Gp Medical & Healthcare Payroll Tax: The Flow Of Separate “Banking” Funds Myth Busted And More…

Many practitioners, practices, and Medical Centres are overwhelmed with the minutiae of details they need to consider in order to make sure they are payroll, income tax, and Fair Work compliant. 

In this edition, we provide you with the latest information and how to get started without wasting your valuable time and money on piecemeal problems and answers. 

The good news is that there are more opportunities than problems for everyone affected.

The QLD Payroll Tax Ruling was updated on February 21, 2024. They made it clear 

According to paragraph 62 and 63 in the latest QRO Payroll Tax Ruling there is a BIG BANK WARNING:

If a “Big Bank” offers you a “XYZ Doctors Reconciliation Account” (patient payments) ”solution for all your GP’s and “Medical Centre” to run a joint account, the arrangement will be subject to payroll tax.

As a double whammy,  the ACT declared any payment arrangement to and from a “Medical Centre” to a practitioner on December 22, 2023 would attract a payroll tax liability 

Note it will be tricky after 1st July 2024 to secure a second opinion from a registered tax agent. 

If your new tax agent’s opinion finds your existing tax agent is breaking the rules, they will mandatorily have to report them and this may implicate you in a prosecution. See The ATO’s new Mandatory reporting standards target unethical accountants, and potentially you! 

Most importantly, it will help in recruiting and retaining practitioners and staff from non-tax-complying practices.

Think of the concept as an investment into a work-flow process that is sustainable, similar to an investment to purchase some solar panels and batteries in an attempt to decrease your carbon footprint while also having reliable power. You do not have to risk everyone’s entire livelihood and future.

Rulings may not apply to you! 

Do not panic!: In Australia, these latest Payroll and Income Tax Rulings, Health Insurance Act and laws may not even apply to you or your “Medical Centre”.

These Rulings may not even apply to you anywhere in Australia  if you are an “administrative business” and not a “Medical Centre business” see: KPMG: What Queensland’s updated payroll tax ruling means for medical centres

Interestingly despite direct webinar media discussions with various payroll tax offices, there is no explicit mention of Quistclose banking clearing arrangements  (the genesis of our banking system) being a problem. 

The QRO has a semi-endorsed position see point 63 of the new ruling. It would have been useful to mention “administrative businesses” in this type of arrangement. More on that later.

 

ACT Latest Update:

On the 22nd December 2023, the ACT Payroll Tax Commissioner stated they have a similar problem and do not accept any types of separate banking arrangements.

They made it clear that they do not accept any payment arrangement to and from a “Medical Centre” to a practitioner.

 Source: ACT Payroll Tax 22.12. 2023 (slide deck)

QLD Latest Update:

QLD Payroll Tax Ruling “Big Bank Fix” update on 21st February 2024

Any quick fix “Big Bank” payroll tax solution may blow up. See new clause 63: Example 14—Assigned Medicare benefits and out-of-pocket patient fees not paid directly to a practitioner

BIG WARNING: if a “Big Bank” offers you a “XYZ Doctors Reconciliation Account” (patient payments) ”solution for all your GP’s and “Medical Centre” to run a joint account, the arrangement will be subject to payroll tax.

The same ABN is being linked to a “Medical Centre” is a BIG issue.

WHERE TO FROM HERE?

nterestingly despite media chatter with various payroll tax offices, there is no mention of Quistclose arrangements being a problem.

This means it is business as unusual.  

With the correct legal and tax accounting advice and digitally encrypted technology, there is no need for separate bank accounts, cashflow problems, and you can mandatorily reconcile every patient cent to a practitioner for income and payroll tax purposes and complete 10 tenant doctor payments including the service entity in under 5 minutes.

Consider establishing with your professional legal and accounting advisers a “Quistclose” clearing account arrangement. 

Respectfully to the skeptics and detractors: I share your skepticism.

I thought about waiting for “it to be tested in Court”  but have found this strategy may do more harm than good. See Corporates prepare to fight payroll tax in court, The Medical Republic 22 February 2024 

It is like tethering yourself to the Titanic when there are lifeboats already in the water and you can see people have died. Sadly, this is not how the law works, ask any lawyer. It is based on your individual facts, regardless of any Federal or State ruling, against the statutory and general national case law precedent.

You should ask a lawyer as I am not one.

Time to invest and protect everyone’s future forever! 

Like solar panels, obtaining and implementing the “right” comprehensive advice should pay for itself by recruiting or retaining existing practitioners. Our clients (yes you can keep your own accountant) confirm competing practitioners from non-complying “Medical Centres”  are seeking tax-complying “Tenant DoctorTM” arrangements.

The Business Case

When payroll and income tax liabilities can cost up to $1,000 per month per practitioner including compliance cost, once set up correctly this can cost as little as $70 to $90 per month per practitioner. When you include the new Fair Work deemed contractor compliance rules and leave payments over 5 years non-compliance can cost up to $250,000 per practitioner and double that in penalties and this excludes legal and accounting compliance costs to defend any claim and implement new agreements and systems. Usually tax deductible set up costs can vary between $1,000 per practitioner up to $7,000 depending on how much work is required.  

To attract more practitioners and ensure staff satisfaction and retention, maintain a positive work environment do the following NOW before 1st July 2024

“Second opinions” after 1st July 2024 will become complicated

 

It will be tricky to get a second opinion from a tax agent without them being forced to dob in your accountant for non-compliance see Source: Tax Agent Services Act  (TASA) dob-in provisions ‘devastating’ for agents, Tax Institute warns 2nd February 2024.  

You will not burn out your practice manager and bookkeeper and have significant ongoing accounting and legal fees and compliance costs.

Clearly many big and small legal and accounting advisers do not know what they are and have practical experience on how they work, and have not defended them in a payroll tax audit. This is the real problem with tenant doctor and service entity payments.

Respectfully when advisers do not have practical experience on how service entities and or Quistclose arrangements work and have not defended them in a payroll tax audit, you can then understand the confusion. 

You may have felt “profoundly misled”. This may be a useful Jamie Packer and Lachlan Murdoch Ontel defence.See James Packer and Lachlan Murdoch foot $40m One.Tel bill

Ethically your legal and accounting advisers should have referred this matter out to an expert. 

You need the right service agreement and accounting systems for it to work.

We have passed a recent payroll/income tax and now Fair Work tests.

We have used this method with clients for many years, which may require more initial investment and effort to set up (which would explain why not many have chosen this method so far). Ultimately it does not affect anyone’s livelihood or who they have to bank with.

Nationally for over 30 years which includes myself as a registered tax agent and Chartered Accountant, it passes the eat well sleep well test.

We see more opportunities than problems for everyone, especially patients and practitioners.

KEY TIPS:

There is a simple fix: operate as a tenant doctor i.e as an “Administrative” and not as a “Medical Business”. If this is the case none of these Rulings, State, Federal Case laws will apply to you. It is business as usual. 

THINGS YOU CAN DO NOW without an adviser!

Educate yourself NOW before it is too late…!

Fast track and educate yourself now without wasting your valuable time and money by asking the wrong questions.

Those that have watched our FREE latest webinar found HERE will understand. Ask your advisers the right questions. There is no need to come to us at all.  

To fast track any concern, take our confidential quick (5 to 20 min) self-assessment FREE test:

       1. Stop calling yourself a “MEDICAL CENTRE”;

      2. Make sure each doctor has a properly legally worded website, tax invoices and letterheads CLICK HERE for               www.Pages.Health; 

      3. For centralised banking “Administrative Business” i.e. service entities consider setting up a

          “Quistclose”  arrangement correctly

     4.For a complete guide on what you need to do visit our website article                                                                

       Medical and healthcare payroll tax is killing bulk billing, where to from here?

    5. Seek independent, medically experienced legal and accounting advice in this subject area (greater than 10            years) with audit and private ruling experience. Ask can they comprehensively explain clearly and prove with          case law and common sense a practical solution compared to other advisers.

Make sure you have the right adviser(s) working together for your needs?

It should be a collaborative effort with your legal and accounting team. The left hand needs to know what the right hand is doing.  Everyone has to be in the same room. This is why there is a payroll tax pandemic. To save on costs, not everyone is on the same page.

Ask if your legal and tax advisers work closely together and have experience in setting up a payroll tax tested “Quistclose arrangement”  , so there is no need for separate bank accounts, cash flow or staffing problems.

Are there recommendations tax  and banking fraud compliant?:  Can any recommended system reconcile (without fake journal entries) to a cent every patient and practitioner transactions for the practitioners and service entity. 

For example can any recommended system complete 10 tenant doctor payments including the service entity and pair each transaction to a legally valid Health Insurance Act compliant service agreement in under 5 minutes.

You have until 1st July 2024, to seek a second opinion before this adviser is mandatorily forced to dob in your tax agent, which may implicate you for non-compliance. See Source: Tax Agent Services Act  (TASA) dob-in provisions ‘devastating’ for agents, Tax Institute warns 

Hubris and ignorance is our greatest enemy. 

I am happy to stand corrected. 

Declaration of Interest: We have no direct or indirect interest in the recommendations made about any firm or product, or service. The payroll tax tested Doctors (e-service Agreement) Pay Calculator is 100% owned (by us) the licensor Health and Life and no external banks or third parties. 

At significant time and cost, we have worked closely for many years with independent law firm Hamilton Bailey Lawyers to legally produce this information at no charge to you. 

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.

Recommended Posts

No comment yet, add your voice below!


Add a Comment

Your email address will not be published. Required fields are marked *