Commissioner's Practice Note CPN 036 - Relief to Medical Centres
Release Date: August 23, 2024
The NSW State Government has finally released details on the previously announced payroll tax relief measures, which medical practices may choose to implement from 4 September 2024.
In this post, we’ll break down what’s new, how it works, and what you need to know to make sure your medical practice is making informed decisions in relation to the application of the rebate and payroll tax registration.
Available Relief
The relief comes in two main forms:
Exemption: Medical centres will receive an exemption for any unpaid payroll tax due on wages paid or payable to relevant GPs before September 4, 2024.
Rebate: A rebate will be available for payroll tax on wages paid or payable to GP contractors on or after September 4, 2024, provided specific conditions are met.
How the Rebate Works
The rebate is designed to reduce the payroll tax impact in medical practices where GPs work under relevant contracts and where there is a high bulk billing percentage. To qualify for the rebate, medical practices must meet a certain threshold of bulk billing services for the financial year. The required threshold is 80% for practices in Sydney Metro and 70% for those in other areas of NSW. The rebate, if eligible, will be a direct reduction in taxable wages for qualifying GP payments.
Detailed Eligibility Criteria - % thresholds
Understandably, medical practices are keen to calculate their eligibility for the rebate and where they sit percentage-wise concerning the 70% or 80% threshold. Below are the key details you need to know before calculating your percentage:
Practice-Level Calculation: The relevant proportion of bulk billing services is calculated at the practice level, not at the level of individual practitioners.
Service-Based Calculation: The calculation is based on services (commonly referred to as "items") rather than the number of appointments, consultations, or billing values.
Registrar Services: Services provided by registrars (trainees) are excluded from the percentage calculation.
Employee Doctors: Services provided by doctors who are engaged as employees are included in the calculation; however, the wages paid to these doctors do not qualify for the rebate.
Location-Specific Calculation: The rebate is location-specific, meaning that medical practices operating multiple sites may find that payments to GPs are exempt at one location but not at another.
Apportionment: If a GP works across multiple sites, the rebate may be apportioned if the relevant percentage for exemption is not met at each site.
Included and Excluded Services
The following table summarises which services are included in the total service count and which are eligible for the rebate:
Service Type | Total Service # A | Rebate Eligible Service # B |
Bulk Billed Medicare Services | Yes | Yes |
Department of Veterans Affairs (DVA) Services | Yes | No |
WorkCover Services | Yes | No |
Privately Billed Services | Yes | No |
Non-Medicare Services (e.g., Overseas Visitors) | Yes | No |
Calculating your Relevant Proportion %
The formula to calculate your percentage, referencing the columns above, is:
Rebate Eligible Service (B) # divided by Total Service (A) #
*Remember that registrar services are not included in the total service numbers, and separate calculations are required for providers working across different locations.
Hot Tip: To obtain data, BP Software users can consider reviewing the report "Patient Contact and Billing Statistics—Individual Locations."
Example - Calculating the Rebate Amount
The rebate amount for a financial year is determined by comparing the payroll tax payable with and without the inclusion of relevant GP wages.
Example: Rebate Calculation (Example 10 from CPN 036)
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.
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
The rebate is calculated on the difference
$24,599.66 - $16,424.66 = $8,175
In this example, $16,424.66 of payroll tax is ultimately payable to Revenue NSW for the month.
Next Steps
It is important to note that this relief is for businesses that engage with doctors under relevant contracts. We suggest each practice obtain professional advice from specialised lawyers and accountants to determine its structure and whether there are alternate options or interpretations regarding its payroll tax obligations.
Further, it is important to consider whether your practice will continue to meet the threshold criteria in the future and how this may impact future payroll tax liabilities. With the shift toward private billing to support practice sustainability, many medical practices will find it difficult to meet the 70% or 80% bulk billing threshold.
After advice and consideration, if you want to take advantage of the NSW Payroll tax relief measures and are over the payroll tax registration threshold (including deemed payments to GPs), you must register for payroll tax and commence reporting taxable wages and GP-exempt wages.
For practices that do not operate in the GP space or do not meet the relief criteria, it is time to consider alternative options, including your ongoing structure of operations, options for surcharges, and cash flow measures to cover any potential payroll tax liabilities.
Conclusion
The amendments introduced by the NSW State Government will offer some relief to eligible General Practices; however, with the industry's shift toward private billing, the number of eligible medical practices may be smaller than originally anticipated.
Contact our team today for further advice or other specialised health accounting services.
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