Payroll tax is the issue practice owners ask us about in the car park, quietly. This article is a map of the terrain so the conversation with your accountant and lawyer starts from the right place. It is not advice, it is not a structure, and it is not a guarantee of anything. Payroll tax is state law, assessed case by case, and the only safe answer is a specialist looking at your contracts and bank flows.
Not legal, tax or financial advice. DocHelp is a practice operations consultancy. Seek independent advice from a specialist medical accountant and a lawyer in your state before changing any contract, banking arrangement or structure.
The issue in one paragraph
State payroll tax laws contain “relevant contract” provisions that can treat payments made to a contractor for work as wages. A medical centre that collects patient and Medicare fees into its own account and pays a doctor a percentage may, depending on how the arrangement operates, be assessed for payroll tax on those payments — even though the doctor is an independent practitioner with their own ABN and indemnity. Revenue offices look at how the arrangement works in practice, not at the label on the contract.
What Thomas and Naaz decided
Thomas and Naaz Pty Ltd operated medical centres in New South Wales. Doctors used rooms and shared services under written agreements and paid the centre 30 per cent of Medicare receipts as an administration fee; the centre collected the Medicare payments for most practitioners and remitted the remaining 70 per cent. The NSW Civil and Administrative Tribunal found the payments to the doctors were subject to payroll tax, holding that the doctors provided services to the centre by providing medical services to patients and that the payments were in relation to the performance of work. The Appeal Panel and then, on 14 March 2023, the NSW Court of Appeal dismissed the appeals. Commentary at the time estimated the decision affected several thousand healthcare practices operating similar arrangements.
The factors that mattered — and that advisers now examine in every practice — include who collects the fees and how they flow, what the agreement obliges the practitioner to do, whether the practitioner is free to work elsewhere, and how much the centre controls the practitioner’s work.
What has changed since
- Victoria — exemption from 1 July 2025. Wages paid to a relevant GP for work performed in relation to fully-funded items — bulk-billed services, related incentive payments and vaccine consumables — are exempt from payroll tax for general practices. Privately billed fees are not exempt. This narrows the exposure for bulk-billing practices; it does not remove it for mixed-billing ones.
- Other states. Revenue offices in several states published rulings and, in some cases, amnesties or bulk-billing-linked concessions with their own dates and conditions. They differ, and they change. Your adviser will know the current position for your state.
What owners actually do about it
We see three responses. Some practices restructure how fees are collected and how the service fee is invoiced so that the operational reality reflects independent practitioners running their own businesses from the premises. Some accept the exposure, register, and price it in. Some rely on the bulk-billing exemption in their state and change their billing mix accordingly. Each has costs, and each has to be designed by a specialist, not copied from a website — including this one. A banking arrangement or a contract clause on its own does not decide the question; the whole arrangement does.
Questions to take to your adviser
- Under our current agreements and fee flows, would our doctor payments be “relevant contract” wages in our state?
- What does the exemption in our state cover for our billing mix, and from when?
- If we restructure, what has to change operationally — collection, invoicing, rostering, exclusivity — and what will that cost to run?
- What is our exposure for prior years, and is there any concession available?
- What do the doctors need to understand and agree to, and when?
Where DocHelp fits
Not in the advice. In the operations. Once your accountant and lawyer have designed the structure, we make the practice run that way — the billing workflow in Best Practice, the terminals and clearing arrangements as specified, the rosters and doctor agreements as administered, and a practice manager who understands why it matters. That is operations and advisory support, and it starts with a clinic audit.
Quick answers
Does payroll tax apply to contractor doctors?
It can. Under the “relevant contract” provisions in state payroll tax law, payments a practice makes to a practitioner for work can be treated as wages even when the practitioner is an independent contractor, depending on how the arrangement operates — who collects the fees, what the contract requires, whether the doctor can work elsewhere. That was the finding in Thomas and Naaz. Whether it applies to your practice is a question for a specialist adviser with your contracts and bank flows in front of them.
What was the Thomas and Naaz case?
A NSW medical centre operator whose doctors used rooms and services under written agreements, paying 30 per cent of Medicare receipts as an administration fee, with the centre collecting the Medicare payments and remitting the remaining 70 per cent. The NSW Civil and Administrative Tribunal found the payments to the doctors were subject to payroll tax; the Appeal Panel and, in March 2023, the NSW Court of Appeal dismissed the appeals.
Is there an exemption for bulk billing?
In Victoria, from 1 July 2025, wages paid to a relevant GP for work performed in relation to fully-funded (bulk-billed) items are exempt from payroll tax; privately billed fees are not. Other states have announced their own measures at different times. The detail, thresholds and how it applies to your structure are for your adviser and the state revenue office.
Can DocHelp restructure our doctor agreements?
No. We are operators, not lawyers or accountants, and we don’t give tax or legal advice. What we do is make sure the operational reality of the practice — rosters, billing flows, systems — matches whatever structure your advisers design, and that the practice manager understands it.
Fifteen years in medical practice operations. MBA, Melbourne Business School. Two medical centres built and sold; ten-plus centres overseen today. About Jamal →