroll tax that have not yet been paid.

What are the conditions for the rebate?

As with the conditions for the payroll tax exemption, the rebate is only available where the GP has been engaged by the medical centre as an independent contractor working under a ‘relevant contract’.

Another important additional condition for access to the rebate is that a certain proportion of all general practitioner services provided by GPs in the medical centre must be provided under a bulk billing arrangement. If the medical centre operates in:

·       Metropolitan Sydney, then at least 80% of the general practitioner services provided from the medical centre must be bulk billed.

·       Other areas of New South Wales, this percentage is reduced to 70%.

The relevant proportion is assessed on a service-by-service basis, rather than by the number of consultations. For example, if a GP working in a medical centre provides three distinct services to a patient during the same appointment but only two of those are bulk billed (that is, the patient had to pay a gap fee for the third service), then only the two bulk billed services will count towards the relevant proportion.

If a medical centre engages some GPs who operate as contractors and some who operate as employees, the ‘relevant proportion’ for determining eligibility for the rebate is determined having regard to all GP services provided by both the contractor GPs and the employee GPs from that medical centre. However, if the relevant proportion is met, the rebate will only apply to wages paid to the contractor GPs.

Operating multiple medical centres

In circumstances where an employer operates multiple medical centres from different locations, then the entitlement to the rebate is determined based on the services provided from each location.

Consider where an employer operates two medical centres, both in Metropolitan Sydney. One medical centre (MC 1) engages three GPs under relevant contracts, and all of services provided from this medical centre are bulk billed. As MC 1 has exceeded the relevant proportion of 80%, then the rebate will be available on wages paid to the contractor GPs providing services from this location.

The employer also engages three different GPs under relevant contracts to perform services from its second location (MC 2). However, only half of the services performed from this location are bulk billed. The rebate will not be available on wages paid to the contractors working from MC 2, as the relevant proportion of 80% has not been met.

It is also common for medical centre operators to engage contractor GPs to work across multiple locations. Where this occurs, eligibility for the rebate will be determined based on whether the ‘relevant proportion’ is met at each location. If the relevant proportion is only met from some locations, then the rebate will need to be pro-rated and reduced according to the proportion of services provided by that GP from the medical centres that met the threshold.

Following on from the above example, assume that a contractor GP works from both MC 1 and MC 2, and spends approximately 50% of their time at each location. The GP bulk bills all the services that they provide when working from MC 1 (which met the relevant threshold) but does not bulk bill any of the services they provide from MC 2 (which did not meet the relevant threshold). In these circumstances, the employer would only be eligible for a rebate in respect of the wages paid in connection with the services performed from MC 1.

What is the amount of the rebate?

The rebate is calculated as the difference between:

1. the payroll tax payable for a financial year when the relevant GP wages are included; and

2. the payroll tax that would be payable for that financial year where the relevant GP wages are not included.

It is important that proper records are kept by the medical centres to enable Revenue NSW to calculate the amount of the rebate. Such records include:

·       if the medical centre is a mixed billing practice, the number of GP services that were bulk billed and the number of GP services that were not bulk billed or had out of pocket expenses;

·       the locations where GP services are provided if more than one medical centre is operated;

·       the methodology for pro-rating the wages paid to contractor GPs who work from more than one location;

·       the relevant GP wages for the financial year, and the payroll tax payable when these wages are included and not included.

Next steps

Medical centres that provide GP services in New South Wales should now take steps to assess their eligibility for the payroll tax exemption and the ongoing rebate. As the exemption and rebate is only available to GP practices, other practices should continue to ensure that they pay the correct amount of payroll tax and regularly review their arrangements with their independent contractors.

If you have any specific questions or require advice in respect of how the Practice Note may affect your practice, please contact the writers.

Authors: Lisa To & Emma Swanson