Commissioner's Practice Note CPN 036 - Relief to Medical Centres
Practice Note number
| CPN 036 |
Tax/benefit |
Payroll Tax |
Date issued
|
23 August 2024 |
Issued by
|
Cullen Smythe
Commissioner of State Revenue
|
Effective from | 24 June 2024 |
Effective to | - |
Status
|
Current |
Purpose
The purpose of this Practice Note is to explain the amendments made to the Payroll Tax Act 2007 (“the Act”) which were introduced as a result of an announcement made in the NSW State Government Budget 2024-25.
The Revenue Legislation Amendment Act 2024 provides an exemption for past unpaid payroll tax that relates to “relevant general practitioner wages” and provides an ongoing rebate for relevant general practitioner wages.
The rebate and exemption only apply to contractor general practitioner (“GP”) services and does not extend to GPs engaged as employees and other staff such as nurses, reception, administration staff, pathology and allied health services.
Refer to PTA 041 for more information on how the relevant contract provisions apply to an entity that conducts a medical centre business.
This Note explains in detail when the exemption and the rebate will apply.
Background
An announcement was made as part of the NSW State Government Budget 2024-25 (handed down on 18 June 2024) to provide relief from payroll tax for medical centres who engage GP contractors.
Division 2A of Part 3 of Schedule 2 of the Act has been introduced to implement that announcement.
The relief announced will be in the form of:
- an exemption for any unpaid payroll tax that was payable on wages paid or payable to relevant GP prior to 4 September 2024; and
- a rebate for payroll tax on wages paid or payable to GP contractors on or after 4 September 2024 when certain conditions are met.
Commissioner’s Practice Note
Definitions
For the purposes of the rebate, wages are relevant general practitioner wages if:
- the wages are paid or payable to a general practitioner:
- under a relevant contract, and
- for the provision of general practitioner services through a medical centre, and
- the relevant contract is part of a practice arrangement, and
- a relevant proportion of all the general practitioner services provided by general practitioners through the medical centre in the relevant financial year are provided under a bulk billing arrangement
The relevant proportion of general practitioner services that must be provided under a bulk billing arrangement is:
- for a medical centre in Metropolitan Sydney – at least 80%
- otherwise – at least 70%
Bulk billing arrangement, for general practitioner services, means an arrangement where
- the person responsible for paying for the services assigns the person’s right to a Medicare benefit for the service to the general practitioner who provided the service, and
- the general practitioner accepts the Medicare benefit as full payment for the service
General practitioner means a medical practitioner who is registered under the Health Practitioner Regulation National Law (NSW) in the speciality of general practice.
General practitioner services means professional services provided by a general practitioner.
Professional services means a professional service specified in the Health Insurance Act 1973 (Cth) section 3 definition of ‘professional service’ paragraph (a) – being a service (other than a diagnostic imaging service) to which an item relates, being a clinically relevant service that is rendered by or on behalf of a medical practitioner.
Relevant Contracti is a contract under which a person supplies to another person services for or in relation to the performance of work as defined in section 32 of the Act.
Medical centre means premises, other than a private health facility, used to provide general practitioner services at the premises or remotely:
- by telephone, or
- using other technology that enables audio, or audio and visual, communication between persons at different places.
Practice arrangement, between a registered health practitioner or unregistered person, and an entity:
- includes:
- a contract of employment, contract for services or another arrangement or agreement between the practitioner or person and the entity in relation to the provision of services; or
- an agreement for the practitioner or person to provide services for or on behalf of the entity, whether in an honorary capacity, as a volunteer or otherwise, and whether or not the practitioner or person receives payment for the services; but
- does not include a contract or agreement not directly related to the provision of a health service.
Private health facilityii means premises at which any person is admitted, provided with medical, surgical or other prescribed treatment and then discharged, or premises at which a person is provided with prescribed services or treatments.
Exemption
Relevant general practitioner wages paid or payable before 4 September 2024
Clause 10D of Schedule 2 of the Act provides that relevant general practitioner wages paid or payable before 4 September 2024 are exempt unless payroll tax has already been paid on those wages before that date.
Where payroll tax has not been paid in respect of relevant general practitioner wages paid or payable prior to 4 September 2024, an exemption applies and the employer is not required to declare those payments as wages for payroll tax purposes.
However, where an employer has already paid payroll tax in respect of relevant general practitioner wages paid or payable prior to 4 September 2024, that employer is not entitled to a refund of that tax.
This definition of general practitioner wages does not include bulk billing for an exemption to apply. Only subclauses (a) & (b) of the definition applies.
Relevant general practitioner wages paid or payable before 4 September 2024 and payroll tax has not been paid at that date
If an employer operates a medical centre practice which pays relevant general practitioner wages, any amounts paid or payable before 4 September 2024 are exempt from payroll tax, if payroll tax has not been paid in respect of those amounts before 4 September 2024.
For the financial year 2024, ABC Pty Ltd (the employer) operates a medical centre in Metropolitan Sydney and engages Dr Fred Lee, a GP. The wages paid to Dr Lee are relevant general practitioner wages.
The employer had not paid payroll tax on the wages paid to Dr Lee for the financial year ending June 2024.
Thus, the employer is exempt from payroll tax on the wages paid to Dr Lee for the 2024 financial year.
Relevant general practitioner wages paid or payable before 4 September 2024 and payroll tax has been paid at that date
If an employer paid payroll tax, before 4 September 2024, on relevant general practitioner wages, the employer is not entitled to a refund for the payroll tax paid before 4 September 2024.
Bricks Medical Centre Pty Ltd (the employer) operates a medical centre and engaged Dr Mary Hahn, a GP. The wages paid to Dr Hahn are relevant general practitioner wages.
The employer paid payroll tax on wages paid to Dr Hahn for the financial year ending June 2024 and for the months July 2024 & August 2024.
The employer is not entitled to a refund of the payroll tax paid on the wages paid to Dr Hahn for the above periods.
Relevant general practitioner wages paid or payable before 4 September 2024 and payroll tax has been partially paid at that date
If an employer only paid payroll tax on relevant general practitioner wages for some, but not all, months up to 4 September 2024, that employer is not entitled to a refund on payroll tax paid but may be entitled to an exemption from unpaid payroll tax on wages paid or payable to the GPs before 4 September 2024.
Best Medical Centre Pty Ltd (the employer) operates a medical practice in Sydney and engaged Dr Joe Murray, a GP, under a relevant contract, to provide GP services to patients.
The employer paid payroll tax on relevant GP wages paid to Dr Murray for the months July 2023 to March 2024, but did not pay payroll tax on relevant GP wages paid to Dr Murray for the months April 2024 to August 2024.
The employer is not entitled to a refund on payroll tax paid for the months July 2023 to March 2024, but is exempt from payroll tax on relevant GP wages paid to Dr Murray for the months April 2024 to August 2024.
Rebate
Relevant general practitioner wages paid or payable on or after 4 September 2024
An employer is entitled to a rebate of payroll tax paid or payable for relevant general practitioner wages if the wages are paid or payable on or after 4 September 2024.
For the purposes of the rebate, for wages to be relevant general practitioner wages, a relevant proportion of all the general practitioner services provided by general practitioners through the medical centre in the relevant financial year must be provided under a bulk billing arrangement (see Definitions).
Although the rebate is only available for wages paid or payable to contractor GPs, for the purpose of determining whether a medical centre meets the relevant proportion, the employer must consider the total number of GP services that are bulk billed as a proportion of the total number of GP services that are provided at the medical centre (whether bulk billed or not) including those GP services provided by GPs who are engaged as employees.
A service is defined as per the definition of “professional services” above.
The relevant proportion is not determined based on the number of GPs, patients, appointments or consultations. One consultation may include a number of services some of which may be bulk billed and some may not be.
Wages paid or payable on or after 4 September 2024 by a medical centre operating in Metropolitan Sydney where at least 80% of GP services are bulk billed
If an employer operates a medical centre in Metropolitan Sydney and engages GP contractors, under a relevant contract to provide GP services and the relevant proportion of GP services (at least 80%) are bulk billed, the wages paid to the GPs are relevant general practitioner wages and the employer is entitled to a rebate of the payroll tax paid or payable on those wages.
For the financial year 2025, C Pty Ltd (the employer) operated a medical centre in Metropolitan Sydney and engaged four GP contractors, under relevant contracts, to provide GP services. No other GPs (including as employees) are engaged.
Over the period September 2024 to June 2025, C Pty Ltd has a bulk billing arrangement in place whereby the four GPs’ services are fully bulk billed.
As 100% of GP services provided at the medical centre were bulk billed, the employer has met the minimum relevant proportion (80%) required to be eligible for the payroll tax rebate on relevant general practitioner wages.
Thus, the employer is entitled to a rebate of payroll tax on the wages paid or payable to the four GPs from 4 September 2024 for the financial year ending 30 June 2025.
Wages paid or payable on or after 4 September 2024 by a medical centre operating in Metropolitan Sydney where less than 80% of GP services are bulk billed
If an employer operates a medical centre in Metropolitan Sydney and engages GP contractors, under a relevant contract, to provide services, and the proportion of GP services that are bulk billed are less than 80% of the total GP services, the wages paid by the employer are not relevant general practitioner wages. Accordingly, the employer is not entitled to a rebate of the payroll tax paid or payable on those wages.
DEF Medical Centre Pty Ltd (the employer) operates a medical centre in Metropolitan Sydney which offers GP services. The employer engages 2 GP contractors, Dr Paul Smith and Dr Lisa Jones, under relevant contracts, to provide GP services under a practice arrangement. No other GP (including as employees) are engaged by DEF Medical Centre Pty Ltd.
Dr Smith offers 2 patients 1 GP service each which is bulk billed.
Dr Jones offers 1 patient 1 GP service which is bulk billed and during that same consultation also offers that patient 4 other GP services which are not bulk billed and the patient has to pay a gap fee.
In total, the medical centre offered 7 GP services, but only 3 GP services were bulk billed and the other 4 GP services incurred an out-of-pocket fee.
As less than 80% of the GP services were bulk billed, the employer has not met the relevant minimum proportion (80%) and is not entitled to a payroll tax rebate on wages paid to the two GPs.
Wages paid or payable on or after 4 September 2024 by a medical centre that engages some GPs under relevant contracts and some as employees
If an employer operates a medical centre and engages GPs, some under a relevant contract and some as employees, to provide GP services, the relevant proportion of GP services (at least 80% in Metropolitan Sydney or at least 70% elsewhere) must be determined having regard to all GP services provided by both contractor GPs and employee GPs at that medical centre.
If the relevant proportion is met, the rebate only applies to wages paid or payable to contractor GPs and not on wages paid or payable for GP services provided by GP employees.
All Medical Services Pty Ltd (the employer), operates a medical centre in Metropolitan Sydney and engaged two GPs, under relevant contracts, to provide GP services. In addition, the employer also engaged three GPs as employees to provide GP services.
In total both the contractor GPs and those engaged as employees provided five GP services but only two of those services were bulk billed.
As such the employer has not met the 80% minimum proportion and is not entitled to the payroll tax rebate on the wages paid or payable to the two contractor GPs.
Where an employer operates multiple medical centre locations and engages GP contractors to work at each respective location
If an employer operates across multiple medical centre locations, the relevant proportion and entitlement to the rebate is determined having regard to GP services at each location.
KLG Medical Practice Pty Ltd (the employer) operates 2 medical centres in Metropolitan Sydney, one in Parramatta and one in Westmead.
The employer engages five GPs, under relevant contracts, to provide GP services to patients at the Parramatta site. All GP services at the Parramatta centre are bulk billed.
As 100% of GP services at Parramatta are bulk billed, the minimum proportion (80%) is met at the Parramatta site and the employer is entitled to a payroll tax rebate on wages paid to the five GPs providing GP services at the Parramatta site.
The employer also engages three GPs, under relevant contracts, to provide GP services to patients at the Westmead site, but only one-third of the GP services at Westmead are bulk billed.
As only one-third (33.3%) of GP services are bulk billed, the minimum proportion (80%) is not met at the Westmead site and the employer is not entitled to a payroll tax rebate on wages paid to the three GPs providing GP services at the Westmead site.
Where an employer operates at multiple medical centre locations and engages a GP contractor who works at the various locations
If an employer engages a GP contractor to provide GP services at multiple medical centre locations, the employer must determine whether the relevant proportion has been met at each medical centre location.
If the relevant proportion has been met at all locations, the employer is entitled to a rebate related to the entire wage paid to that GP.
If the relevant proportion has only been met at some locations but not at others, the employer will need to pro-rata and reduce the applicable rebate in line with the proportion of GP services provided by the GP at the locations that met the minimum threshold.
XYZ Pty Ltd (the employer) engages Dr Susan Smith, a GP, under a relevant contract to provide GP services to patients at two medical centres in Metropolitan Sydney, one in Parramatta and one in Westmead. There are no other GPs at the two sites.
All of the GP services provided by Dr Smith at the Parramatta site are bulk billed.
As 100% of the GP services are bulk billed, the minimum proportion (80%) is met at the Parramatta site.
None of the GP services provided by Dr Smith at the Westmead site are bulk billed.
The minimum proportion (80%) is not met at the Westmead site.
Under the contract, the employer pays Dr Smith a taxable wage for her services across both sites and Dr Smith works equally across both sites (i.e. 50% of her time at each).
As Dr Smith’s wage is in respect of services for which only 50% of her time is spent at the Parramatta site (the one that meets the minimum proportion) the employer is only entitled to a rebate in respect of 50% of the wages paid to Dr Smith.
Wages paid or payable on or after 4 September 2024 by a medical centre providing services to patients where the cost is covered by an arrangement apart from Medicare.
A “bulk billing arrangement” is where a Medicare benefit is accepted as full payment for the service.
If an employer operates a medical centre and engages GP contractors, under a relevant contract, to provide GP services to patients where there is no out of pocket cost or gap fee for the patient due to an arrangement apart from Medicare, those services are still regarded as GP services but are not considered “bulk billing” arrangements.
Family Medical Centre Pty Ltd (the employer) operates a medical centre in Metropolitan Sydney and engages five GP contractors, under a relevant contract, to provide GP services.
Two of the GPs provide GP services to two patients whereby the two GPs accept the Medicare benefit as full payment for their services (i.e. bulk billing arrangement).
The other three GPs provide three GP services to two veteran patients and one patient under the workers compensation scheme.
Those three patients do not pay for the GP services, but the three GPs accept as full payment the amounts paid to them by the Department of Veteran Affairs and workers compensation insurer.
Five GP services have been provided by the medical centre, but only two of those services are bulk billed. As such the employer does not meet the relevant proportion of at least 80% and is not entitled to the rebate.
Total number of GP services include those services provided to patients who are not entitled to Medicare benefits such as tourists.
General Practitioner Trainees
Section 10A(b) of the Act defines general practitioner as a medical practitioner who is registered under the Health Practitioner Regulation National Law (NSW) in the specialty of general practice. This does not include GP trainees as they are not a medical practitioner registered in the specialty of general practice. This means wages paid to trainee GPs are not eligible for the rebate. Equally, any services provided by a trainee GP would be excluded from calculation of the bulk billing threshold as these would not be “general practitioner services” since the trainees are not “general practitioners”.
Amount of the Rebate
The amount of the rebate for a financial year is the difference between:
- the payroll tax payable for the financial year when the relevant general practitioner wages are included, and
- the payroll tax that would be payable for the financial year when the relevant general practitioner wages are not included.
ABC Pty Ltd (the employer) is a medical centre that lodges and pays payroll tax monthly and it only pays wages in NSW.
For November 2024, its wages were $550,000 of which $150,000 were relevant general practitioner wages.
The threshold for the period would be: 30/365 x $1,200,000 = $ 98,630.14
Tax calculation including relevant GP wages
($550,000 - $98,630.14) x 5.45% = $24,599.66
Tax calculation excluding relevant GP wages
($550,000 - $150,000 - $98,630.14) x 5.45% = $16,424.66
Rebate is calculated on the difference
$24,599.66 - $16,424.66 = $8,175
Records you should keep
To allow the Chief Commissioner to verify the amount of any rebate claimed for a financial year, you must maintain sufficient records to enable RNSW to calculate the amount of the rebate.
Records that you should maintain include:
- the number of GP services bulk-billed and the number of GP services that have out of pocket expenses if you are a mixed billing practice
- the locations where GP services are provided if you operate more than one medical centre
- how you have pro-rated for any GPs engaged under a relevant contract if the GP works at more than one medical centre location
- the relevant general practitioner wages for the financial year
- the payroll tax payable for the financial year when the relevant general practitioner wages are included
- the payroll tax that would be payable for the financial year if the relevant general practitioner wages are not included.
i See sec 32 of the Payroll Tax Act 2007
ii Private Health Facilities Act 2007