Payroll Tax:
why seeing a GP will costs more

TLDR

In the 2024 State Budget, the NSW State Government expanded Payroll Tax to apply to contracted doctors. To cover this tax, fees will need to be increased by 10-20% from September 2024.

What is Payroll Tax?

Payroll tax is a state tax paid by employers based on wages paid to employees. In New South Wales (NSW), it is administered by the State Revenue Office (SRO) and is set at 5.45% for affected businesses. Private fees will need to be increased by 10-20% to also cover the portion bulk billed and how the money is distributed between practice and doctor.

It’s important to note that medical practices already pay this tax for employees such as nurses and administrative staff. However, the situation differs for the majority of general practitioners in Australia, as they are not employees but independent contractors.

Under the contractor model, the GP provides services directly to the patient, and the practice provides support services to the GP. This arrangement gives the GP a range of freedoms in how they provide their services, and payroll tax has not been required.

For more information see: NSW State Revnue Payroll Tax and Payroll Tax and the Medical Industry.

What has changed?

Payment distributions to contracted doctors will be considered assessable for payroll tax purposes from September 4th, 2024. The Minns Labor Government 2024 officially announced this change in the NSW State Budget on June 18th, 2024.

We estimate this change in definitions will increase Tallowwood Health’s operating costs by $10-15,000 per doctor or ~$65-100,000 per year.

Unfortunately, the state government cannot apply this tax to general practice and not pass it on to patients.

The tax can rest with one of three groups: practices, GPs, or patients. There is no margin for the practice to absorb it. (Most already rely on the altruism of their owners to keep going.) GPs already earn less than their hospital equivalents, and recruitment is increasingly difficult. So, it must ultimately be shifted to the patients.

The only positive note was confirmation they wouldn’t also apply the tax retrospectively by asking for back payments. Retrospective taxation would have led to bankruptcies across the industry.

For more information, see: NSW State Revenue Budget Summary and RACGP: NSW Issues Payroll Tax Exemption tied to Bulk Billing.

Political Spin

The Minns Labor Government has disingenuously presented this as a win for cost-of-living pressure. See media releases: “Bulk-Billing support to ease cost of living pressure” and “Minns Labor Government’s new bulk-billing initiative to support bulk-billed GP visits statewide.”

This claim is based on a false assumption and a restrictive condition. The assumption is that distributions to contractors always attract payroll tax; this is untrue and goes against the industry standard. The condition is that if a medical practice is able to bulk bill 70% of services, the tax will be rebated. (Details yet to be announced.)

So, can’t you just bulk bill more?

Doctors at Tallowwood Health bulk bill all chronic disease item numbers, health assessments, and children aged 0-5. Our total bulk billing rate based on value is approximately 27% by value.

Our team at Tallowwood Health is acutely aware of the delicate balance between maintaining high quality and ensuring accessibility. We understand that a certain level of funding is necessary to support our staffing, facilities, and time, all of which are crucial for delivering high-quality care.

A move to bulk billing would lead to shorter consultations and reduced facilities and staffing. 

Unfortunately, successive governments have severely reduced funding for general practice through Medicare freezes and indexation below inflation. Fewer doctors choose to become General Practitioners due to incomes below those of their hospital and specialist colleagues and increased bureaucracy.

Advocacy in Action

Dr Daniel Rankmore wrote to state Members of Parliament the Hon. Kevin Anderson and Hon. Adam Marshall, in October 2022 warning of this issue. Both referred the concerns to the treasury office and wrote replies back. Further, prior to the 2023 election, Dr. Rankmore met with Mr. Anderson (incumbent and continuing National Party Member) and Mark Rodda (Independent candidate) and spoke to Kate McGrath (Labor candidate.) Around the same time, he supported advocacy on the issue by the AMA and RACGP, and met with local GP practice owners.

The best option is to abolish the tax or at least group general practice with other health services that have already receive an exemptionIf that is a bridge too far, they could consider an exemption for rural and remote practices. Rural practice is different to city practice. We deal with more complex cases, have longer appointments, and have greater continuity with our patients and community. Bulk billing models are less suited to rural medicine for these reasons.

Quirks of Payroll Tax

Payroll Tax directly taxes employment. It doesn’t consider profit or productivity. Adam Marshall once called for it to be abolished to boost employment in rural areas

Not-for-profits, government organisations and health services qualify for a NSW Payroll tax exemption. 

“health care service providers –  for employees working exclusively in the kind of work ordinarily performed by health care service providers. Health care service providers are:

  • a public hospital
  • a non-profit hospital carried on by a society or association
  • area health services
  • ambulance services”

General Practice, which provides tremendous public good and reduces burdens on NSW Hospitals, does not receive an exemption.

Payroll tax percentages and thresholds vary state to state.

What happens now?

On September 4th 2024, Tallowwood Health will increase patient fees to cover increased Taxation by the NSW Government. We worked very hard to prevent this and will not profit from this fee increase. We will post more details as they become available

If you have concerns about how this tax will impact you, we recommend you speak to our staff and raise your concerns with our local member, the Hon. Kevin Anderson.