State tax threat to general practice care must be top priority at National Cabinet: RACGP

The Royal Australian College of General Practitioners (RACGP) is urging National Cabinet to agree on a nationally consistent approach to state payroll tax that ensures no general practices are forced to close and patients can access the care they need in every state and territory. 

RACGP President Dr Nicole Higgins said the need for national consistency in the application of payroll tax is urgent, and state and territory governments should follow Queensland’s approach. 

“This new extra payroll tax is one of the biggest threats to general practice care in Australia,” she said. 

“The Federal Government has recognised the critical role of general practice in keeping people healthy and out of hospital, and they’re progressing important reforms to strengthen Medicare, and ensure all Australians have access to affordable GP care. 

“But state and territory governments risk derailing these federal reforms by hitting practices with extra payroll tax. In many states and territories, there’s a very real risk of widespread practice closures and higher out-of-pocket fees for patients. This will mean worsening health and more pressure on state hospitals.” 

The RACGP is asking state and territory governments to commit to:  

• no retrospective collection of payroll tax liabilities  

• clarification on what constitutes a ‘relevant contract’ 

• a full exemption from payroll tax for independent practitioners, or an amnesty until the Federal Government finalises its health funding reforms and general practices can transition to new business models 

• no payroll tax on patients’ fees/Medicare paid to their GP for their services. 

The RACGP President said: “There’s an urgent need for consistency in how payroll tax is applied to independent practitioners across Australia. Practices operate on thin margins, our 2023 Health of the Nation report found four-in-five practice owners are concerned about the viability of their practice. Australia lost 184 general practices last year; we cannot afford to lose more. 

“Only Queensland has provided a new payroll tax ruling, clarifying that patients' fees paid directly to a GP for their services will not be subject to payroll tax. We want other governments to follow this approach. 

“But the situation is dire in other places. For example, Victoria is refusing to admit anything has changed, despite the many practice owners crying out for help because they’ve being hit with huge retrospective tax bills they can’t afford to pay. 

“And just recently, in Australia’s capital, practices have received threatening letters from the ACT Revenue Office informing them they risk being audited unless they register for payroll tax. The ACT Government has shown it has no clue how general practice or bulk billing works by demanding practices bulk bill an impossibly high amount in order to receive a temporary payroll tax amnesty – it's a joke at best and coercive at worst, and it will send practices broke.  

“We need to sort this out urgently. The RACGP wants to work with the federal, state, and territory governments to establish a consistent approach to this tax that ensures the sustainability of general practice care Australia-wide.” 

General practices Australia-wide have always paid payroll tax on their employees, including receptionists, GPs in training, managers, and nurses. But it has never applied to GPs because most work under independent agreements, they are not employees. This changed after court cases deemed independent practitioners as employees for payroll tax purposes, leading to a new interpretation of payroll tax. 

Since the court ruling, states and territories have taken different approaches to applying payroll tax to independent practitioners which has led to confusion and distress for GPs across the country. This is despite a 2010 Harmonisation Joint Protocol for payroll tax – a key mechanism to ensure a uniform approach to the application of taxation across Australia. The lack of harmonisation has resulted in practices in several states being hit with retrospective tax bills, including one for $800,000 in Victoria. 

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