Banking on a practice tax time bomb?

Australian Tax Office Risk: Contractor doctors or healthcare providers who allow their patient fees to be banked in their practices ABN linked bank account may trigger an expensive tax audit in the new financial year.


For decades, we believe, many thousands of practices/doctors have unknowingly submitted the wrong bank account information to Medicare. 


Many unknowingly may have committed a “serious offence” under the Health Insurance Act and/or Income Tax Act and Payroll Tax rules


Due to the Australian Tax Office’s new mandatory e-invoicing laws, it will be simpler for the tax office to automatically raise a red flag. Failing to promptly answer their questions could turn this into a super spreader event and affect the entire practice. We have seen this with the recent NSW GP payroll tax decision. This has set the nation-wide series of payroll tax audits on medical and health practices in NSW, Victoria, QLD and WA.


Contractors who wish to protect themselves click this confidential and free self-assessment test called the Medical and Health Contractors checklistFind out if you are at risk and what you can do about it.


For decades, many thousands of practices/doctors may have unknowingly submitted the wrong bank account information to Medicare. 


If you engage independent contractors and you have submitted a HW 052 Online Medicare claiming form practice bank account bank account ABN linked details, then technically this may constitute a “serious offence” committed by the practice or organisation, as referred to in the HW052 form, if they are independent contractors.


If this is the case then according to the Government a Provider registration for Electronic Funds Transfer payments form (HW029) form should be completed and submitted.


Notwithstanding, you may not have committed an offence under the Health Insurance Act, however commencing from 1st July 2022, do not surprised if the Tax Office comes knocking on your door with a please explain letter.


Practices and providers should check their HW 052 Online Medicare claiming form that has been submitted to Medicare. Did you give the practices ABN bank linked details or the contractors.


For unprepared practices, our earlier article Do not Use the “C” Contractor Word! explains this may not be cheap or easy to defend. While time is no your side, now is a good time to get started.


Practices and hospitals need to ensure they have been set up correctly when the Australian Tax Office’s new mandatory e-invoicing for Commonwealth agencies begins on 1st July 2022. The inflection point is when the private sector for example private medical and health practices will be forced to join. Check your PRODA account now has a e-invoicing option.

As happened when the GST was introduced, this may expose and highlight any poor tax compliance issues.

E-invoicing is akin to real-time microchipping every transaction you make. When fully operational, e-invoicing should work like plugging in a missing bulb in a Xmas tree. It can instantly expose non-compliance and lead to a robo-audit of your tax affairs.

An example is what may happen with a patient’s computer-generated tax invoice and related provider stationary. 

Tenant doctor’s (contractor) service fee arrangements are common in a medical and allied health practice and in public hospitals. Often the practice’s ABN, rather than the tenant doctor’s ABN, appears on a patient tax invoice, stationary and website/digital payment systems without an appropriate disclaimer. This automatically flows downstream into the organisation’s accounting system. In front of a judge, this may unintentionally mischaracterise your arrangements.

Take action! Share this article with your practice manager to see if YOU have a serious problem.

The good news is that there may be a practical and cost-effective solution. 


The bad news is, some practices will have to take a number of not-so-cheap steps to clean up their books and processes. 




What should I do next?


Do not remain naive. It is a complex problem that needs a complex solution. Just because you are healthcare worker or practice there are no special exemptions when it comes to paying taxes. There is a simpler way to work it all out.


Step 1 – Find out if you really have a problem


This Employee v Contractors checklist and Medical and Health Contractors checklist may be a useful starting point in mitigating a potential blame game.


We stumbled over this issue when a GP practice client asked us to sign off on their new Medicare Bank account details for Online Claiming (HW052) application. When I read the form, alarm bells started to ring, given the new mandatory ATO tax office e-invoicing rules commencing on 1st July 2022.


This affects all Medicare billing doctors and providers in private practices with contractor, employee and tenant doctors arrangements. This includes public hospitals with provider private practice arrangements that bill Medicare. All providers and practices should immediately check whose ABN linked bank account name appears on their banking online claiming arrangements.



If you are a non-employee provider, an business an Australian Business Number (ABN) is mandatory. You or your entity should have a bank account linked to this number. The ATO’s new e-invoicing rules are part of a global digitally-encrypted invoicing integrity program designed to stamp out fraud. However, it appears to have greater application beyond merely fraud.


Every tax invoice you issue to a patient legally must have a registered ABN printed on it. Your registered Australian business (e.g. a provider) will leave a permanent digital audit trail. If the ABN is incorrect, it will not be easy to go back and fix your books or transactions later. 


In future years, it may trigger a series of “please explain” statutory audits, which may prove costly, especially if the practice ABN is used as the ABN that banks and or bills the provider and/or patients. By data matching your humble bank account, this may trigger a domino effect of audits income tax, payroll tax, superannuation guarantee, to Fair Work and WorkCover audits may arise.


Without remedial action, this may lead to commercial disputes. This may harm staff morale and potentially lead to expensive arguments with a provider’s external legal and accounting advisers.


Step 2 Confirm which bank account should you nominate on which form: the practice or the contractor?


The simple answer is: put the provider’s name and not the practice on the form. This simple measure will have significant implications on your business, legal and tax structure. This will affect the practice’s or provider’s accounting, bookkeeping, banking reconciliations, BAS and annual tax returns! Seek professional advice before making this change.


However, and to be clear…


“If they are a contractor or tenant doctor, only put a provider’s name that has a valid Australian Business Number (ABN). Avoid putting it in a contractors personal non business bank account details.

How should a contractor/tenant doctor’sTM bank account be set up?



All provider bank accounts must be linked to a separate, individually-named commercial bank account. They cannot be linked a personal bank account that has no ABN. The owner of the bank account must have an ABN registered with the Tax Office. 


You can check if you have one here. Ideally the ABN should be GST-registered. GST registration is mandatory if your practice billings exceed $75,000 p.a. 


Banks will not allow multiple ABN’s to be attached to one bank account. Many practices have clearing or billings in which all contractors deposit their money into the one bank account.


To get around these rules, often the practice offers doctors its own practice ABN for the purposes of billing, so that all doctors billings can be centrally paid into the one account. They currently do not check whether you have this authority, other than what the practice advises. 


As a former bank and trust account auditor, take it from me, this is a no no! Or so my friends high up in banking have advised me.


You can be forgiven for being confused. 


Yes, indeed, it is confusing.


Filling out the forms


There are three essential and somewhat mandatory forms providers and practices commonly complete when signing up a new doctor/provider. They are confusing and misleading documents. They may automatically imply an ëmployment arrangement pre-exists even though none were intended. The following application for a new provider/prescriber number contains steps that lead to this conclusion.



1. Application for a Medicare provider number and/or prescriber number for a medical practitioner (HW019).


The first form a HW019, requires the provider only to sign and individual and not a practice or organisation declaration. It is a serious Federal offence if it is incorrect or misleading.


Specifically, question 23 provides is pre-emptively suggestive. It may unintentionally self-incriminate the individual provider. The form should state their engagement status and not state “employment status”.


A self-employed independent contractor could accidentally tick the incorrect box i.e. an “employee – contractor” as shown below. If so this may the beginning of many problems to come. Many providers make this mistake as they do not seek professional accounting or legal advice. They usually leave it up to the practice manager to sort out. This is not recommended.



Adding to this concern is the use of the words ëmployment status and question 24 “employment at this location”.

This may legally imply that an employee or employer relationship exists. This type of evidence would raise the eye of the tax office, Payroll Tax and Fairwork in a heartbeat. It is clear the various State and Federal Department agencies have not been talking to each other.


Question 29 of the form asks: “Provide the bank account details for the recipient of the Medicare benefit for the location(s) named at question 21”…




BUT it is not clear whether the recipient means the provider or the practice, since Q.21 simply refers to the location of the practice. 



2. Online Claiming Provider Agreement (HW027) 


Now, in order for a provider to claim online for a practice or organisation, completion of form HW052. By completing these forms according to a recent media statement on 10th December 2021 by Services Australia
This form (HW052) is intended for payee providers for one or more servicing providers. For example, a medical practice that employs multiple doctors where claims are paid into a business bank account.
To give us those bank account details, the ‘financial institution details’ section of the form needs to include the name of the nominated provider linked to that organisation’s bank account (known as the payee provider).

We have an additional form (HW029) for individual contractors who may work for multiple practices with different payment arrangements.The payment arrangement between a servicing provider and their employer is solely a matter between them.”

Specifically, the form HW027 must be signed by the individual provider to allow the practice or organisation to bill on the provider’s behalf. It clearly states that this form is for providers and organisations whose primary role is the provision of healthcare services. Clearly if multiple providers are linked to the same practice ABN account, it becomes more difficult to defend a payroll or income tax audit. It does start to throw into the question of whether the provider is an independent contractor.




3. Bank account details for Online Claiming (HW052)


Alarmingly, as stated earlier, for many practices signing this form, Services Australia has assumed you are either employing or subcontracting independent contractors. This evidence may significant medico-legal, payroll tax, income tax, superannuation guarantee and Fair Work Act implications if you never intended these independent contract providers to be caught under these laws.


The definition of “payee provider” is interesting to note. It implies if the money is not being paid into the independent providers bank account, then it is implied the practice or organisation is the healthcare service provider due to the completion of a HW027 form and therefor the primary healthcare provider/employer.

Question13 clearly states “The bank, building society or credit union account must be in your name. A joint account is acceptable. Payments cannot be made to credit card, loan or mortgage accounts.”


A joint bank account cannot be in the name of the practice bank account with multiple provider names or monies added. A commercial (practice) bank account is not permitted to hold or link multiple (independent contractor) ABN bank accounts.


There can only be one ABN linked to the practice bank account. Many practices have inadvertently been using their practice ABN bank linked account to receive all independent contractor fees. This is a bad idea.


This can only be achieved with a regulated solicitors or accountants independent trust account. Fancy software solutions or promises made by a bank will not save you, other than a rare Act of Parliament and a good defence. This is acheivable.



The form also states you may be liable for breaches; since on each of the above forms, it clearly states if you are the applicant you are committing a “serious offence” for false or misleading statements! i.e implying there may be a Health Insurance Act breach. A greater concern, in the absence of a good defence, this information could be used against a practice or organisation or provider for breaches in the Income and Payroll Tax Acts and Fair Work.


Common practice arrangements – clearing and billing trust accounts


Practice Managers should not be completing a providers form for them.


It is not unusual to see practices prepare this information, rather than the doctor, who is in a rush, and simply trusts the paperwork has been completed correctly by the practice manager or the organisation. Providers, not wanting to be perceived as ‘difficult’, they unwittingly sign and submit an incorrect form without question. After, all every other doctor and practice has been doing it this way for a long time, and there appear to have been no problems. 


To centralise banking and bookkeeping, it is common to see the practice’s bank account linked to the practice’s ABN. Rarely is the commercial independent contactor’s bank account linked to their individual ABN or submitted in a HW052 Online Claiming Form. 


A practice usually directly deducts, from a provider’s bank accounts, any service fees and charges, from a separate account set up by the practice. This is normally linked to the practices ABN. This account is commonly referred to as a clearing or billings trust account.


This also helps complete accurate bank reconciliations for any fees collected on behalf of the provider. This is critical in ensuring there are no errors, and that fraud controls are in place. Usually, it is set out as a key provision in the service or practice agreement with the provider.



These arrangements have now become more popular, due to a recent GP payroll tax case. Unfortunately this practice maintained only one bank account to pay all their doctors and administration staff and overheads. This triggered a successful payroll tax prosecution.


With the above arrangements it could be argued has the independent contractor money legally assigned to the practice their income. If not the practice would have no written authority to deduct service or any other money from the independent providers bank account. Without an up to date signed service agreement or contract, the practice runs the risk of being accused of theft plus many other statutory offences.


Indeed, the above arrangements would technically constitute a “serious offence” committed by the provider and or practice,if the practice engages independent contractors.


Ideally independent contractors should complete a Provider registration for Electronic Funds Transfer payments form (HW029) form  and a valid service agreement should be in place. It is important to seek appropriate legal and accounting advice before considering this option.


When each independent provider banks into their own bank account this can create a banking, cashflow, book keeping and accounting nightmare.



Am I a potentially high tax audit target? 


If you are a tenant doctor/ independent contractor the simple answer is YES if you have completed a HW052 online claiming form with the practice account and not your own personal ABN-connected commercial bank account.


Consider submitting a Provider registration for Electronic Funds Transfer payments form (HW029) form .


But do not be alarmed, remain calm. You may find you are not alone. So seek independent medically experienced legal and accounting advice. If not professionally handled, the situation can rapidly escalate. This can be avoided.


For a clearer view, if you are a contractor, click here for our free Medical and Health Contractors checklist to find out what questions you need to ask your accountant and lawyer.


Am I, David Dahm, scaremongering??


Knowing the COVID19 pressures that practices are already facing, I faced writing this piece with considerable trepidation –  feeling like the sailor Frederick Fleet in the Titanic’s crow nest yelling “Iceberg ahead!”. It is something nobody really wants to face.


Understandably, some may feel I am scaremongering. Judge for yourself – here are the facts. Here is the ATO’s current position on their nationwide data matching activities.


The Tax Office is ready to data match


The introduction of the new e-invoicing laws heralds a new era for the Australian Tax Office.


“The Prime Minister and Treasurer have announced a $A3.6 million push to make electronic invoicing mandatory for all Australia’s Commonwealth agencies by July 1, 2022. They also plan to consult on options for mandatory adoption of e-invoicing by businesses.”


Hence the old excuse, “nothing has happened before so why should I care” is no longer sufficient.


All Australian Federal Government departments, including Medicare, from 1st July 2022 must issue e-invoices. In exchange, providers/suppliers will receive a fast payment if they voluntarily register. It will be mandatory for the private sector (however the accounting profession  successfully lobbied for a delayed start due to COVID19). 

However, clients using our cloud based Doctors (e-Service Fee) Pay Calculator will be ready for the new tax office rules.

Source: information and data manager

The Federal Commissioner of Taxation Chris Jordan recently announced;

“We receive, match and pre-fill increasingly large volumes of data from a variety of third-party providers. In 2021, we pre-filled over 89.5 million pieces of data and we’ve expanded our data matching protocols to get more data from third parties..”

Source:‘A new decade in tax administration’: ATO Tax Commissioner Chris Jordan speaks to challenges ahead 25th November, 2021


When it comes to successfully prosecuting tax fraud or non-compliance, two things are required; firstly a minimum of two willing parties (with identifiable banked linked ABN’s) and secondly a transaction (e-invoicing), to instantly prove an offence may have been committed beyond a reasonable doubt. 


It is logical that. if the ABN that is receiving the doctor’s money is not the same as the doctor’s ABN, then this may trigger a robo-audit. 


Who should I blame!


When I spoke with a doctor last week, and raised the issue with him, he was alarmed, appreciating that a payment error originating from head office, might trigger a significant systemic tax audit against all located in the practice. His reaction? “Who can I sue?!”  


Unfortunately blaming others will not save you. It is not enough to assume that because your practice manager, bank, accountant, lawyer, the Tax Office etc., said nothing, you are in the clear.  Or that common sense is necessarily on your side. Common sense does not always prevail. 



Step 3 Move quickly to address the problem


The reality is that you need to move quickly to address the issue before 1st July 2021 – if not earlier. 


The last thing you need is an angry call from a doctor or their lawyer. The natural defence will be if you did not ask then we could not tell you what to do.


Do nothing and you maybe be found guilty of being complicit


I fear that most doctors, an overwhelming majority, will play the “wait and see” game. The feeling may be that there are just too many people affected, so the government will simply act and fix the form. After all, how could they ground the system to a halt? 


This may be true, but it may turn out to be a systemic tax problem, not just a simple form problem. One that may take some time to fix. 



Unfortunately, either hubris, undisciplined growth, or being in denial, may result in you or your practice putting yourself at risk and attracting an audit.


Do not believe for a second that any big corporate or small practice has got this right or there is a special loophole or privilege they enjoy. That is a myth.


Just as with medical and allied health payroll tax audits, if there are many breaches identified,  systemic bank account integrity tax audits are likely to follow. It could get ugly. You have at least 1st July 2022, if not earlier, to get your affairs in order. 

Start now, by understanding you and your practice may be implicated in a group practice audit. We have seen this happen in a number of recent payroll tax cases.  Contractor doctors were forced to sign affidavits in relation to their arrangements. To protect yourself, arrange to discuss this with your providers.

On a positive note, due to unforeseen compliance debts, more doctors might become available to meet a doctor shortage. Who knows… there may be a silver lining!


Yes this is going to hurt a tad!


Any fix will not be cheap. The first step will depend on how well your business model and legal structure and practice agreements have been set up. 


The next step is for you to finely calibrate your accounting and bookkeeping systems to address any concerns. Either way you will need to seek professional advice… now!



Alternatively you may pay a higher price later should you get audited or receive a complaint from an angry provider. It is better to be on the front foot and act now.


Consider this.. the last thing anyone needs is for medical and healthcare practices to end up on the ATO’s top 100 list of targets. Do not expect the public to be too sympathetic.


Three things you should do right now


The issue is not worth losing your family home over. It is avoidable with careful planning. 



  1. Complete a self audit and update your systems


Put everything in writing and assume nothing is correct unless you see it for yourself. To get started, complete our self audit questionnaires to pinpoint any problems. 


This Employee v Contractors checklist and Medical and Health Contractors checklist may be a useful starting point in mitigating a potential blame game.



First up, fix the low hanging fruit – such as each contractor getting their own website, and removing the word “Our Doctors” from your website if you have contractor doctors. Or it will make it harder in an investigation to assert that the doctors are contractors. 


Carefully review your banking arrangements. Set a legal and tax compliance budget… it may cost up to $1000 per full time GP or more depending on how well you are set up.

This is the cost of doing business, just like the introduction of the GST in 2000 incurred costs. I think you will find it in the end.


Update your contracts and systems – and be aware there is a problem with individual provider bank accounts.


If each provider banks in their own name, the practice staff would require access to multiple provider bank accounts to perform multiple reconciliations. 


It would be next to impossible and/or uneconomical to do a bank reconciliation where you have multiple providers. You would need many, well-trained staff to keep on top of it.  


Many practices came to this realisation of the need to keep a separate doctors bank account after the GP medical practice Thomas payroll tax case made a key point about this issue.  


Quick solutions offered by advisers included setting up a seperate billings trust or clearing account. 


However if this arrangement is not permitted by Medicare, this remains a problem. The threat of having committed a serious offence via your Proda account (which allows for e-invoicing) will not go away. 


Carefully familiarise yourself with the new forms. Do not tick any boxes you do not understand.


Source: Proda online


Bank reconciliations prevent fraud and error – a practice must not relinquish this role



Normally, practice staff perform daily patient fee bank reconciliations on behalf of providers who also bill their patients and clients.


This is a critical service – if they were to cease this role, it would open the contractor and the practice to cashflow problems, false reporting of income and BAS information, fraud and inappropriate billing allegations.  This may trigger a breach of contract with your providers.


Furthermore, the practice might not charge, on a timely basis, the correct service fee percentage against their gross billings received. This may be a significant revenue risk to the contractor and the practice. 


Normally a patient billing system (such as Pracsoft, Best Practice, Zed Med, Genie etc) are operated by the practice.

Practices use this information to complete a provider’s bank reconciliation using the practices Xero, MYOB or Quick Books accounting software programs.


It takes significant time to daily and accurately reconcile hundreds of transactions to a bank statement and patient fee debtor reports.


This is why the majority of providers outsource this critical function to the practice.


What is bank reconciliation?

Regular bank reconciliations are a way to double-check your bookkeeping. In recent times I have found a number of practices have started to by pass this critical function as it has got all too hard. It is not a choice it must be done if you do not want to stand accused of not having adequate fraud and accounting controls in place.

You do it by comparing your business accounts against your bank statements. Both sets of records should agree with each other. If not, you need to figure out why.

Why are bank reconciliations important?


An alternative practice outsourcing solution: 


Set up an accountant’s independent trust bank account compliant with APES 310.



Only an experienced public practice accountant who is a member of one of the recognised professional bodies such as a Chartered Accountant (CAANZ), CPA or IP member, can do this. Legal and audit oversight is needed, and this is a specialist area, beyond the scope of most traditional accounting firms, regardless of their size.


Ideally, they will have worked closely with medical practices for over 10 years, have worked with lawyers in drafting practice tax compliant agreements, have been involved in tax investigations, prepared doctors’ pays and have access to accredited tax agent registered endorsed service fee compliant software. 


We are about to release a solution that should tick all of the above boxes. Contact us for more information. 


  1. Get reliable advice now 


Make sure you have an accountant and legal adviser who has a deep understanding of how practices are set up, beyond simply a tax return and financial planning. The devil is in the details e.g. how to correctly complete a HW052 form.

We have been operating as a chartered accounting firm in public practice now for over 30 years. Since 2001, clients have used our unique national cloud based Doctors (e-Service Fee) Pay Calculator program for medical and allied health practices. It is designed to meet your medical and health practice accounting, legal and tax compliance needs.


Our recommended agreements and systems have successfully defended clients facing income tax, payroll tax and pathology kickback investigations. It is important to ask yourself if your adviser has the same experience and capability.


  1. Obtain tax audit insurance – remember this is not a solution


It used to be a much more expensive and difficult exercise for the tax office to audit you. Not any more. Tax audit insurance is now a must.


BUT make sure to read all your tax audit insurance policies. In recent years Medical Defence organisations have either amended or removed cover. Speak to your accountant.


Policies usually cover expensive legal and accounting fees, for statutory compliance and for income tax, payroll tax, superannuation guarantee, and Fair Work. If these associated Federal and State agencies are not listed, you are not covered. Many are not. 


To comply or not to comply?




For many of you, this will fall into the “too hard” and “see what happens” baskets.  An expensive audit or complaint is a matter of choice. It becomes harder when there is so much industry information out there to argue and plead ignorance. 


We have all hit the same fork in the road. The good news is, this will give you a competitive advantage when it comes to recruiting and retaining doctors. In the end, like the GST, it should leave practices in a stronger position.


How it will end is up to you. 


Click here for the original version of this article.


About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (


After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are, and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer, so please seek appropriate legal and accounting advice. This information is for general information and discussion only

Federal Court Tax Ruling Shock: Your spouse may no longer be able to protect your family home

Federal Court Tax Ruling Shock: Your spouse may no longer be able to protect your family home

This article was first published by the Medical Republic on 16th November 2021.


The latest Federal Tax Court case is a sobering reminder you and your spouse cannot take asset protection for granted. You are not entitled to financial security. you have to work to protect it.

Protecting the family home should always be at the forefront of one’s mind. This ruling may have serious implications for doctors or healthcare professionals and practice owners.


It is very common for people to transfer assets to a spouse (or family trust) before embarking on a “risky” activity. For example, before going into practice, becoming a partner in a medical or healthcare practice or undertaking a “risky” development.

Back in the 1990’s pharma companies would have me present nationally to packed out audiences. Often the local venue organisers would ask me why I was so popular.


I would joke that: “I teach people how to Make it, Keep it and Hide it!” 


How to Make Money in healthcare, Keep it from the tax office and Hide your money from people who wanted to sue you.


The basic principles remain the same, however, there are some recent big BUT’s!


In these COVID times, healthcare professionals and their owners have been forced to undertake higher than usual risks. These include and are not limited to:


A COVID19 practice outbreak causing the practice to shut down and quarantine all staff for 14 days for a costly deep clean; and or 


State or Federal government multi-million dollar plus contractor payroll or income tax audits due to recent case decisions found not in favour or practices or a sharp increase in interest rates.

A single significant adverse event could potentially destroy the livelihoods and life savings of frontline workers and their owners. Unfortunately, these new threats are real especially if you carry a lot of personal or business debt.


The family home exposed and more? 



Unwittingly, you may have placed your family home at risk when your accountant said to put the house in the spouse’s name. This latest court case sheds new light on how something that appears so simple can go so horribly wrong.


In the Commissioner of Taxation v Bosanac [2021] FCAFC 158 tax case, the court made a judgment against the taxpayer for unpaid taxes. It established holding a $4.5 million property acquired in the name of one spouse (despite being divorced) was jointly owned 50/50. The tax office could recover the debt by attacking the family home that was not in the taxpayer’s name.

Mr and Ms Bosanac had initially jointly purchased a home in 2006. They paid a $250,000 deposit with funds from a pre-existing joint loan account in their joint names and borrowed the remainder to acquire the property in Dalkeith, Australia. The property was then used as collateral to acquire other investment assets like shares.

The Full Federal Court said, “on the objective facts… the spouse Ms Bosanac held 50 per cent of the property on trust for Mr Bosanac.”

The Full Court of the Federal Court judge held that the property was jointly owned thereby “enabling the Commissioner of Taxation to make a claim on the property for unpaid taxes” incurred by Mr Bosanac.

Trying to avoid paying your debts is not a recommended strategy, however…

At one extreme, you have people who go into business, rack up large loans, then dump their businesses with little exposure to their ‘personal’ finances. They use ‘legal structures’ and ‘property transfers’ to avoid taking responsibility for their actions: leaving the small creditors and the tax office to foot the bill.

On the other end, you have people who have transferred the property to a spouse or trust well before going into business or incurring any liabilities.

They have correctly structured and financed their business, and have just been down on their luck.

You should be able to choose how much risk when you go into business or undertake a speculative investment. Appropriate risk for reward is the basis of our financial system. It promotes innovation and progress. Supporting beneficial risk-taking that is not reckless should be admired and not shunned.

On the contrary, unlimited liability could be seen to do more harm. Creditors do need to take some responsibility when offering credit.

Deliberately incurring debt without any intention of paying it, should not be condoned. Nor should you have to lose your house if you have taken the right steps due to an unforeseeable event.

The law supports this view to a scary point…

Sackville J in Prentice v Cummins (2002) 124 FCR 67 states at :

“I am prepared to assume for the purposes of this case, without deciding, that if all that is known is that a professional person:

  • transfers the bulk of his or her assets to a family member for no consideration;

  • has no creditors at the time of the transfer (or retains assets sufficient to meet all liabilities known at that time);

  • is not engaged and does not propose to engage in any hazardous financial ventures; and

  • intends to protect the transferred assets from any action brought by a client who might in the future sue for professional negligence (there being no such suit in the offing at the time of the transfer),

then s121(1) of the Bankruptcy Act does not render the transfer void against the person’s trustee in bankruptcy.”

The accountant who lost his family home

Despite Sackville’s view, in recent times this no longer appears to as clear cut.


The Federal Court decision of Turner (As Trustee of Bankrupt Estate of Wallace) v Wallace [2016] FCCA 963 (Wallace Case) suggests that transferring an asset to a spouse may not be an effective strategy in some circumstances.


Mr Wallace was an accountant, when he transferred the family home, just before he invested in a failed car detailing business, it was held he had intended to defeat creditors. Accordingly, 10 years later when the business failed his interest in the family home was deemed to be available to pay unsecured creditors.

Protecting the family home and your wealth

The recent decision may come as a surprise to many lawyers and accountants. How can you protect your home (or other assets)?

We have 14 tips that may help you that you should raise with your legal and accounting adviser.

New Mandatory Director Identification Laws



As a side note, there are new ASIC Director identification number laws. Big brother is with us. This will help data match with government agencies any entities you are a director of. Company directors can now apply for their new Director identification numbers (director ID). 

Key dates are:

  • individuals who became a director on or before 31 October 2021 – must apply by 30 November 2022

  • individuals who become a director between 1 November 2021 and 4 April 2022 – must apply within 28 days of appointment, and

  • individuals who become a director from 5 April 2022 onwards – must apply before the appointment.

To apply, directors can log into ABRS online using the myGovID app and the online application is likely to be the fastest channel, with director IDs issued instantly. It is free to apply and available to directors within Australia and overseas. Applications are available by phone and by paper, for those who need them.

Further information about the MBR program and director IDs can be found at the Australian Business Registry Services (ABRS) website.

To obtain a better understanding click here for your Protecting the family home and your wealth checklist to find out what steps you need to take. Consult your accounting and legal advisers first. It is advisable to do this before you comply with the new Mandatory Director Identification Laws. 

Click here for the original version of this article.


About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (


After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

New Medical Practice Payroll Tax Ruling: How you pay your contractor doctors may affect your bottom line

New Medical Practice Payroll Tax Ruling: How you pay your contractor doctors may affect your bottom line


Did you know that payroll tax applies to your medical or healthcare practice? 


This article was first published by the Medical Republic on 24th of September 2021.


The latest $795,292.95 payroll tax decision is Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259 (3 September 2021) reveals a clearer way in which State Revenue offices makes sure to collect revenue from sources other than income taxes. If you are not aware, or if you haven’t been paying attention, continue reading to learn how this affects you.


The latest medical practice payroll tax case is the Thomas decision. It is about a general practice with three locations that has engaged contractor GP doctors who were paid 30% of the patient fees they had generated. 


Dr Thomas was billing, on behalf of his doctors, patient fees and charging a flat 30% service fee on everything the doctors had billed.


Despite the contractors holding themselves out as individual sole traders, co-located on the same premise, their income was deemed to be a relevant contract and subject to payroll tax.


Sadly, Dr Thomas had lost his case. He was hit with an eye-watering payroll tax bill. 


For over three decades across Australia, I have seen this common type of arrangement. Many unknowingly share similar errors. Engaging lawyers and accountants can be a grudge purchase. Alternatively, something to put into the ‘I am too busy’ or ‘it’s too hard’ basket. With the benefit of hindsight, it may be a cheaper alternative to do something now while you can. 


The case is a timely warning to reexamine your agreement and practice arrangements today.


This alarming decision sets a new NSW Tribunal precedent that many other hungry State Revenue Offices will be watching with interest. 


It is clear it is next to impossible for an experienced well-trained barrister to help practices comply. The rules are opaque. They seem to have more mutated interpretations than the coronavirus and we might have stumbled on a Delta variant.


This is my optimistic assessment. Being subject to an audit can be a financially debilitating and demoralising experience. They can be never-ending. Some practices I know have been waiting for up to 8 years for a multi-million decision. In one case, a practice website triggered a full-scale investigation because it said “Our Doctors” and “Our AGPAL accredited general practice”.


Your next level option is going to Court. This is rare. It takes a special kind of person(s) who is prepared to put everything on the line. You need to be pretty sure of yourself. We thank those who are for their courage. We can learn from you. We all should do our utmost to help them. 


In the end, we need everyone’s help to lobby for change. 


  1. I did not know payroll tax applied to my practice?



Having written extensively about medical practices and complying with payroll tax before, this decision may come as a shock to you as it has to me. 


It’s important for those who practice as an independent medical or allied health contractor to know what type of practice they work with and what that means for them and their practice. 


For my regular followers, you know I do not like the ”C”contractor word. When it comes to statutory authorities, this can be like holding out a red rag to a bull. We prefer the name Tenant DoctorTM  as a more appropriate description. 


Primarily because the practice should act as the landlord providing support services and the practitioner is the tenant who purchases these services based on a percentage of the individual practitioner’s gross billing.  


If you happen to work at a large group practice (circa greater than 4 to 5 full-time equivalents, it is time to take careful notice. 


One day, do not be surprised if your practice charges you a higher service fee to cover any payroll tax owed. For contractors, depending on your practice size and location, this can be up to 4.95% of what you are getting paid each month.


It is time to reexamine your agreement and practice arrangements now.


2. The new payroll tax case that will affect many practices


COVID-19 has certainly hit the hip pockets of State Revenue Offices around the country. NSW and Victoria have been hit the worst. At first glance, this latest decision appears to be the Delta variant of all decisions depending on who you talk to. 


After working with many solicitors and barristers who have front row tickets to this and other similar payroll tax matters, it seems in this decision how you pay your doctors may irrevocably get you caught up in an audit and there is no clear solution.


If upheld, this decision could mean Uber, Deliveroo, building contractors and many other industries could easily be caught. This decision appears overwhelmingly too broad, unworkable and therefore appealable in a Court if you have the deep pockets to go with it.


The various State payroll tax laws are no different to the MBS interpretation rules. Currently, there are no clear Court precedents for general or medical practices, other than possibly confusing State Tribunal decisions. In 2016, the closest more authoritative Court case appeared in allied health called the Super Optical Court case. This had begun to reveal some key practical issues for practices to review.


The latest decision leaves open a new world of avoidable uncertainty. It can only fuel a hungry State Revenue Office to go after low-hanging fruit practices that have paid little attention to the ever changing interpretation of rules. You would be naive to think a well-written contract was a silver bullet solution. In this decision, the opposite may be true.


Unchallenged, it will have a significant systemic impact on general practice compliance costs and practice morale, valuations and succession planning. In these COVID times, our community’s front line GP defence teams are once again being hit with a greater threat, but this time it is from within. 


Ultimately, practices will be forced to pass these costs to patients. Those on razor thin profit margins will be forced to significantly cut costs, merge or close. It is a problem that does not appear to be going away anytime soon.


Interestingly, smaller practices may stand to benefit over large practices. I would not be surprised to see GP contractors moving to smaller practices, if larger practices do not proactively address these concerns today.


Nobody is really immune, you still have to properly protect yourself and ensure you do not unintentionally self-incriminate. It is not easy and you are not alone. 


Your accountants and legal advisers are also struggling to get a grasp of this problem.


3. How the new ruling could affect your medical or healthcare practice



The recent Thomas decision is a less authoritative Tribunal decision. It has not dissimilar arrangements, from a favourable general practice decision called Homefront Nursing Pty Ltd v Chief Commissioner of State Revenue, from the 25th of July 2019. 


A key takeaway from those involved in this case was their failed defence in arguing the effect of bulk billing and Medicare assignment of income. 


As established in the Homefront Nursing home case, when GPs bulk billed Medicare and assigned the patient responsibility to the Government and not the practice, it appears to have been a key argument demonstrating the doctors individual clinical practice was separate from the practice who was in the business of providing practice management support services for a percentage of the doctors gross fees.


Unfortunately, in the Thomas case, this argument appears to have fallen on deaf ears. 


Curiously, the judge spent little time explaining his reasons for knocking back the Homefront Nursing defence. 


He simply relied on the Super Optical case. He relied on the “flow of funds/payment” argument. 


This established, that if there is any flow of funds between the practice and the provider or anyone associated, this will be deemed a relevant contract where obligations are imposed, such as restraints of trade. The High Court had refused to hear the matter. In other words, only local State politicians can change this ridiculous outcome. 


This has caused much confusion and angst amongst professional legal and accounting circles. 

Many feel the jury is still out on this one. I am less inclined to think so. The possible solution remains in your practice agreements and systems.


Deemed “relevant contract”


In the Thomas decision, this case would deem your contractors as employees if you have a “relevant contract” with them. The barrister from the case has advised me, the employee or contractor test is totally irrelevant. It is about how providers are paid and any obligations that are attached to the payment.


How the doctors are paid between associated bank accounts creates the problem. It deems a “relevant contract” for payroll tax purposes. 


Ultimately, this leaves a practice and contractors open to a large retrospective payroll tax bill. I have seen some go back up to five years and be tied up for many years. 


Practices face a significant payroll tax dilemma. They will feel forced to include their normal employee staff pays, e.g., for administration and nursing staff with how they pay their doctors or healthcare workers. This means each month they would need to add and submit each provider’s patient fees net of service fees charged against their individual gross patient billings.


If they exceed their relevant State’s payroll tax threshold (which varies from state from $650,000 p.a. to over $1.5m p.a.), payroll tax will be payable. Payroll tax on wages, fringe benefits, and now how much you have paid your contractors can vary depending on location and threshold from 0% to 4.95%


Getting contractor doctors to bank patient fees in their individual name will not save you



It does not matter if patient money is first banked in the contractor’s own bank account or the money is held in trust on behalf of the provider. Practices engaging in auto debit arrangements for a provider’s gross fees can be caught under the anti-avoidance provisions. If there is a doctor/director or employee connection, you will fall foul of the rules.


The banking arrangements trigger the deemed relevant contract provisions that may give rise to unexpected payroll tax liability.


This seems to fly in the face of how accountants, solicitors, and real estate agents’ trust accounts work. One may argue if this is true, surely payroll tax should apply to them as well as Uber, building contractors and other industries that have intra payment systems.


The ramifications are serious. There are practices with over 60 doctors and providers. Technically, each of them would have to have a separate EFTPOS/Credit card merchant facility at the front desk. This is impractical. As a former trust account and banking auditor at KPMG, this would open the practice to fraud. It would be impossible to introduce affordable watertight fraud controls.


Group practices with in excess of 4 full-time equivalent GPs or high billing specialist practices need to be very careful.  


No obligations are key to any arrangement



A key takeaway from this case is to remove obligations on the provider which may be deemed a relevant contract (a second supply). The first supply was the provider providing clinical services to individual patients. 


The second supply which appears to be the problem are obligations the provider has to the practice. In past articles, we have given numerous warnings about what not to put into your contractor agreements. These were raised again in this case: 


“Para 38 The terms of the Agreement indicate that the Doctors agreed to:



(1) provide the Services on a five day per week basis, including weekend rotation (cl 2) and in this regard agreed to meet roster commitments (cl 3.8) and to provide advance notice of planned vacations (which were limited to four weeks in a 12-month period and which had to be approved by the applicant (cl 6));


(2) promote the interests of the applicant (cl 3.4) including not channelling patients away from the applicant (cl 3.8);

Following protocols

(3) abide by the applicant’s operating protocols and to complete all necessary documentation for that purpose (cl 3); and

Restraints of trade

(4) a restrictive covenant, which would become operational upon the Doctor leaving the particular medical centre owned by the applicant, with such covenant to have an “exclusion zone” of 5 kilometres from that medical centre and to be in place for two years after the Doctor’s departure (cl 7).

The bottom is your contractors should not be providing services to the Practice! So be careful about asking them to turn up to clinical meetings to do care plans. Revise your agreements today.” 

Doctors need to be seen to be working in other non-associated practices

Another eyebrow raiser, it might be a good idea to let your doctors work in friendly rival practices and keep a record of it.

Reporting Contractor income and expenses 

It was noted that contractor income was recorded in the financial statements and tax returns. This is not a great idea if you are trying to establish two separate and independent businesses. Interestingly, the payroll tax office had directly contacted the accountant for information to check whether practice was registered for payroll tax.

I can hear what people are thinking. Are you serious? I am, that is the challenge. Many of these key issues can be mitigated. 

4. Tips on how to stay compliant with the law and avoid penalties



  1. Don’t panic

Take a deep breath. You are not alone. Do not automatically notify your local payroll tax office. Think carefully. Find out more. You may find out your arrangements are not that bad, but could do with some fine tuning;


  1. Remember, Court cases are more authoritative than Tribunal cases

One lawyer I had spoken to described this decision as “superficial”. It can or should be Court appealed. From time to time, flip-flop decisions do occur. The Super Optical, Homefront Nursing and this Thomas case illustrate how contrasting decisions can be, even though the facts may appear similar. Be prepared to keep clarifying your arrangements when necessary. 


  1. Seek experienced professional accounting and taxation advice 

The devil is in the details. There is no such thing as a silver bullet. The right contract is a small part of the answer. You have to walk the talk. A common mistake is only a piecemeal and not a holistic approach is taken. It goes beyond a cleverly written practice agreement. 


It must complement your policies and procedures, administrative and accounting systems. You need to walk the talk. The Courts take a holistic view. 


Many practices use Mum and Dad and or traditional accountants and legal advisers. Many are totally unaware of the increasing complexity and nuances of the healthcare industry. You may find they are not obliged to let you know unless you ask. After all, this is a State and not a Federal tax.


You may be better served with specialist medical and health accounting and legal advisers who work exclusively in this area. 


  1. Tax audit insurance cover 

It may be a little too late if an audit investigation has started. It becomes a lot harder to unsay or undo things and blame people for not letting you know. Tax audits can become quite expensive. However, cost effective tax audit insurance is available so your advisers can better respond to any concerns. 

Note, as we have been receiving reports from some Medical Defence Organisations, that they are no longer offering this cover. So do not forget to ask your accountant if they offer any insurance cover.


  1. Write to your professional adviser: seek written advice

If you do not know what to ask or where to start, complete this free self-assessment checklist and provide your responses to your accountant and or legal adviser: review the article Don’t use the C word.


Be prepared to budget for it. The checklist creates an automatic agenda of key issues for you to send and discuss with your advisers. Confirm any important answers and decisions in writing. Be prepared to budget and implement changes where necessary;


  1. Remember, payroll tax is tax deductible

Depending on your circumstances, you may not have to immediately write a check to get a tax deduction. Seek professional legal and accounting advice before acting on this information.


  1. This is a political issue: it is a serious public interest issue

I have seen first hand practices being forced to charge already anxious patients more at the front desk. Furthermore, nobody wants to buy a practice that could be at risk to a lengthy and expensive payroll tax audit.


If the Thomas decision is upheld in Court, the viability of many practices across Australia is at systemic risk. We need all our GP practices focussed on fighting the virus and not be distracted fighting mercurial State payroll tax rules. 


  1. You can help change the law: Take the GP and healthcare provider Payroll Tax National Survey 

Thank you for taking the time to complete this survey. This will be used to lobby State and Federal politicians. Thank you to Health and Life – Chartered Accountants and medical and health practice advisers for assisting The Medical Republic with this national survey.


Click here.


This article was first published at the Health and Life Blog: New Medical Practice Payroll Tax Ruling: How you pay your contractor doctors may affect your bottom line


About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Registered Tax Agent, Former AGPAL Surveyor 10 years of service 

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not-for-profit project the International Healthcare Standards and Ethics Board (


After a serious work related car accident in 1989, and nine operations later, I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal.  I continue to provide accounting tax and practice management advice to many practices all over Australia. 


You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer. Please seek appropriate legal and accounting advice. This information is for general information and discussion only.

Is ‘consent’ the o-ring of Medicare audit?

Is ‘consent’ the o-ring of Medicare audit?


This article was first published by the Medical Republic on 27th of August 2021.

There’s a tiny technical glitch underpinning the legal integrity of Medicare auditing that could one day blow the whole system up. 

Medicare audit anxiety is a real thing that affects most doctors who provide (bulk-billed) “free care” to their patients.

Medicare rules keep changing with little notice or clarity.

Should the Medicare cops come knocking on their door, we know now that there is virtually nothing a GP can do about it but humbly pay it all back and wear any humiliation that accompanies the government default notice on their use of MBS items.

The way the current system works has been described as like getting a speeding ticket from a hidden camera when nobody will tell you the speed limit until you get caught.

Once you do get “caught” you have to pay back two years’ worth of speeding fines based on your gross income. It does not matter if you were actually in the car speeding.

According to two surveys, it looks like a large proportion of doctors are withholding services either regularly or from time to time for fear of a Medicare audit.

In The Medical Republic’s recent landmark national GP survey of more than 1,400 doctors conducted just a few weeks ago, it was found that over 84% of GPs, regularly, or from time to time, don’t perform certain services because of anxiety over the PSR.

But  “Medicare audit anxiety ” is not a recent phenomena. The fear effects of Medicare audits on doctors practising behaviour can be traced back as far as the mid-1990s.

Back then I helped establish a Women’s Health clinic for a client (at a time where male doctors dominated the workforce). Within 12 months of the clinic’s commencement, the only dedicated female doctor clinic received a Medicare audit letter for “performing too many Pap smears”.

Karmakar vs Minister for Health

The recent Karmakar case informs much about how hard it has been for individual GPs to try to fight the system, and how little has changed in 25 years as far as the power of the system over an individual doctor.

Most commentary has that this case puts beyond doubt that the PSR and Medicare can’t be fought in court and that instead someone has to work on changing the law.

In some ways the government bought itself cover on this whole problem via the  2011 Federal Senate PSR Inquiry. Nothing came of it as far as GPs are concerned despite quite a bit of protest from the sector.

A High Court finding and a finding of this inquiry, that this legislation exists to protect the taxpayer,  appears profoundly misguided in the context of  TMR survey results, which suggest the law may well be systemically harming patient care.

In the absence of a provable counterargument, the High Court has deemed that a focus on how well taxpayers funds are spent must take priority on how optimally doctors treat their patients.

Importantly, while Justice Logan’s judgement in Dr Karmakar’s case was clear in terms of law, he took the trouble to point out that there may be a public interest issue worth pursuing outside the domain of the PSR and the law as it stands.

A faulty o-ring in a complex system?

But there may be a small legal loophole that has still not been explored in the legal domain.

One question in the TMR survey departs a little from the core anxiety topic to explore how much a typical GP understands about their requirement to get consent from a patient for each billing item in Medicare to transfer their rights to the bulk billing rebate over to the GP.

The answer to the question is quite revealing (see below).

Essentially, most GPs either don’t even know the requirement exists, or they make an assumption  (one that has been has been pushed at them by the government)  that their practice receptionist pushing ‘yes’ on the billing terminal, constitutes implied consent.

It’s a convenience for everyone. But it’s a potentially big issue for the government one day.

The government understands that it must have the consent transferred formally from the patient for Medicare bulk billing to the doctor, for bulk billing to be a legal transaction. But they also understand that asking every patient to sign a DB020 form, which is the only real legal manner in which this consent could be given, is highly impractical. So the government has suggested that a GP can obtain ‘implied consent’ for this transaction via getting a verbal OK from a patient or by the act of pressing ‘yes’ on a billing terminal.

No one wants the major form of consent tested legally. It wouldn’t stand up in court. And working out what to do after that could become very messy, for the government and GPs.

But the fact that 50% of GPs aren’t aware of the rule at all (and therefore we probably can assume don’t do anything regarding consent) and of the 50% that do understand the rule only 9% say they obtain proper consent via the signing of a DB020 form, suggests very strongly that the vast majority of all MBS claims made for bulk billing over the years have been done, technically, without proper legal consent.

Wouldn’t it be interesting to see this technicality tested by a GP one day in the Federal Court?

The problem is that it could end up backfiring on GPs, as it could force a change that would introduce a horrific new piece of red tape that the profession doesn’t need.  But the concept that the government is winning all its cases based on an assumption that all the bulk billing transactions that a doctor has done have legally been transferred to the doctor from the patient, when they clearly haven’t, is an interesting one.