We predict more Government audits for 2019 and beyond!
We expect an increase in ATO audits over the next 12 months after seeing a spike in taxpayers details being linked (data matched) to the Tax Office’s databases. Furthermore there will be new 1st July 2019 harsh laws that stop legitimate payroll tax deductions if you do not lodge tax information on time .. and these new laws are of concern.
10 Major changes that may affect your practice…
In this article we identify 10 major changes that will impact your practice.
Why? – The Government needs money from you!
Our view is, the Federal Government has spent a lot of money on infrastructure and needs cash. The economy is not doing as well as the Government had hoped. China’s slowing demand for our resources and tighter home lending rules for home and business loans are reducing State and Federal Government revenue.
As the Federal election approaches, the number one voter complaint is the high cost of living. The Government can’t increase taxes for fear of losing the next election.
An alternative is to increase audit activity across all Government departments. This will occur regardless of what party gets in. New data matching technology makes detection and the non-compliance process almost instantaneous.
The digitisation of business systems, although extremely convenient and efficient, creates a new rod for a practice’s back. By creating a permanent digital audit trail, it makes it impossible to unsay or re-interpret events or discussions.
Increasingly investigators are also interviewing practice staff to gather evidence to add to the paper/digital trail.
2019 will mark a dramatic rise in automated Government audits intended to claw back taxpayer income, particularly in social service areas such as Medicare, Aged Care and Tax. The Royal Commissions into Aged and Mental Healthcare will further increase compliance costs and reduce funding.
Busy doctors are low hanging fruit!
Doctors are perceived to have higher-than-average disposable incomes. And, they are less likely to fight an audit. This makes them a soft target. Due to the long Medicare fee freeze, for a number of years, many medical and healthcare practices have been cutting costs to compensate. This has given rise to a higher audit risk, especially for those practitioners who have been reluctant to ‘dot their I’s and cross their T’s’.
Unfortunately, now is not a good time to be penny wise and pound foolish, for the reasons given below.
With national head lines like these doctors, in particular, are an easy target.
One piece of advice is to get rid of the trophy house, cars and toys so you do not draw unnecessary attention to yourself. Be humble, you do not get much public sympathy when things go wrong.
Interestingly the article goes on to say…
‘The Health Department has asked the AFP whether the Proceeds of Crime Act — commonly used to restrain assets of drug dealers, money launderers and fraudsters — could help it to deal with errant doctors.
Doctors suspected of rorting Medicare could lose their luxury houses and cars, under a dramatic escalation of compliance efforts tipped to raise tens of millions of dollars a year for the federal government.’
New laws come into effective from 1st July 2019 and so we are expecting a big decades of audits to prevail.
Out of the fry pan and into the fire!
Our observation is that, once you are have failed one audit, you are at risk of many other related audits e.g. Fair Work and Payroll Tax. Increasingly, practices have to get their ducks lined up from the beginning in order to avoid a cascade of audit queries that practice insurance may not cover you for.
For example, the new 1st July 2019 shared debt Medicare audit rules (detailed below) may force practices to change their contracts with doctors or providers. A knee-jerk reaction is to provide more practice owner oversight. But Fair Work Australia, the Payroll Tax Office and the Australian Tax Office may take a dim view of this and deem the doctors or providers as employees and not self-employed contractors.
This may trigger a Fair Work, superannuation, Payroll tax and/or GST tax audit as the doctors or providers are not bona fide self-employed contractors. Relying for a defence on piecemeal or old tax rulings or cases is not enough.
The recent shared debt rule (see 2019 New Medicare Laws expose practices to fraudulent billing, the 2018 Historic Payroll Tax Case and the 2018 Brothel tax case see New Tax sting: Is your practice running like a brothel?) are good examples of common mistakes practices make that could lead to this audit outcome.
The costly dark days of compliance are back but there is a silver lining…
We all feared the worst in 2000 when the GST was introduced. New computer systems and compliance were required. However, once we got used to it, many approved of the greater control of our finances it gave us. The same might be said for the next evolution of cloud accounting system upgrades you must undertake. Here at Health and Life, we recommend Xero. It is designed for the future and is flexible, unlike its competitors.
With the prospect of a federal Labor victory, we believe it’s time now for a restructure; see Restructure Now: Labor will limit your tax deductible accounting and taxation fees to $3000 p.a.
For patients, the cost of visiting their GP or healthcare practitioner will rise.
Compliance costs will start to skyrocket unless practices implement smart business models, structures and systems. We anticipate more mergers or practice retirements for those that do not want to invest to meet the changes; see Exit Planning – Five things to think about.
There is a silver lining, however. As the move towards more cloud-based solutions gains momentum, practice systems will become more efficient and effective. This is a game changer. Many of our client’s practices are at the forefront of these changes, and, despite the initial pain, are reporting that they are enjoying the new world. They see a lot more opportunities than problems ahead.
Yes, it has become a very noisy and confusing marketplace. The key is to know what the correct strategy and technology for your practice is.
A Challenge or Opportunity?
Proactive practices are experiencing significant and sustainable change – and are doing more with less. The biggest challenge is the big change in work culture.
Here is a useful table to identify your strong and weak spots.
For more information see Use the ‘Best of Breed’ processes. Technology is the key to survival.
There are many moving parts. Everything needs to be in place, and consistently applied, like every cog in a watch or it will come to a sudden (and expensive) morale-damaging halt.
1. More patient complaints
We anticipate increasing patient complaints and laws continue to tighten practitioner conduct. Many are and will be from older doctors and competitors see “Identifying doctors at highest risk of claims and complaints”.
Already, 9% of medical practitioners annually (out of a total of about 110,000) are referred to the Australian Health Practitioner Regulation Agency (AHPRA). This agency was set up to protect the public’s interest as professional bodies struggle to self-regulate their own members.
Although self-regulation would seem to be a better and cheaper solution, there is little appetite for leadership in this area. So for now it would appear you need the services of an expensive Queens Council lawyer to defend even the smallest of complaints; see Launceston surgeon Gary Fettke’s name cleared after formal sanction from AHPRA.
Of concern is that medical practitioners are being unfairly silenced, according to news reports; see Medical Board accused of trying to silence doctors.
A practice should have an excellent and regular patient feedback system in place e.g. patient surveys and Google reviews, that are reviewed by the practice owners and acted on.
2. Mandatory Reporting does more harm than good – watch for stress
As doctor suicide rates skyrocket (they are the second to highest after veterinarians), the requirement for professionals to ‘dob in each other’ (except in WA) if they suspect a provider is impaired, actually has the opposite outcome if a practitioner faces deregistration. As a result, practitioners, whether their health condition is permanent or temporary, will continue to suffer in silence and not seek help. So regardless of how well-intended these laws are, the practical effect is they do more harm than good.
This is the case particularly for junior doctors who have been the victims of bullying.
It is important to have regular one-on-one, face-to-face ‘RU OK’ style chats with all your staff when these type of problems occur. Listen carefully and refer to a professional adviser for assistance. Watching staff workloads is a useful starting point; review their calendars/diaries/ appointment schedules and track missed deadlines. For more information, see Use the ‘Best of Breed’ processes. Technology is the key to survival.
3. Advertising
There is fierce competition for patients. So first impressions matter.
There is nothing worse than a patient seeing a 3 out of 5 star rating with a negative review.
The Government wants practitioners to be more open and transparent, so patients can make informed decisions. Consequently, there has been an explosion in practices ‘pimping’ their website to attract patients. In principle, aggressive marketing is a good thing. However, the Australian Health Practitioner Regulation Agency (AHPRA) restricts advertising. For example, you may be reported to AHPRA for a positive testimonial on your website for miracle cures nobody else seems to know about!
Google Reviews play an influential part on how patients choose a practice. This is a double-edge sword. It seems to us that AHPRA takes a dim view on positive reviews and are happy for negative reviews to persist. It is not hard for patients to generate negative reviews on Google. All it takes is one click.
Practices need to watch their social media reviews daily to keep up their 4 to 5 star rating. Watch out for fake negative reviews. Many times this is used to bait organisations to use social media review services.
We are receiving reports that, despite its recent negative publicity, Facebook is still a good place to start recruiting and retaining patients for your practice. Make sure you have a great facebook page.
4. Hyper Competition and Hyper Billing
In certain geographical areas, there is hyper competition for patients and not doctors. These days there appears to be a medical centre around every corner, fuelled up with high pathology rents. However, the high pathology rent days appear to be numbered see point 6 below;
High Pathology Rent Days are numbered?
The widespread use of bulk-billing of patients, where the practice charges no gap, means the government is not under pressure to increase Medicare rebates, even though a slight increased has been announced. We note there is a new trend for practitioners to couple billing item numbers to overcome this problem. Correct billing and coding is becoming a big issue with Medicare. It is important to accurately document your billing for clinical relevance or risk an expensive audit.
One negative result of hyper competition is that the government starts to scrutinise possible cases of alleged overservicing. This is reasonable in our view, as long as the rules are open, transparent and fair. Currently, this is the subject of a Federal Court challenge, which argues there are no clear published rules and that practitioners are being unnecessarily or excessively investigated behind closed doors.
This is forcing providers to withdraw clinically relevant care and it now appears practice owners will share liability. For more information see articles:
5. It only takes one doctor to bring down a practice – New 2019 Medicare Audit Laws
From 1st July 2019, in the case of doctors and providers who are convicted of inappropriate billing, the practice owners will have to pay back any service fee they charged the provider.
Medicare audits are on the increase in the aftermath of the junior doctors after hours debacle.
Expect more national headlines to come like these:
With new legislative changes commencing July 1 2019, a practice could be up to 100% responsible for debt repayment of incorrect Medicare billings based on the percentage received by the practice as a service fee.
From July 1 2018, the new debt recovery powers of Medicare allow the garnishing of funds in bank accounts, as well as up to 100% of MBS billed items in practice. Non-compliance is not an option, and compliance is essential for practice sustainability. One single dodgy doctor has the potential to wipe out an entire practice should an investigate spread to other providers co-located at the same clinic.
Understanding the basics of the MBS, and how and where to find information, will assist practice managers and practitioners to provide compliant billing and avoid the severe penalties that can be imposed for incorrect billing.
Care plans, health assessment, mental health and team care arrangements are the most non-compliant items and we cover these in detail. See below for information on skin lesions and procedures, treatment room fees and bulk-billing restrictions.
This article is by Medical Billing expert Loryn Einstein explains the impact of the new rules on specialists and surgical fee assistants. See Medical Billing Compliance Nutshell 2018
For more information see articles:
6. High Pathology rent days are numbered?
High paying pathology rents that support bulk billing or free medicine to patients are under pressure. A key driver is a noticeable reduction in the once highly competitive pathology collection centre network. We see practices fielding requests from pathology labs and the government to have their rents reviewed for area, size, appropriate leasing terms and tender processes to ensure ‘market values’ are true market values.
Poorly-written leases that do not address signage and access and parking rights can harm a valid ‘market value’ defence.
Our national benchmarks indicate an interesting trend.
Review how pathology rents and agreements affect your bottom line. Can you negotiate the same or a better deal. What if you cannot?
What alternate sources of income can you consider e.g. stop bulk billing and charge $10 per consult or start charging for consumables (do not bulk bill for the same consult).
For more information see
7. Fair Wages
Just because you pay your staff above the minimum Award rate does not mean you are compliant. Practices must ensure they have the correct employment contracts which reflect the current employment laws.
The 2018 permanent casual Fair Work case decision found cases where regular casuals may be underpaid; for a clear example see New Fair Work Law – Permanent Casuals can double dip on their pay!
We have lawyers and advisers who can provide healthcare specific template agreements that can assist with compliance.
See point 8.3 below; will your Accountant or bookkeeper ‘dob you in’ for underpaying your staff?
8. Major Tax Changes! – Employee v Contractor Rules
1. 1st July the new mandatory Single Touch Pay (STP) rules
- Do you have any employees, including yourself?
- Are you self-employed as a PAYG earner?
- Are you using the right software to comply with the new regulations?
New tax rules mean your practice must report its employee tax and super obligations to the ATO. This means you will have to use an electronic payroll system from 1st July 2019, no matter how large or small you are. Transition rules apply.
The ATO is granting a three-month buffer to 30 September 2019 for small businesses to transition to the new regime.
The ATO has also released a detailed register of STP products for micro-businesses, with several options currently available. After 12 months significant penalties could arise.
Using payroll or accounting software that offers Single Touch Payroll (STP) such as Xero, employers send their employees’ tax and super information to the ATO each time they run their payroll and pay their employees.
No matter how few staff you employ (even one or two), the STP rules will still impact you, even if you don’t currently use a payroll software package (and we know that many small employers still prepare payrolls manually).
The ATO will easily be able to track non-complying taxpayers. The penalties can be quite harsh; see the points below No tax deduction for failure to report or pay, and Will your Accountant or book keeper dob you in for under paying your staff?
You should talk to your tax agent now to get advice on your next move, or contact us at Health and Life at pa@healthandlife.com.au for more information.
2. 2019 No wages tax deduction for failure to report or withhold PAYG!
According to the ABC, controversially Labor wants to limit the tax deduction advice you pay your accountant to $3,000 p.a. Perhaps they think this is a good idea as people will naturally end up paying more tax because they cannot afford their accountant’s advice.
To take it a step further, from 1st July 2019, if you do report withhold PAYG payments with the ATO they will deny you a tax deduction.
‘Any payments you make where you haven’t withheld or reported the PAYG tax are called non-compliant payments. You won’t be able to claim a deduction if you don’t withhold any PAYG tax or report the PAYG tax to us’
We see a problem with practice arrangements with hospital trainees and salaried public hospital doctors and contractors e.g. cleaners and providers.
Excellent accounting systems that connect with the new STP are critical. A missed lodgement deadline was because somebody had just left their job or was sick would be most unfortunate.
To what extent there may be leniency from the Tax Office is unclear.
To safeguard yourself see our articles:
3. Will your Accountant or bookkeeper dob you in for underpaying your staff?
It appears Fair Work are encouraging accountants and bookkeepers, under the accessorial liability laws, to dob in their clients if they do not pay staff appropriately. See New Fair Work Law – Permanent Casuals can double dip on their pay! This decision is a case in point as how you can get caught out.
‘In 2017, the Fair Work Ombudsman successfully secured first-of-its-kind penalties against a Victorian accounting firm for allegedly facilitating underpayments by its client.’
Hopefully your accountants and bookkeepers will not dob YOU in. They should make you aware of your obligations, however. They will no doubt do so to protect themselves. However, ultimately it is your responsibility to get it right. Accountants and bookkeepers have been warned they may be responsible for checking your payments. So do not be surprised to see an increase in your annual accounting and bookkeeping fees as a result. After all, if there is a problem and they do nothing, they may be prosecuted together with your practice. See Accessorial liability a potential risk under the STP regime.
4. New Employee v Contractor Rules
Practices face multi-million dollar payroll tax audits based on how their website and structures and systems have been set up. Various Federal and State Agencies have a mixed view as to when a doctor or a provider is a contractor.
Over the decades, and after consulting Barristers and QC’s, we are starting to see a common theme emerging when it comes to mounting a successful defence and keeping of trouble.
You need to have the right structures, business model, systems and signed contract documentation including your website that should affirm that you do not engage contractors or employees. Your ‘contractors’ should seek independent legal advice.
Furthermore, be prepared for your practice staff to be interviewed (these interviews could either make or break your defence).
The following articles provide useful evidence as to what Government agencies are looking for; New Tax sting: Is your practice running like a brothel?
And for how to overcome it, see the Payroll tax office in 2018; this may be a useful starting point for your practice.
To safeguard yourself see our articles:
Contact us at Health and Life pa@healthandlife.com.au for further information.
9. Data matching
Like the Tax Office the Government itself is getting better at data matching. Data matching instantly identifies problems for further investigation. We can only expect more of this to come, given the headlines like the one below.
The only way to combat this is to have clear structures and systems in place. Health records and correct handling of data privacy is of greater concern. There have been many breaches in the healthcare sector see Yet another wake-up call”: Privacy Commissioner releases new data breach report, with health sector top of the list
Increasingly the Federal Government, via the MyHealth centralised patient records system, has been encouraging the placing of patients’ healthcare data online see Are your medical records exposed online without your consent?.
Many practices continue to struggle with the changing technology, and managing staff password access and responsibilities.
It will become easy to get caught and the fines may be significant. The answer is to use better technology to better safeguard your practice. We can show you how and where to start and why; see Use the ‘Best of Breed’ processes. Technology is the key to survival and Outsourcing the hard stuff!
10. Time to Change Practice Culture – it is no longer a choice
If you have managed to get to the end of this article you have done well …and may be feeling overwhelmed!
Depending on your point of view, the glass is either half empty or full. Your staff and patients may not like change and this will be your biggest hurdle. It will initially not feel comfortable.
Your staff can feel it is not you that is the enemy, but outside forces that need to be managed.
1. Share information about the current state of play
Being open with information and sharing it will help diffuse any personal concerns or paranoia. The next step is to have a strategy that can help everyone stay on the same page, as you rebuild or refine existing systems and structures.
2. Have a strategy
We have provide a thought workflow process with an example of how you can achieve this by using inexpensive technology as your friend; see the article Use the ‘Best of Breed’ processes. Technology is the key to survival.
3. Technology is your friend and not your enemy
Adapting to new technology is a real game-changer for practices seeking to compete for patients and meet their compliance requirements in a sustainable way. It will definitely lift productivity, reduce stress and the sustainability of your practice; see Use the ‘Best of Breed’ processes. Technology is the key to survival.
The flipside of having this convenience, is that your affairs are now more open and transparent to Government departments that can trigger an automatic computer audit. These days it does not seem like a choice anymore so we all need to get used to it, unless you yourself are planning to lobby your MP for change!
4. Get rid of the hard staff and be prepared to pay for it
If it all gets too hard, consider outsourcing some functions; see Outsourcing the hard stuff! Can you afford to get it wrong? What if key staff leave or away sick does this leave the practice exposed? Outsourcing may be the answer.
5. Be prepared to let go
Reassess how many years you have until retirement; see the article Do you love your wife? Do you love your job? Consider your exit strategy; see Exit Planning – Five things to think about
Now may be a good time to introduce new owners to share the burden, or you may even consider selling the practice. Is it worth considering and seeking professional help?
How to find people that may be interested in your practice see Practice Opportunities with or without a view to ownership .
6. Do not sign anything – First, seek experienced professional advice
There are many issues raised here. Do not sign anything; first seek experienced professional advice. It is hard to undo a bad decision. Sure, seek recommendations from family and friends but remember you are the one stuck with the consequences of the decision. It is hard to hold family and friends accountable for a poor decision. Do not be afraid to seek paid, professional help.
Please note, we are not lawyers. Please seek independent legal and financial advice on any matters raised before acting on any information we have provided.
For more information contact us at Health and Life pa@healthandlife.com.au or for a no obligation free consult.
(c)Health and Life Pty Ltd
For more insights visit our blog.
About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.
Chartered Accountant, Chartered Tax Adviser, 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 (www.ihseb.org)
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.
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