Doctors’ Groups Urge Andrews Government to Scrap New Payroll Tax

Victorian Premier Daniel Andrews speaks to media at the Parliament of Victoria in Melbourne, Australia, on May 18, 2023. (AAP Image/Joel Carrett)

The Victorian Labor government is being urged to scrap its new payroll tax on GPs, with doctors’ groups saying that it will lead to higher fees for patients or widespread shutdowns of medical clinics.

This follows an Aug. 11 ruling by Victoria’s State Revenue Office (SRO), which indicated that medical clinics in Victoria will be subject to a new backdated payroll tax.

This has left one Victorian practice owner “no choice” but to shut the doors of two clinics after the owner received an $800,000 bill (US$519,000), according to a joint statement issued by the Royal Australian College of GPs (RACGP), the Australian Medical Association Victoria (AMA Victoria), and the Australian GP Alliance (AGPA).

“I have to close down. It’s going to happen not only to me. Unless there’s an exemption, we’ll see a catastrophic closure of medical centres—more than half will be wiped out,” the practice owner said.

Medical clinics already pay payroll tax on their employees, including receptionists, GPs in training, and nurses. But it was not applied to GPs because most doctors are not employees; they lease rooms from a practice owner and work under independent agreements.

Shadow Health Minister Georgie Crozier said the new tax will have flow-on effects with higher patient fees, fewer bulk billing clinics, and more demand on Victoria’s hospitals and emergency health services.

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“This is a desperate cash grab by a government that is broke. It will have huge ramifications for Victoria’s beleaguered health system and leave Victorians without vital health services,” she said on Aug. 30.

Ms. Crozier added that the tax would result in tax bills of hundreds of thousands of dollars for clinics, and place the ongoing viability of some clinics at risk.

RACGP Victoria Chair Dr. Anita Munoz has called on Premier Daniel Andrews to intervene.

“GP practices operate on very thin margins, and if our Premier doesn’t intervene fast, we’ll see more and more practices forced to close, or to raise fees. This will mean more patients going to overflowing emergency departments and spiralling spending on hospital services,” Dr. Munoz said.

“Whatever little extra payroll tax revenue could be made from GPs will be rapidly negated by much higher spending on hospitals.”

The move also comes after the state government said it will not provide payroll tax relief for businesses in the next financial year as it prioritises health spending and a budget surplus.

NSW Government Pauses Payroll Audits for GPs

The New South Wales (NSW) state government also introduced a similar tax ruling, along with South Australia and Queensland.

However, the NSW government has paused its payroll tax audits for 12 months and committed to halting any tax penalties and interest accrued on outstanding payroll tax debts.

This follows an unsuccessful bid by the state’s opposition to seek a five-year amnesty against payroll tax for GPs.

While the 12-month pause is a slight reprieve, practice owners Mathew Simpson and his wife, Dr. Tonya Coren, told The Sydney Morning Herald that it did not solve the issue.

“So while today’s announcement is great for the sector in that it’s at least allowed primary care to breathe to some extent, it’s ultimately just kicking the can down the road, and it’s not been dealt with,” Mr. Simpson said.

In mid-August, the couple was handed a $450,000 retrospective tax bill with 21 days to pay.

Additionally, the pair said that the tax bill was another blow given that the clinic was recovering from the pandemic and was damaged by the severe flooding.

Meanwhile, both the South Australian and Queensland state governments have announced amnesties for GP clinics following extensive negotiations with the RACGP.

This comes after the Supreme Court of the NSW Court of Appeal rejected an attempt to appeal the Thomas and Naan v NSW Chief Commissioner of State Revenue ruling.

In that ruling, the tribunal found that tenant GPs—who pay a percentage of their earnings to a clinic rather than being paid a wage—count as employees for payroll tax purposes.

“This potentially disrupts established business models for many practices, which now face the unenviable choice of charging patients more or shutting up shop. The RACGP has been advocating ever since for a fair go for all practices, including in South Australia,” the RACGP said.

Poll Finds Only 3 Percent of Clinics Can Absorb the New Payroll Tax

According to a newsGP poll, only 3 percent of general practices across Australia are in a position to absorb the costs if GPs were considered employees for payroll tax purposes.

Meanwhile, 78 percent would be forced to raise their patient fees.

RACGP President Dr. Nicole Higgins said the federal government is making investments and reforms to make GP services more accessible and affordable, such as tripling bulk-billing incentives.

“But at the same time, state governments are ripping funding from general practice to boost their own tax revenues. GPs and their patients are caught in the middle, and it is the patients who will be hurt most when they lose their local GPs and access to essential care,” Dr. Higgins said.

Dr. Higgins said that her practice in Mackay, Queensland, would need to raise its fees and end bulk billing in order to pay for the new tax.

“I’ve had many discussions with a number of practice owners … about what this means for us and whether we can comply with the conditions in the ruling—and it’s incredibly difficult,” she said.

“For example, we will lose the bulk billing incentive if we stop bulk billing our children, so we need to be able to compensate for that and then add the equivalent of probably 5 percent on top of our fee to account for the payroll tax.”