Safely recruit and retain more practitioners.

Legally protect everyone’s livelihood (including your advisers) from a contagious tax audit. Do not lose a practitioner’s trust over a contract or payment dispute.

According to  PCG 2022/D5, Classifying workers as employees or independent contractors – ATO compliance approach ruling, to become tax compliant means you must ensure you are not misclassifying your employees as contractors. Your accountant is annually expected to police whether your contractor agreements are compliant and advise you accordingly if you are a high risk.

If you are from Western Australia, the AMA WA have sent PWC letter of advice to all members attaching a tricky contractor payroll tax questionnaire warning all practices to become compliant. 

We strongly advise you to seek the advice of an experienced medical and healthcare legal and accounting payroll and income tax adviser who has successfully defended an audit. You only get one chance to answer their questions. You cannot unsay or undo what you tell them. Your answers could trigger a series of State and Federal tax audits. We feel somewhat vindicated that the question at the very end of the questionnaire about how you brand your practice can get you into serious trouble. Clearly, this is in response to the Supreme Court (NSW) Thomas and Naaz decision where they decided Dr. Thomas got it wrong.

Sadly, ignorance of the law is no excuse. Being an honest fool is not a legal defence. Thankfully the same rules apply to your trusted legal and accounting adviser. Similar to COVID, you need advisers who can deep clean your legal and accounting affairs, unfortunately do not expect this to be at the regular price of your practice cleaner.

             Source: Pulp Fiction Mr Wolf

Respectfully, it is clear that many practice owners, practitioners, ”expert” high-profile lawyers and accountants are unaware that safer harbour rules do exist under the ruling. Furthermore there is a need to meet the High Court’s “totality” test of all your arrangements

We strongly recommend obtaining their opinion in writing now. Do not rely on verbal advice or the statement “they’ve got it under control; don’t worry.” Ask for clear, written explanations. Legal and accounting advisers, before giving any advice, need to be aware of the key 21 Court cases and rulings governing independent medical and healthcare contractor arrangements or according to their own regulators and/or the tax agent board they should not be providing any advice and refer to an experienced expert.

For this reason we have clients who feel they have been profoundly misled. They are currently suing their high profile trusted advisers for negligence. This evidence will come in handy when mounting any defence with the taxman or against your adviser.

As a side note implementing any change correctly should also satisfy any payroll tax concerns.

Like finding out you have stage one cancer, with some expert help, by taking appropriate action now, it can be contained.

I am worried I will lose my doctors, they are hard to replace! 

Many owners of practices are worried they will lose their practitioners if they start asking their providers to sign updated contractor or service agreements or start making changes that will trigger an audit. The reality is that both of you have a lot more to lose if you do not ensure you are both tax compliant. 

When implemented correctly, it is possible to become compliant and recruit and retain more practitioners at your location without having to run an expensive advertising campaign. For many practices, this is a new competitive edge and not a problem. Surprisingly, practitioners report being happier and more professionally recognised. They feel they are working in a more open, transparent, and flexible environment.

For fear of sounding repetitive, Australia’s medical and health care practices need to check their income (ATO) and payroll tax compliance right away.

It is not a choice. It is highly unlikely that the laws will change. All governments need the money to pay for the COVID-19 budget deficit. Based on the most recent rulings and High Court decisions, all regulators are focused on businesses that have wrongly labeled their contractors as employees

Recruitment and Retention Opportunity: Reduce tax audit fear.

Annual tax compliance certification will recruit and retain more practitioners.

At Health and Life, we offer our clients an annual contractor safe harbour tax audited tested compliance tool that can assist you. When the taxman calls, you no longer have to worry about unnecessarily losing your livelihood.

More importantly, reduce any unnecessary practitioner concern about tax contagion or increasing pay discrepancies due to private billing.  You can place the legal and accounting certification certification Tenant Doctor™ logo on your website. This should instantly put everyone’s mind at ease. It proves you are a high-quality tax-compliant practice or service entity. Note this software program has applied for a national ATO tax product ruling.

Our annual Tenant Doctor™ legal and accounting certification process meets the mandatory tax law enforcement and tax-safe compliance requirements in accordance with current laws and rulings. Furthermore, over the last 20 years, we have successfully settled audits and gained exemptions even under the new laws and rules.

According to the new ATO ruling, PCG 2022/D5, Classifying workers as employees or independent contractors – ATO compliance approach ruling, your accountant is annually

required to assess whether your contractor contracts and service entity arrangements are low risk.🚦

All contracts are automatically deemed high-risk unless an employment lawyer and accountant sign off on an annual basis that they are compliant with the ATO ruling: PCG 2022/D5 Classifying workers as employees or independent contractors – ATO compliance approach ruling

If you don’t follow the rules, the following could happen (see articles below for more information):

Table 1: ATO Consequences of a worker’s classification

Where the worker is an employee of the engaging entity

Consequences for the engaging entity

(e.g. Medical Centre or Clinic or Practice)


● Report via Single Touch Payroll
● Withhold amounts under the pay as
you go (PAYG) withholding regime
● Make superannuation contributions or
be liable for the superannuation
guarantee charge
● Meet fringe benefits tax obligations for
benefits provided
● Not entitled to claim input tax credits
for wages paid

Consequences for the worker

(e.g. “Medical or Allied Health Contractor”)


● Not entitled to an ABN in relation to
that employment
● Not entitled to register for goods and
services tax (GST) and no GST
reporting obligations in relation to that
employment

A contractor would no longer be able to claim business tax deductions (or they would be limited)
if they were subject to PSI rules. Furthermore, a 10% GST refund on your business expenses
would be disallowed because you are no longer a genuine business).

Expenses that may be affected include service fee or management fee payments to your
landlord or service entity (commonly and incorrectly referred to a “Medical Centre”, family
practice or clinic), motor vehicles, medical indemnity, travel and conferences, payments to
relatives etc.

For your arrangements and contracts to be classed as a very low risk a LAWYER and a TAX PROFESIONAL must legally sign-off for a service entity, you must meet all the 21 service entity legal and taxation requirements

Although the necessary compliance requirements may be deemed by the business owner as cost prohibitive and/or time consuming, our Tenant Doctor certification program is a timely and cost effective solution that meets all the ATO requirements under the draft ruling PCG 2022/D5, Classifying workers as employees or independent contractors – ATO compliance approach ruling

To be classified that you have a “very low risk arrangement” you must comply with the following:

“Very low-risk arrangements

  1. An arrangement will fall into the very low-risk zone if all of the following are met:
  • there is evidence to show that both parties agreed for the arrangement to have a given worker classification
  • there is evidence[6] the parties both understood the tax and superannuation consequences of that classification and intended for that to be the classification
  • the performance of the arrangement has not deviated significantly from the contractual rights and obligations agreed to by the parties (including the actions outlined in Table 1 of this Guideline)
  • the party relying on this Guideline obtained specific advice confirming that their classification was correct under both the common law definition of employee and the extended definition; the advice must be professional advice from the engaging entity’s in-house counsel or an appropriately qualified third party, such as a solicitor or tax professional, an administrative body or client-specific written advice from the ATO[7], and
  • the party relying on this Guideline is meeting the correct tax, superannuation and reporting obligations that arise for that classification[8], including voluntarily reporting under TPAR where a business satisfies the turnover threshold test.
  1. For an engaging entity relying on this Guideline, the arrangement will only fall into the very low-risk zone if the entity can demonstrate they have also satisfied the criteria in paragraph 24 of this Guideline for the extended definition of ’employee’ for superannuation purposes. That is:
  • they took steps to ensure the worker understood that they would not be an employee under the extended definition, and
  • the advice obtained addressed the extended definition as well as the broader worker classification issue.

A low cost annual compliance solution

Using the our Doctors Pay Calculator software program we will be rolling out the Tax Safe Harbour logo for individual and practice websites so practitioners can feel confident (safe) in joining a medical centre and not be implicated in a tax audit due to the medical centre’s tax non-compliance. 

Doctors Pay Calculator: is the annual contractor safe harbour tax compliance tool, or risk losing your livelihood. It is a small investment (depending on the size and complexity of your service entity) for less than $70 per month per practitioner after once-off set-up fees.

For peace of mind with the new annual service agreement compliance requirements built into our Doctors Pay Calculator program, we have applied for a tax ruling for practices that use the Doctors Pay Calculator to meet the ATO tax substantiation requirements and tax ruling compliance. 

“Guilt by association” is how the current audit activity appears to be operating. We are witnessing entire livelihoods being irreversibly affected. It is also affecting access to patient care and the cost of care for patients.

Tax audits may result in the cancellation of a practitioner’s ABN, the loss of GST refunds, and tax deductions going back to the previous 5 years. 

This is all preventable.

Recent High Court rulings require each GP practitioner to be “deemed” (seen) as operating their own separate practice. This includes advertising their medical services to the public by way of their own individual website (marketing expenses), and not through the medical centre’s website and related marketing collateral. In addition to the legally-binding service and practice agreements, the GP needs to show they have legitimate business expenses, e.g., annual software licence fees billed in their business name and not the medical centre’s name. 

The Doctors Pay Calculator is a cost-effective e-service agreement and service fee calculator for general bookkeeping, accounting and tax. It is a doctor and healthcare practitioner friendly, payroll and income tax tested compliance solution. 

Depending on how complex your arrangements are, our automated service fee calculations and reporting can be done in minutes, and not hours, for each pay period.

It enables separate banking and provision tax compliance reports, ensuring that there are no sharing, data entry or matching errors that could lead to an audit. 

Start with Self – Education

A common concern is that many trusted traditional lawyers, accountants, or even self-professed medical/healthcare advisers don’t know about these new enforcement programs or in the alternative may only know a portion of the details that need to be addressed; i.e. stationary, letterheads, tax invoices and Proda Accounts and/or Quistclose Accounts. 

To alleviate any misunderstandings, feel free to share the articles below. This should calmly/amicably assist the self-educatation amongst themselves prior to their spending vast sums of money and time on lawyers, accountants and consultants that unfortunately do not have a complete understanding of the “totality” of the problem. 

Do you want to be Tenant Doctor™ Certified?

For more information contact us HERE.

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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