Payroll tax audits and court cases during 2023 have brought the issue of payroll tax for medical practices into focus. Until recently, medical practices largely excluded contractors from calculations on the basis that the contractor operates their own business out of rooms rented from a medical practice.

Payroll tax is a state-administered tax with different rules, rates and thresholds in each state. Employers that pay employees or contractors totalling more than the state threshold must submit wage reports to the relevant state revenue office and pay the calculated payroll tax monthly.

A medical or health centre that pays contractors is deemed an employer for payroll tax; therefore, relevant payments made to the practitioner are treated the same as wages.

Many types of arrangements could be counted as relevant for payroll tax. Contractor agreements, service arrangements, and management or agency agreements could all be considered for payroll tax.

The Rules Haven’t Changed

Various states have guidance on what contractors are included and excluded in payroll tax calculations. The recent focus is not because of changes to the law but because of audits and court cases where the final ruling required the practice to pay tax on contractor payments.

The rules in each state are similar but with some distinctions. It’s essential to check the contractor guidance for inclusions and exclusions in your state. In addition, each state currently has different dates at which they will enforce the tax on medical practice contractor payments, with some states offering an amnesty.

What You Need to Do

If your medical or allied health practice pays employees and contractors above the state threshold, you must do an internal audit on agreements with contractors. Check your state’s rulings on inclusions and exclusions and clarify written agreements with your contractors.

Payroll tax laws are notoriously complex and it’s a good idea to get professional advice about which workers should be included. Talk to us today about the contractor rules, and we’ll ensure you include the appropriate workers (and are paying only what you need to!)

If you need more clarification about the rules for contractors in your medical practice, please call 1300 696 585 or contact us now.

The ATO has shifted its focus from providing assistance with tax through the pandemic to now re-establishing the culture of businesses paying their tax debts on time.

Beginning from July 2023, The ATO has issued notices of intent to disclose business tax debts of more than 22,000 businesses with a tax debt of at least $100,000 that is overdue by more than 90 days, to credit rating agencies (CRAs).

Disclosure of business tax debts

The ATO may report your business tax debt if it meets the following criteria:

• you have an ABN and your business in not an excluded entity.
• you have one or more tax debts and at least $100,000 is overdue by more than 90 days.
• you are not engaging with the ATO to manage your tax debt.
• you don’t have an active complaint with the Inspector-General of Taxation Ombudsman (IGTO) about our intent to report your tax debt information.

The Commissioner has urged taxpayers, with outstanding debts, to engage with the ATO to not risk their business’s tax debts becoming visible in credit rating checks.

Intent to disclose notice – next steps

Section 255-15 of the Tax Administration Act 1953 empowers the Commissioner to enter an arrangement with an entity which has, or which is expected to have, a tax-related liability, whereby the entity may pay the liability by instalments.

Businesses need to pay their debt or enter an appropriate payment arrangement within 28 days of when the intent to disclose notice was issued to prevent disclosure.

In October 2023, more than 9,000 businesses are expected to have their debts disclosed and the ATO expects to issue 50,000 notices of intent to disclose by the end of 2023–24 financial year. A disclosed debt can impact your business’s ability to receive finance and your business may also lose suppliers.

Contact us

If you have received a notice of intent or have a tax debt of $100,000 or more that is overdue by more than 90 days, we can assist you in engaging/re-engaging with the ATO and help create an arrangement or payment plan that best suits your current and future financial position.  If you would like to discuss further or need any assistance, please call 1300 696 585 or contact us now.