Patient fees for a standard consultation in Newcastle are set to rise by $10 to $15 this month due to the NSW government hitting contracted GPs with payroll tax.
Doctors are angry that the Minns government promoted the tax as a "bulk-billing initiative".
The government said it would provide a "new, ongoing payroll rebate" to clinics for contractor GPs that meet bulk-billing thresholds of 70 per cent.
Whitebridge doctor Max Mollenkopf said the government was, in a sense, pulling a "bait and switch" by hiding the tax behind a "bulk-billing initiative" that many would not benefit from.
"This is not going to change the billing behaviours of any GPs in Newcastle," he said, adding that it would not improve bulk-billing rates.
Dr Mollenkopf, who owns the independent Whitebridge Medical Centre, said corporate medical centres would benefit most from the government's payroll tax moves.
Independent clinics with about six to 15 full-time equivalent GPs would be most affected.
"There is an increasing squeeze on GP practices when you have a fine being introduced effectively in the form of a tax," he said.
"This will have to be passed on to consumers."
Dr Mollenkopf said GPs were "increasingly facing a watershed moment" and patients were getting a "dud deal".
Payroll tax of 5.45 per cent applies to businesses in NSW when their total wages in a financial year exceed $1.2 million.
Small GP clinics may avoid the tax, but many are already struggling.
The Newcastle Herald reported on Saturday that the two-doctor Seaside Medical Centre at Fern Bay will close next month "due to the ongoing difficulty of doctor shortages".
Dr Milton Sales, who runs the Brunker Rd General Practice at Adamstown, believed most GPs in Newcastle would not reach the 70 per cent target to avoid the payroll tax.
This was because only a small percentage of patients were bulk-billed due to rising costs and inadequate Medicare rebates.
"The payroll tax has to be paid upfront. If we did get to 70 per cent bulk billing, we'd have to apply to be reimbursed for the tax," Dr Sales said.
"Our practice will be paying about $130,000 more tax this year because of the change. We can't trust that we'll get the money back."
He said the "safest thing" for those who own private practices was to pay the tax upfront and charge the patients more to cover the cost.
This means GP fees in Newcastle for a standard consultation will rise as high as $120.
The rebate for a standard consultation - lasting at least six minutes and less than 20 minutes - is $42.85.
So the gap fee for a standard consultation is set to be as high as $77.
The GP issue arose after two court cases in 2019 and 2023, which led Revenue NSW - the state tax office - to rule that contracted GPs would be subject to payroll tax.
Contracted GPs argued against this, saying they shouldn't be considered employees because they receive no holiday pay, sick pay, superannuation or workers comp.
The Minns government reacted by exempting medical centres from paying retrospective payroll tax.
But from this month, the tax will apply to contracted GPs who fall under the "bulk-billing threshold".
Nevertheless, Dr Sales said that GPs "won't pay any of the payroll tax, it's the company that runs the practice".
Dr Sales said the tax was "5.4 per cent of the net profit of doctors who are renting space from us".
And clinic owners only received "35 per cent of what the GPs bill".
This was why fees would have to rise by $10 to $15 to cover the tax.
