Crunch talks are under way as doctors face a four-month deadline before a fresh tax hit kicks in and potentially adds an extra $15 to the bill for NSW patients' GP visits.
Doctors across the country's most populous state could be forced to increase their fees in order to keep their doors open if the scheduled payroll tax change comes into effect in August.
Medical practices have previously been exempt from paying payroll tax for tenant doctors considered to be independent contractors.
It is estimated around 90 per cent of GPs lease rooms in clinics, with their wage not included as part of the overall business and therefore not subject to payroll tax.
But a NSW Civil and Administrative Tribunal ruling in July 2023 found doctors were a necessary part of a clinic's business and therefore also subject to the tax.
A 12-month pause on payroll tax audits for GPs and their practices was put in place after some clinics said they were retrospectively slugged with the tax totalling millions.
The freeze is set to end in August.
Royal Australian College of General Practitioners NSW chair Rebekah Hoffman said most GPs would need to increase their fees in order to stay open.
"For most GPs it will mean increasing their fees from $12 to $15 to cover the additional costs," she told ABC Radio on Wednesday.
"Most GPs are small businesses, we don't have large amount of surplus funds to be able to cover big tax increases by asking us to pay more tax.
"The only option is to unfortunately pass it on to our patients."
Dr Hoffman noted a typical GP covered their superannuation, tax, annual leave, insurance and other costs themselves.
Premier Chris Minns said the government was still negotiating with GPs about what would happen at the end of the 12-month pause.
"It's complex, tax arrangements for GP co-operatives are not easy things to navigate," he told reporters.
When asked whether a new tax would lead to some GPs shutting their doors, he replied: "I don't believe that we'll come to that ... negotiations have been fruitful."
Mr Minns said a functioning primary healthcare sector took pressure off the public hospital system, which would otherwise be overwhelmed.
"It's not going to be the case if we whack them with a massive tax," he said.
But opposition health spokesman Matt Kean described the changes as nothing more than a "tax grab" and pointed towards reprieves offered to Star casino as an example of the government having its priorities wrong.
"Star was able to get a $320 million tax cut from this government but our GPs are now getting smashed with an unfair tax," he said.
Finance Minister Courtney Houssos said recent Medicare data showed an uptick in bulk-billing rates in NSW after the federal government made changes to related GP incentives in November.
"It's clear those effects are starting to flow through to practices to ease cost pressures on GP practices and patients," she said.
