Navigating Payroll Tax Changes for Medical Practices
Recent changes to payroll tax regulations have highlighted the importance of accurate contractor agreements and financial management for medical practices. The traditional service entity model, where medical centres collect fees and distribute them to individual doctors after deducting a service fee, is facing scrutiny.
A specialist medical accounting firm can support your practice to navigate the new payroll tax regulations and proactively manage financial risks in this evolving landscape.
Consider how your doctors are employed
Historically, doctors operating under the service entity model were often labelled as independent contractors, exempting the medical practice from payroll tax on fees paid to the doctors. However, a contract between a medical centre and a practitioner may now deemed a relevant contract subject to payroll tax, unless exemptions apply.
In December 2022, the Queensland Revenue Office issued Public Ruling PTAQ000.6.1, signalling a shift in the taxation landscape for medical practices. This public ruling clarifies the application of contract provisions in the Payroll Tax Act 1971 (Qld) to medical centres, including dental clinics and healthcare providers. The ruling covers liability for payroll tax, relevant contract criteria, exemptions, and the relationship between medical centres and practitioners. It aims to provide guidance on determining payroll tax obligations for medical services contracts and emphasises individual case assessments.
The impact for WA healthcare providers
Operating a medical practice in WA brings some relief as it lacks some of the relevant contract provisions found in other states. Nonetheless, there's still a risk of noncompliance if a common law employer-employee relationship is identified or if the business operates across state borders.
We recommend a thorough review to ensure that all contracts clearly and accurately portray your contractors as true independent workers. Careful documentation is necessary to avoid the unintentional classification of the relationship as that of an employer and employee, which could result in having to pay additional taxes, even in WA.
Navigating the changes
As a specialist healthcare accounting firm, Rock Oak can offer strategic advice on tax planning, cash flow management, and compliance to help you navigate this changing landscape. Our specialist team can meticulously review your contracts, ensuring they align with recent rulings and emphasise factors crucial in determining a contractor's status.
Learn more about our healthcare professional accounting service.
Rock Oak specialises in medical accounting for healthcare providers in Perth. You can book your free 30 minute strategy call to discuss how we can support the financial health of your medical practice. Get in touch with us today!
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