By Madeleine Andrews

20 December 2023

A State Revenue Office (‘SRO’) recent tax ruling has put Victorian medical businesses on notice that their service agreements with doctors may attract payroll tax.


The recent SRO Ruling (PTA-041) on 11 August 2023, confirms the SRO’s stance on the payroll tax obligations of medical centres including “dental clinics, physiotherapy practices, radiology centres and similar healthcare providers who contract with medical, dental and other health practitioners or their entities (‘practitioners’) to provide patients with access to the services of practitioners”.


Part 3, Division 7 of the Payroll Tax Act 2007 (Vic) states that if a ‘relevant contract’ is in place between a medical centre and a practitioner, then the payments made by the medical centre to the practitioner for the performance of work will be liable for payroll tax.


What is a ‘relevant contract’?

Put simply, if a medical centre runs a business where it promotes and provides medical services to patients and they engage practitioners to provide those medical services, there most likely will be a relevant contract in place between the parties for the purpose of payroll tax.


Is there a relevant contract in place?

Below are the types of terms and conditions of an arrangement between a medical centre and a practitioner that will be considered when determining whether a relevant contract exists:

  • restraints of trade;
  • requirements for the practitioner to work set times and set hours;
  • the practitioner is required to promote the medical centre;
  • obligations on the practitioner to receive the medical centre’s approval for leave;
  • responsibilities and obligations that the practitioner must abide by within the medical centre, such as rules and guidelines;
  • if the medical centre collects patient fees on behalf of a practitioner and subsequently pays those patient fees to the practitioner less a standard service fee;
  • if the medical centre collects patient fees on behalf of a practitioner and subsequently pays 100% of the patient fees to the practitioner, who then later collects a separate service fee payment;
  • the medical centre provides access to the services and facilities, attracts patients to the medical centre, advertises services provided by the practitioners, manages the patients and arranges appointments and billing (either directly or bulk billing);
  • the services provided by practitioners under the arrangement are such services necessary for the medical centre’s business;
  • the medical centre holds out to the public that it provides patients with access to medical services of a practitioner; and
  • the practitioner is listed on the medical centre’s website e.g. under ‘our team’.


The SRO has stated that even in circumstances where the practitioner has an entity, such as a company or a trust, and that entity supplies the services of the practitioner to the medical centre, this arrangement may still be liable for payroll tax. This is because the services are supplied by the practitioner in relation to the performance of work.


What does this mean moving forward?

While this Ruling is not law, it seems to confirm an increase in the scope of payroll tax in the medical sphere.  This scope, however, appears to exclude arrangements where:

  • the practitioner receives payment from patients directly for the services they have provided; and
  • the agreement between the medical centre and practitioner avoids employer / employee type terms as outlined above.

There are also a few exemptions that may apply.  These exemptions should be considered by medical centres and practitioners to understand if payroll tax will otherwise be avoided.
This ruling is retrospective and prospective, so it is important for medical centres to consider their arrangements with practitioners and whether they may be liable for payroll tax.  If you are unsure about whether you may be liable for payroll tax, please get in contact with our commercial team who will be able to assist you in revising your arrangements to avoid these fees.

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