GPs say medical centres in NSW could be forced to shut down or charge patients higher fees if a court decision finds clinics are liable for payroll tax.
Prior to a recent NSW tribunal ruling, medical clinics typically collected patient fees, withheld a certain percentage to cover rent or other expenses, and passed on the rest to "tenanted" General Practitioners (GPs).
Under a new interpretation of payroll tax administration, tenanted GPs would be considered employees rather than service providers.
It would mean clinics in NSW that pay more than $1.2 million per year in wages, superannuation and contractor payments would have to pay 5.45 per cent of those wages in tax to the state's revenue office.
The Royal Australian College of General Practitioners' (RACGP) North Coast representative Debra King said it was a "terrible situation for patients", with the increased costs for GPs likely to be passed on.
"They're going to have to pay more out of pocket expenses for primary health and GP services," said Dr King, who works as a GP in Port Macquarie.
A RACGP survey found that if payroll tax was applied to tenanted GPs, only three per cent of practices would be able to absorb the cost.
One in five survey respondents said their practice would close, and 78 per cent said patients would have to pay higher fees.
"GP businesses will close down … less and less medical students will pick general practice as a specialty and that flows on to the whole health system," Dr King said.
GP clinics being liable for payroll tax hinges on the outcome of an appeal in the Thomas and Naaz medical centre case, which was heard in the NSW Court of Appeal last Friday.
Smaller GP clinics are expected to be hit hardest, meaning regional and rural areas already starved of doctors will likely suffer the most.
Dr King said bulk billing was already declining and patients were paying more because the Medicare rebate had not increased for 10 years.
"It's ridiculous … it's going to put further strain [on GPs] in an already strained [healthcare] industry," she said.
"People that are most vulnerable … that can't afford to go to the doctor will be the ones that don't treat their medical conditions. That's not right."
The RACGP has called for NSW to follow Queensland and adopt a two-year "grace period" for clinics to get their affairs in order before the changes are enforced.
Last month, Queensland Treasurer Cameron Dick said he had discussed the matter with NSW counterpart Matt Kean, but the NSW treasurer's office declined to provide a comment on whether NSW was considering a similar grace period.
A NSW government spokesperson said "the NSW government is assessing the implications for general practices and will continue to work constructively with all relevant stakeholders".
Dr King said a grace period and provision of clear government guidance in NSW was urgently needed, but the RACGP wanted tenanted GPs to be exempt completely from payroll tax.
Calls to change law
ECOVIS director Heath Stewart, a tax specialist in the healthcare industry, said state governments should amend the law immediately, not wait for the outcome of the Thomas and Naaz appeal.
Mr Stewart said typically, a medical centre with $5 million in patient revenue might be operating with a bottom line profit of less than 10 per cent, so having to pay payroll tax of around $200,000, potentially made the business economically unviable.
"[The Payroll Tax Act] should be amended to exclude payments to doctors … [for] the wider healthcare benefit of the … community," he said
"This should be about affordable healthcare for mums and dads and this is just a sad tax grab.
"This is an opportunity for the states to take federal Medicare money and deploy it at a state level."
