Recent revenue rulings in NSW and VIC, mirroring rulings already released in QLD and SA, now mean that Medical (Dental) practices may be liable for payroll tax on payments made to independent contractors.
The rulings have the effect of treating independent contractor dentists as deemed employees for payroll tax purposes. So what does this mean, and what will be the price we pay?
A recent article published in Accountants Daily, extracted below’ sums it up nicely.
As many as 60 per cent of dental practices across Australia are expected to be caught by the revenue rulings, and those in NSW and VIC are likely to receive tax bills going back as far as 5 years.
According to the Australian Dental Association (ADA), the move by state revenue offices to update the interpretation of an existing payroll tax law will be financially devastating for dentists and force a reduction in services, fee increases and, in some cases, even practice closures.
The ADA estimated as many as 60 per cent of dental practices could be subject to payroll tax under the ruling, and they would have little option but to charge patients more.
“Dentists haven’t passed on fee increases despite rising operating costs,” the ADA said. “The ADA’s Dental Fees Survey shows that on average, fees charged by general dental practitioners increased by only about 2.14 per cent between 2017 and 2022 – a period in which inflation increased by 14.5 per cent.”
Regional, rural and remote areas would be hit especially hard, where medical services are already undersupplied and in high demand, with tens of thousands of people registered on public dental waiting lists.
Dr Kate Amos, an ADA NSW member with a Coffs Harbour-based dental practice with three full-time dentists and one part-time, said access to regional health services was already an issue.
“The waiting lists in our area are now over three months, which is just not workable when people are in pain,” she said. “We have the space to take on another dentist but can’t because payroll tax is triggered.”
“Similar to general practice medical clinics, every dentist usually has at least two support staff, so payroll tax is triggered for many clinics.
“Many areas need more than this number to service their location. However, we also know patient care should combine these services and share the load rather than having three separate clinics.
Dr Amos said the government encouraged general practices to move towards a group practice model that led to better patient care outcomes, and dentistry followed suit.
“The problem now is that the government is now turning around and penalising this same model”.
Worst still, whilst in QLD and SA, where an amnesty was provided for past years, Currently NSW and VIC have an amnesty applied, but for how long is the question? Consequently, some practices may well be hit with years of retrospective tax bills because the government has reinterpreted how a service and facility agreement is viewed.
The ADA said that general medical practice and dentistry were already struggling with significant increases in supply and staffing costs.
“We still have all of the compliance requirements of hospitals in terms of infection control, training and support, but very little government support,” the association said.
The ADA said it calls on the government to retain the current rules and interpret how they are or exclude health and health services.
