– Before calling a lawyer first work out (or confirm) how to run your practice –

(Part Three of Three)

This 7th June 2023 update, is due to the Supreme Court Naaz payroll tax failed appeal decision that occurred on 14, March 2023.  

More concerning is the media report AusDoc Special Report: General Practice and its battle with the ‘existential’ threat of payroll tax”, 6 June 2023. 

They report practices are “going bankrupt”. We do agree that anyone who continues to do nothing are at a greater risk of insolvency or bankruptcy. 

To the contrary, we do believe there are some silver lining “silver bullet” solutions. They have been recently payroll tax tested and establishes the payroll risk is avoidable and cost-effective if you stick to the rules.  

Surprisingly, despite our ongoing efforts to highlight these rudimentary solutions such as the Tenant Doctor model, they continue to fall on deaf ears (which respectfully include legal and accounting advisers). 

Alarmingly, this fuels much unnecessary uncertainty and concern.

Recent High Court rulings and Treasury are the real driving force for all State and Federal regulators, it is just not the State Revenue Offices. The rules affect all industries, even schools.

Take key steps now, you can significantly reduce your risk. As reported earlier, a simple and cost-effective first step is for each doctor to set up their own website and review how they advertise.

The more you do, the less you need to be worried about. 

It should be business as usual with the right advice and implementation. Practices that operate under the Tenant Doctor model continue to achieve these eight key benefits:

Depending on how well you have been set up, there are a number of one-off fixes you may need to make to comply.

The payroll tax and income tax are old rules. The only difference is the tax man have better enforcement rules and tools to access and data match and share your tax information across different State and Federal regulators.

The devil is in the detail. Left untreated, I predict this will spread to a more serious income tax problem as well as other regulators, and across practices as GP payroll tax owner Dr Chambers has publicly stated in the report.

Sadly, advisers and/or practices have not properly understood and/or applied the rules. This is the real reason for this payroll tax pandemic. 

By using this “deep dive guide”, find out what you need to do now and why.

For the harder to convince, this edition will provide the practical and accounting and legal evidence you can provide your independent legal and accounting advisers. Trust but verify in writing what they have advised you. Context matters, ad hoc advice will not protect you.

Ultimately it is your responsibility to protect yourself. Do not leave this solely to your trusted advisers or leave it too late.

The last of this trilogy ends here. I hope to provide, both a helicopter view in the first instance, followed by a detailed outline of the current state of play, why it is happening, and what you need to do.

I have targeted practice managers as the key to solving your payroll tax problem. You have the ear of the practitioners and can drive the change that may be needed.

The first part provides a response to the public reaction to the ruling and debunking some critical myths and misconceptions.

The second part can be skipped for those who are not into the technical details. This is for you to share with your lawyers and accountants. It should give them a heads-up and reduce any unnecessary accounting,legal fees, and delays.

The final part is a practical fast-track solution on how to self-assess and navigate your way towards compliance. Get your practice manager on to this now!

Tax contagion is real. 

Your solo practitioners can give a payroll tax and income tax audit to your Medical Centre or your Medical Centre can give it to your practitioners. 

It is everyone’s problem and not just the Medical Centre’s. ‘

Without written contracts and independent solo practitioner websites, Medical Centres and practitioners are at significant payroll and income tax risk.  Everyone needs to work together to clear any blurred lines.

Solo practitioner Dr Aaron Chambers provides proof that payroll tax is a contagious tax.

He says he got the first (payroll) tax office letter in February last year. He knew something of what was coming. He had watched on as a solo contractor himself when the practice he was working at faced a tax demand and it nearly went broke.

Dr Aaron Chambers  (GP Practice Owner QLD) 

Source: AusDoc special report: General practice and its battle with the “existential” threat of payroll tax Australian Doctor, 6th June 2023

TLDR (too long didn’t read): If you do not like reading and can wait, we will be presenting a national webinar on this topic. So if you are a practice owner and would like to join, complete this confidential payroll tax self-assessment checklist by clicking HERE (register for seminar).

This is a deep dive edition. So to help you get started on the points you want to know, click on the links below:

Editorial Note – David Dahm:

We are about protecting you and our healthcare system for your patients and the community you serve. This article is dedicated to all healthcare practices and their staff as a small thank-you for your service.

My articles are intended to be educational and are for discussion.  I will humbly stand corrected if I have misunderstood the law or caused offence. No offense or disrespect is intended. Please accept my apology in advance if you have been hurt and contact me.

I am simply the messenger. We have been deep-diving court rulings and consulting leading tax lawyers and barristers on the subject. By their nature, court rulings are pedantic, for this reason, I have produced this “guidebook” edition.

I hope this edition provides greater confidence and clarity when you next contact your legal and accounting advisers.

I understand I have a few payroll tax “detractors”. This topic is a highly charged and emotional issue where livelihoods are on the line. 

This payroll tax issue has become a lawyer’s and accountant’s picnic, with many Johnny–Come–Lately players. Out of fairness to the legal and accounting community, we have consulted all the major players to ensure the interested parties were informed of the facts.

We want to stop the unnecessary uncertainty and confusion. This includes your time and money.

Many are unaware that, even among advisers, a lot of well-intended advice is ad hoc. Absent is a contextual top-down and bottom-up legal, accounting, people and systems approach. This is the process the Courts have taken and so have we.

Initially, my opinions may feel inflammatory (often this is deliberate to get your attention). I painfully and naively challenge the simpler and easier “popular view”. Sadly complying with tax rules is not a popularity contest. 

For better or worse you need to take a clinical approach if you want the problem to permanently go away. It is a complex multifactorial issue.

Some say “there is no silver bullet” solution, but we are pleased to report we may have found some. Some high-profile barristers are a similar approach. More on that later. 

In full disclosure: It should be noted that we use and own the  Tenant DoctorTM trademark and an automated e-service fee agreement calculator tax compliance software tool called the Doctors Pay Calculator. Pro Bono we are applying for a national ATO and payroll tax product class ruling for the industry; which upon formal acceptance by the ATO, we believe will  l provide further certainty.  

Alternatively, contact us, you may be running out of time.

Complying is like playing a game of snakes and ladders when you should be playing chess and knowing the solutions in advance. At all costs avoid checkers which is a move away from the simple but dangerous ad hoc approach to solving a complex problem. The Tenant Doctor solution may be the way forward for you. 

How You Run Your Practice Matters

The clamour around payroll tax being applied to medical practices has achieved national mainstream news coverage, and that sounds like a good thing, but it’s not.

The Queensland Revenue Office’s ruling, titled Public Ruling PTAQ000.6.1 Relevant contracts – medical centres, which went into effect in December 2022; has generated numerous incorrect media statements and misconceptions that I will respectfully challenge in the following.

What is clear is that how you run your practice actually does matter, by taking a top-down and bottom-up approach. Legal contracts may be turned into confetti if your agreements do not walk the talk. Template agreements will not work. 

It is human nature: You have to ask why we have a medical and health payroll tax & contractor compliance pandemic.

Respectfully, the answer may be relatively simple in one that incorporates all 21 regulations and laws that I have brought this community’s attention to.  Finding out that you have been implementing incomplete or the wrong advice may be quite expensive to fix.

There appears to be a lack of holistic education among, practices, contractors (but more so, amongst the lawyers, and accountants who profess their speciality in the medical/healthcare sector). If there was actual awareness in the specificity of providing legal/accounting advice to the medical sector, we would not be currently experiencing a payroll tax pandemic.

Early in 2022 certain doctor-related associations’ (AMA & RACGP) medical-specialist solicitors and accountants made direct comments to the payroll tax commissioner and media as to how widespread the problem is, stating more than 7400 practices could be liable – effectively throwing everyone under the bus.

whereas, in actual fact, each practice will be judged by the relevant tax authority on an individual basis on their particular arrangements, and not on everyone else’s.

These public statements have only piqued the interests of tax authorities and increased their requests to audit medical practices.

Furthermore, waiting for an easier way out, like an medical industry-wide exemption (because you did not want to change or review your arrangements or have no time to do so), is a poor and incredibly high-risk strategy.

The payroll tax exemption strategy does not solve the remaining State and Federal regulators who may also wish to have a crack at you e.g. ATO, Workcover and Fair Work.

Killing bulk billing is this really an option?

78% at the 2023 RACGP Owners conference said they would increase their fees to cover the additional payroll tax bill. 

This is like killing Bambi. Expect some opposition.

After many decades of warnings, I would have never guessed that payroll tax would be screened on national TV as the primary reason (among many others) for GPs to cease bulk billing.

The need to stop bulk billing may represent a golden opportunity. But think again if you are using payroll tax as an excuse.

Suddenly increasing your fees will only increase your payroll tax bill and kill your patient base. 

It does not make dollars or sense, it is a vicious circle (death-spiral) tax.

What about applying for an exemption?

You will find there is no easy way out, other than to ensure you comply. 

If you are in Queensland you could apply for a payroll tax amnesty. By applying you may be “accidentally” self-incriminating yourself. See a lawyer and accountant first. But then what happens after the exemption period if you have no solution to fix your practice? 

To continue with the Bambi-hunter theme, amnesty is like handing in your gun during a gun amnesty, but what if you still need it to put food on the table just understand you may not be able to get it back the same way you had handed it in. 

You still need a solution, so is there really any point in handing it in, unless you first have a solution in mind?

The tenant doctor solution is a way forward, sustainable and cost-effective. In fact you might find yourself better off. Before applying for an amnesty it is worth first considering if this is a suitable option for you.

For some, this is a big ask. For others, they may need to make a few adjustments. Everyone is different, depending on how conscientiously you budgeted each year for legal and accounting fees and implemented the advice.

The only difference now is that more war stories about practices like yours have hit the national media, with entire livelihoods being wiped out by payroll tax. The issue has caught the attention of everyone who has been affected.

The government needs the money [especially the State of Victoria…]. The tax office has become more interested as a result of the national media attention that various national professional bodies have received. 

If this issue does not appear to pass the tax office’s “pub test” any more than the alleged PWC selling the ATO’s tax secrets to the highest bidder, you most likely have a problem. 

Whether it is poor advice or implementation, expect them to enforce the laws. It is their job.

Contractor (deemed employee) tax compliance rules are complex and confusing 

The rules can be deceptively complex. Pardon the pun! But there are many snaky taxes and laws we need that you do not always see! 

As mentioned earlier, complying is like playing a game of snakes and ladders when you need to be playing chess for solutions; and not checkers which is a move away from simple but dangerous ad hoc answers.

This is why you need medical and healthcare experience and expert tax and accounting advice. Ensure that any advice has been tested and is not ad hoc.

To keep up, you have to read a lot of case law since 1978, and have practical, successful tax audit investigation experience in this area across different regulators. This is a hard task for those new to the specialty.

Respectfully, in court, you have to take notice: when even the biggest law and accounting firms with shiny letterheads have not managed to save their high-profile billion-dollar client.

This means this is not a simple problem that a traditional law and accounting firm can easily solve. 

The sad reality is that compliance is not sustainable. Poor compliance education appears to be the number one problem. 

It is naive to expect the tax office to give you an extensive guide on how to comply. 

Understandably, it would be against the compliance model of the tax authorities to highlight problems and the solutions. You need experienced advisers for that.

For these reasons, in this edition, without obligation, we have given you some ideas that you can take back to your advisers. I am happy to stand corrected on any point raised.

Why does my advice differ from what you may have heard?

For over 30 years, I have specialised as a medical and health chartered accountant, practice adviser, and registered tax agent. For GP practices, you may be surprised to know I have been an AGPAL surveyor for 10 years. and served on the State and national levels of AAPM.

Tax judges appreciate intimate working knowledge. Any court decision is based on the law and actual evidence. Investigators tend to target the low-hanging fruit.

Even though I’m not a lawyer, lawyers have reviewed these opinions for legal accuracy. I am not providing legal advice. I am commenting from my unique personal experience, on the impact of the payroll tax issue, how it may affect your practice, and how you can successfully address any concerns. 

Furthermore, to protect our clients, we will once again courageously apply for a national ATO class ruling, which we hope you can all read. We have been successful in similar applications. It would be useful to ask your own adviser if they have been successful in taking a similar approach.

You can pass a tax audit today – you do not need to wait for a tax exemption

There is no need to wait. It is possible to get started now and become compliant by confirming you have the Tenant Doctor Model in place and by following the “Five Tenant Doctor principles” which we will describe in more detail later.

Why the Tenant DoctorTM Model?

The Tenant Doctor model, as described earlier, refers to when a practitioner uses a service entity. 

This is a legally sustainable commercial alternative. After a major Federal Court Decision called the Phillips case, since 1978 it has been used by accountants, lawyers and doctors. Even high-profile barristers use a derivative of a similar arrangement.  

Based on prevailing regulations, case and taxation laws, we have identified five Tenant DoctorTM principles every practice should observe to ensure compliance. Furthermore for decades, the model has passed ATO and payroll tax audits and rulings that have legislative backing.

The key is to have one arrangement that addresses all these competing laws and regulations. As you can see below, the real battle is to decide whether you are a Tenant DoctorTM (are you using a service entity model) or a Medical Centre?

The laws are complex. They extend beyond payroll and income taxes and include other regulatory authorities such as Fair Work and Workcover, the Health Insurance Act, and AHPRA. 

It is noteworthy that the 2022 ATO contractor ruling which many advisers have not commented on is far worse than the payroll tax rules, however, there is a way to remain compliant.  

On a final point, the “Tenant Doctor” model has also been alluded to in the QRO Ruling, and more specifically referred to by Dr Bruce Willet from national Vice President of the RACGP It is imperative that the practice owners have a clear business and legal contextual understanding of their business structures and arrangements for this arrangement to work.

To achieve this goal, each party must understand the business purpose of establishing their respective legal entities.

The following questions need to be written down and answered. Why do these entities exist? What do they do? How do they do it? 

The Five Tenant DoctorTM Principles

For over 30 years, our Tenant Doctor work has been subject to ATO and payroll tax office private rulings and investigations. All have ended with a positive outcome.

Post Thomas and Naaz, We have enjoyed a safe track record of advising clients and defending audits, this includes securing payroll tax exemptions. 

This is an important question to ask your adviser before taking their advice. We have been publicly raising the payroll tax issue with practices like yours since the late 1990’s. 

Until the recent audits and national media coverage, it had largely fallen on deaf (and uninterested)ears 

Many practices have found that there are no real shortcuts. It can be cost-effective and sustainable to become compliant. Furthermore, it has provided them with a unique tenant doctor recruitment and retention edge which pays for itself. 

Last week we were informed that our WA client has used the fact that they are tenant doctor compliant (and thereby financially stable) to attract new Tenant Doctor GPS to their business.

Most importantly, it provides everyone with peace of mind.

It has become a normal cost of doing business that has in the past been seriously undercapitalised. A healthier and less tokenistic attitude towards compliance is better than risking your entire livelihood. 

You are lucky if you have not been touched yet. New compliance laws and high-tech ATO and state regulator data matching and sharing are alive and well.

Where do you start?

Usually, the first place to start is with any rulings and the law.

So where you start is critical. 

We are currently running a “Tax Vax Clinic ” to help you. We are using our 5-step tax vaccination program. We have identified the following “Five Tenant DoctorTM principles” you need to consider if you want to be compliant.


  1. Purpose 

Intentions matter, know your why?

Are you a Tenant Doctor (Service Entity) or Medical Centre?

The starting point is to simply know the type of business entity you have and its purpose.

Your accountant and/or legal advisers should have asked what was your original “Intention” before you started your business and the purpose of any structure they have advised you to establish. 

If you cannot document, this is the first problem you have to solve.

Are you a Tenant Doctor or Medical Centre? 

From experience, many practice owners find their structures have been established as a service entity (Hint: check your trust deeds and practice agreements), but they have been poorly advised or implemented. Often they have been accidentally mischaracterised and referred to as a “Medical Centre”.

This is mainly due to copying a competitor, without realising what legal and tax harm any mislabelling may cause. 

The Ruling provides many examples of what constitutes a “Medical Centre”.

So why is there a problem?

Many practice owners misunderstand or have forgotten the commercial purpose of their business structure, or it has not been clearly explained to them. It is usually a problem left to the humble accountant. 

We often hear “My accountant told me to do it to save on tax”. This is a terrible response. This would immediately put you in hot water. 

Alternatively, we see people copying somebody else’s ideas (including agreements). Once again, this is never a good idea without any real thought or awareness. It is like passing around a dirty syringe.

Many have assumed they know how it really works until there is an audit. This is the primary cause of a failed tax audit. Poor understanding and implementation of your structures.

Are you a “Medical Centre”?

The first objective is to rule out the possibility that your practice does not have the characteristics of a “Medical Centre”. This is a key and only payroll tax exemption that is under your control. 

The QRO and other State Revenue offices have primarily leaned on this single issue.

Are you carrying on a “Medical Centre” business or a practice management support or landlord tenant business? If you pass that test, there are a couple more you need to pass. More on this later.

If they determine you are a “Medical Centre” by their own definitions in the Ruling you may have a serious problem. You will then have to satisfy the other exemptions, such as the 90 day rule and services performed by two or more people. These may be more difficult to pass; see below.

Without a good commercial (not tax) reason, you would immediately lose your first line of defence from the tax man. 

The Tenant Doctor model is recommended. Accordingly, tenant doctors should be seen as renting consulting suites and promoting themselves, and not the service entity, i.e. landlord.

The Ruling states below under the Payroll Tax Act 1971 (Qld) (similar provisions exist in other States due to national payroll tax harmonisation:

“Application of relevant contract provisions to a medical centre


  1. A contract between an entity that conducts a medical centre and a practitioner is a relevant contract under s.13B if all the following apply:

    1. the practitioner carries on a business or practice of providing medical-related services to patients

    2. in the course of conducting its business, the medical centre

      1. provides members of the public with access to medical-related services

      2. engages a practitioner to supply services to the medical centre by serving patients on its behalf

    3. an exemption under s.13B(2) does not apply.”

Interestingly, the only practical exemption is to provide services to the public generally—s.13B(2)(b)(iv). The QRO attempted to characterise and define the term “Medical Centre” for payroll tax purposes. 

Co-Mingling of “Purpose”

A common mistake we see is a co-mingling of purpose. A couple of examples are below.

Contracts for services or of services  

You cannot have some practitioners thinking they are and work like employees taking instructions e.g. fulfilling roster duties from a service entity provider and then labelling themselves  a “Tenant Doctor”. They have to think and walk the talk, beyond any signed contract between the tenant doctor and service entity, or the contract may be invalid. 

Employing Registrars and Locums in the Service Entity

You cannot have both a Medical Centre and Tenant Doctor arrangement in the same entity sharing the same ABN, letterheads, and tax invoices. You cannot have employee and subcontractor doctors in the same service entity.

For example, if you believe you have a Tenant Doctor model using a service entity arrangement that we have described earlier, you cannot employ or engage registrars/locums in your service entity.

Furthermore, you cannot then bill registrars and locums out to patients with the service entity’s name using its ABN. 

Billing Consumables

The same rules apply to consumables or nursing support. This entity should be exclusively providing support services to a Tenant Doctor and no one else, otherwise you may be seen as co-mingling your purposes. 

Furthermore, because the service entity’s actions have compromised their intentions, your tenant doctors run the risk of losing their ABN and being forced to pay five years worth of back taxes (or as some refer to it as, Clawbacks by the ATO)

Everything that is old is new again

The Tenant Doctor (Service Entity) Solution Revisited

The “Tenant Doctor” principle focuses on the 1978 service entity Federal Court case and ATO rules for professional practices such as doctors, lawyers and accountants. 

Below is a quick explanation of what a service entity is.

A service entity has a service agreement. This service agreement operates as a ‘contract for services’, whereby the Principal requests and pays for services provided by the service entity. Essentially, the Principal operates a professional practice and the service entity operates a separate business of providing administration and support services to the Principal.

Operating under this service agreement should not result in an employment relationship, as the service entity is an independent entity and not an employee of the Principal. More on this later.

Confusion continues amongst advisers and professional bodies

I recently attended the 2023 RACGP national practice owners conference. The panel made it painfully clear how much uncertainty and confusion exists on this subject matter. 

Dr. Bruce Willet, the RACGP Vice President, stated “There was no silver bullet”.

I respectfully disagree with Dr. Willet’s assessment. 

Stemming from the QRO guidelines and the recent Naaz ruling, it was made abundantly clear (at least in my reading of the plain English case law and policy ruling) that it is very much possible to get exemptions after the Naaz decision. 

The Qro has provided unprecedented clarity as to the intentions of the payroll tax office and their basis for concern has been disclosed. This is also consistent with the recent ATO contractor ruling

Practices need to urgently seek expert advice when it comes to ensuring compliance.

We have been here before, where prominent advisers have been left confused after a ruling. At the time, I shared a similar thought piece.

In 2007, after the Federal AMA asked for my assistance in relation to the ATO’s national 2008 “Your service entity arrangements” ruling, this remains a current ruling and good law.

In 2007, the Big Four accounting and legal firms and others were struggling with the rules. The ATO’s dispute with some of the Big Four accounting firms gave rise to the ruling. 

My comments in the above AFR “Bit Rich” article were ironically in defence of the ATO’s (Tenant Doctor) service entity ruling when it was published.

My position was that the purposes of service entities have always been clear but poorly implemented and or understood by my peers.

Strangely, given the current level of payroll tax audits, it appears not much has changed amongst advisers and clients. This would go some way to explaining why we have a tax pandemic.

2. Perception

The Medical Centre must advertise the practitioner and not the Medical Centre