Medical industry

Medical businesses must understand their payroll tax obligations when engaging health practitioners.

Businesses in the medical industry often engage a variety of practitioners. Contractor arrangements may be defined as a relevant contract and still be subject to payroll tax.

Health practitioners may include:

general practitioners (GPs)
dentists and dental workers
nurses, midwives and paramedics
physiotherapists, podiatrists and optometrists
psychologists and occupational therapists
chiropractors and osteopaths
pharmacists
Chinese medicine practitioners
Aboriginal health workers.

Refer to medical industry definitions for the terms used on this page.

Exemption for fully-funded consultations

From 1 July 2025, wages paid, or payable, by a general practice (GP) medical business to employee and contractor GPs are exempt when related to fully-funded items of GP work. As the proportion of GP work that is fully-funded will be the proportion of GP wages exempt from payroll tax, this exemption aims to support GP medical businesses that bulk bill their services.

Please note that this exemption does not apply to non-medical GP businesses (i.e. allied health professionals and dentists).

The exempt wages are calculated using the following formula:

A × B ÷ C

A = the total amount of GP medical business wages paid, or payable, by the GP medical business for, or in relation to, the performance of GP work.
B = total amount paid to the GP medical business (or any associated person) for fully-funded items of GP work, excluding amounts paid for consumable items.
C = the total amount paid to the GP medical business (or any associated person) for all items of GP work, excluding amounts paid for consumable items.

Note: please do not include this exempt wage component in your monthly/annual payroll tax lodgements. You will be required to keep your calculation of the exempt component for any future compliance purposes. However, your remaining taxable wage component should be included in your wage lodgement.

Example 1

This month, $30,000 was paid to a GP medical business for GP work, including $12,000 for fully-funded items. These amounts exclude amounts paid for consumable items.

In the same period, the business paid $20,000 in wages for the performance of GP work.

Applying the formula:

$20,000 × ($12,000 ÷ $30,000) = $8,000

This means $8,000 of wages are exempt from payroll tax. However, the business must declare $12,000 (i.e $20,000 - $8,000) as taxable wages.

Example 2

Dennis books a vaccination at his local medical clinic and is charged $150. He is entitled to a Medicare rebate of $100, and the reasonable cost of the vaccine consumable to the clinic is $50. No other amounts are paid for the vaccination.

As the amount charged for the work does not exceed the combined amount of the Medicare rebate ($100) and the reasonable cost of the consumable items used to administer the vaccine ($50), the item of GP work is fully-funded.

To calculate exempt wages, the amount of $100 is included in both B and C of the above formula. The amount payable for the consumable vaccine items ($50) is excluded from both B and C in the calculation instructions noted above.

Relief for Victorian GP businesses

On 22 May 2024, the Victorian Government announced changes to how payroll tax applies to GP businesses.

For the periods up to 30 June 2024

Victorian GP businesses can obtain relief from payroll tax on payments made to contractor GPs. This applies to any unpaid or future assessments for periods up to and including 30 June 2024.

A general practitioner is defined as any of the following:

a Specialist General Practitioner as defined in the National Law (i.e. Health Practitioner Regulation National Law (Victoria) Act 2009)
prescribed Medical Practitioners (as defined in MBS Note AN.7.1) who predominantly provide general practice medical services similar to those provided by specialist GPs
medical practitioners on an accredited general practice training pathway in accordance with section 1.1.3 of the Health Insurance (General Medical Services Table) Regulations 2021.

Other relevant definitions include:

a Victorian general practice business is a medical practice in Victoria where GPs provide services, but does not include hospitals
outstanding assessments are any assessments which are unpaid, or the unpaid portion of partly paid assessments
future assessments are those issued after 22 May 2024.

If your Victorian GP business has an outstanding assessment for a period up to 30 June 2024 and we have not contacted you about relief, please email us.

This relief only applies to Victorian GP businesses. Medical and allied health professionals should review their wage disclosures for the period up to 30 June 2024 to ensure they are correct.

For the period up to 30 June 2025

Victorian GP businesses may also be eligible for payroll tax relief for payments to contractor GPs for the 2024-25 year. This will apply to GP businesses that did not:

receive advice by 22 May 2024
pay payroll tax on payments to their contractor GPs.

‘Received advice’ means that the business was told by 22 May 2024 that payroll tax was payable on their payments to contractor GPs. This advice could have come from the SRO (e.g. through a private ruling or assessment), or a lawyer or accountant.

The relief for the periods ending 30 June 2024 and 30 June 2025 will be provided through the Treasurer’s ex gratia powers.

This relief only applies to GP businesses. It does not apply to other medical or allied health professionals.

Claiming relief

We have updated the PTX Express portal to help eligible GP businesses disclose their GP wages and claim relief. This happens when registering for payroll tax or lodging their 2024-25 annual reconciliation.

Registration

A GP business that operates as a ‘General Practice Medical Service’ must select this business type when registering in PTX Express. During registration, a GP business must provide:

wage information for the current financial year and up to the last 4 financial years
total payments to contractor GPs in the ‘Ex-Gratia GP wages’ column.

This amount will not be used to calculate the payroll tax liability of an eligible GP business. Do not include payments to contractor GPs in the taxable wages field.

Annual reconciliation

For the 1 July 2024 to 30 June 2025 annual reconciliation process:

enter total payments to contractor GPs in the ‘Ex-Gratia Exempt GP Wages’ section.

An amount disclosed in this section will not be used to calculate the payroll tax liability of an eligible GP business. Do not include payments to contractor GPs in the taxable wages field.

Please note that there is no requirement for groups to enter a group total ‘Ex-Gratia GP Wages’ amount in PTX Express.

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Practitioner contracts

If you engage practitioners as employees under common law principles, their wages are subject to payroll tax under the Payroll Tax Act 2007 (PTA).

If practitioners are not engaged as common law employees, the PTA can treat them as employees under a relevant contract. In this case, payments made to the practitioners are deemed to be wages and are subject to payroll tax.

The Commissioner has explained his position in 2 revenue rulings:

Revenue Ruling PTA-041 explains how the relevant contract provisions apply to medical centres.
Revenue Ruling PTA-038 helps determine whether a worker is a common law employee.

Contractor exclusions

There are several exclusions available under the PTA for relevant contracts. More information about these exclusions can be found on our contractors webpage.

The 3 most common exclusions for medical or healthcare practice are:

Medical practice structures

Typically, a practitioner provides services to the practice by:

treating patients at the practice
generating income
following the practice’s protocols.

Revenue Ruling PTA-041 states that, unless an exemption applies, a contract between a medical practice and a practitioner is a relevant contract if the following apply:

the practitioner operates their own business or practice providing medical services to patients
in the course of conducting its business, the medical practice:
- provides members of the public with access to medical services
- engages a practitioner to supply services to the medical centre by serving patients on its behalf
an exclusion under section 32(2) of the PTA does not apply.

The ruling also states that the relevant contract rules will likely apply if:

a medical practice allows a practitioner work from its premises
the practice advertises access to the practitioner’s services.