Queensland's peak medical bodies are warning the cost of going to the doctor could skyrocket as general practice comes under more strain due to a clash over tax law.
An increase to the amount of payroll tax medical practices could be liable for may force Queenslanders to pay up to $15 more at the doctors, according to one medical accountant.
General practitioners are sounding the alarm that they will have to pass on some costs to patients and cut bulk billing, or be forced to close their clinics.
AMA Queensland president Maria Boulton has labelled it "immoral" and a "tax grab" from the Queensland government.
"My fear is that vulnerable patients will not have the access to general practice that they did in the past, and that is catastrophic," she said.
"When you look at the people who most frequently visit their GP, it's the most vulnerable people, it's people who have chronic disease, it's the elderly, it's young families.
"They are the ones that are going to be having to pay this patient tax."
However, Queensland Treasury says there has been no change to payroll tax liability for medical practices.
What caused this payroll tax issue for general practice?
General practitioners work under different models with some operating under a service agreement with a medical practice.
This is where the clinic provides a space and support for the GP, and those GPs then provide healthcare to the community.
This means medical practices pay payroll tax.
They pay it for receptionists, nurses and other staff in their clinic but not for tenant GPs because they are not considered employees.
The doctor sets the patient fees, which are collected by the medical practice on their behalf so they can efficiently process Medicare rebates and any out-of-pocket costs.
The medical centre then deducts a fee for use of the clinic's facilities and then remits back to the doctor the balance of their patient fees.
However, a New South Wales tribunal ruling which came down last year has triggered a war of words between medical bodies and some state governments.
The ruling of Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue deemed that the doctors working in those medical centres were contractors engaged under "relevant contracts" and the payments to the doctors were taxable wages for payroll tax purposes.
This meant the case viewed the doctors as operating under a contractor arrangement, not a service agreement arrangement, and the medical clinic would have to pay more payroll tax.
After this ruling, the country’s peak medical bodies asked various state revenue offices for clarity on the matter.
In December, the Queensland Revenue Office (QRO) put out a ruling confirming that GPs are employees for payroll tax purposes and that the fees they receive from patients via the medical clinics should be taxable.
William Buck director and medical accountant Paul Copeland said it was a new position for the QRO to include service arrangements for payroll tax, and that was causing outrage from medical groups.
"Not one of the ruling examples deals specifically with a service arrangement, they're always talking about contractor arrangements," he said.
"They're not typically considered contractor arrangements where that doctor provides their services to the medical centre.
"That's just not how it works. The doctor provides the services to the patients."
However, the QRO says the payroll tax liabilities for medical practice contractors have not changed since 2008 and that it had not been targeting GP clinics for payroll tax compliance.
What does this mean for future trips to the doctor?
Payroll tax is a state-based tax on wages paid by an employer when they have more than $1.3 million as a total of wages, superannuation and contractor payments over a full financial year.
In Queensland, the rate is 4.75 per cent for businesses who pay $6.5 million or less in taxable wages.
The medical industry is warning the change means general practice could soon have to pay payroll tax on the cut they receive from patient fees before they give the money to GPs.
Royal Australian College of General Practitioners (RACGP) president and Queensland chair Bruce Willett said the increased tax will severely cut the profit margins for clinics which will result in more costly trips to the GP.
"There is essentially a 4.75 per cent taxation on Medicare payments and other payments patients are making to practices," he said.
"And that's more than the margin for most practices and unfortunately practices are going to have to pass that on.
"That's going to worsen the problem we're having with dropping bulk billing rates and increasing out-of-pocket expenses."
Dr Willett said it was likely medical practices would have to put their costs up by 15 per cent to keep their business viable.
Mr Copeland said this would result in higher fees for patients so clinics can avoid closing their doors. He said appointments could increase by up to $15 a visit.
"What you're looking at is a lot of practices will be putting a letter together that will go to their patients explaining why their fees have gone up $10 to $15 a visit to cover this additional cost," Mr Copeland said.
"There are a few variables such as the patient fees being charged, the bulk billing rates and the percentage that the practice charges the doctor.
"This will impact the amount which the practice will need to charge just to retain their profit.
"The 'average' is around $10 to $11 to retain your profitability as a medical centre, however this does not take into account any additional administrative burden to calculate and record the tax and deal with the compliance side of things."
What are doctors calling for?
The peak medical bodies for general practice have been consulting with state governments in Queensland, New South Wales and Victoria for months over this issue.
It flared up after some medical practices across the country said they received retrospective payroll tax bills costing hundreds of thousands or even millions of dollars.
Following consultation from AMA Queensland and the RACGP, the QRO advised it would limit audits on GPs to the 2021-22 financial year and future years.
The Queensland branch of the AMA said GPs needed a tax exemption or there would be further pressure on the public health system in emergency departments.
"My fear is that vulnerable patients will not have the access to general practice that they did in the past and that is catastrophic," Dr Boulton said.
"We need to ensure that our policymakers and politicians, both levels of government, act upon this.
"We're seeing so much ramping, we're seeing the elective surgery lists grow and grow, we're seeing a maternity crisis in central Queensland — this has to stop."
Dr Willett praised the Queensland Government for being open to discussions and continuing to work through their concerns.
However, he called on the state to help resolve the matter immediately or it would further cripple general practice which is already struggling with low Medicare rebate rates.
"Last year we saw the so-called end to the Medicare freeze, but that meant that the rebates got an increase of 1.6 per cent when the inflation rates were running at 6.1 per cent, so it wasn't much of an end to the Medicare freeze at all," Dr Willett said.
"Then you can imagine an extra 4.75 per cent off the top [due to extra payroll tax] at this time is just unpalatable.
"We're just treading water. We're not going anywhere."
How are they going to monitor it?
Acting Commissioner of State Revenue Amy Rosanowski said while the law itself had not changed, the Thomas and Naaz case in New South Wales brought the issue "more sharply into focus".
"The treatment of payroll tax and contractors in Queensland is not new, and we know there are a number of businesses in Queensland that operate medical practices and do pay payroll tax," she said.
"There are clearly different models for medical practices, ranging from large corporations through to small operators and sole traders, but our application of the law hasn't changed."
Ms Rosanowski said compliance checks were not widely undertaken for medical clinics during the peak of the COVID pandemic, but those activities have since resumed.
"Through that, we have identified instances where there are businesses that operate medical practices that have been non-compliant," she said.
Queensland Treasurer Cameron Dick said the state government is "doing everything we can" to help GP clinics navigate the payroll tax framework.
"We are continuing to work with the peak bodies to deliver a solution that will protect the interests of general practice and Queensland taxpayers, and to ensure the integrity of the harmonised national payroll tax system," he said.
"Even though rates and thresholds may vary from state to state, it is a harmonised national system which means all states and territories apply payroll tax in a consistent matter. Individual states do not exempt particular industries or professions because it's a national system.
"The Queensland Revenue Office will continue to work with those peak bodies, as they have been doing for months now."
