With the recent announcement of payroll tax audits on corporates, corporates and practitioners may face a major issue with payroll and income tax see 

Corporates prepare to fight payroll tax in court, The Medical Republic, 22nd February  2024

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

This issue has become even more urgent since the ATO’s crackdown in December 2023 on employee contractor arrangements. If the ABN or practitioner is cancelled, there could be consequences such as the loss of service fee tax deductions and GST refunds, potentially resulting in significant penalties.

Medical Centres, in particular, face the risk of Fair Work, income, and payroll tax audits. Failure to pay deemed “employee” liabilities for full-time GPs over a five-year period can lead to assessments of up to $250,000 this excludes penalties that can be up to double this amount.

Your contractual agreements and the way you operate are important.

Source: What do brothels and medical and healthcare practices have in common: ATO contractor rules!

If you are characterised as operating an “Administrative Business” i.e. a genuine service trust “Tenant DoctorTM” arrangement, and not a “Medical Centre” business, you may find you no longer have to be as concerned about State and Federal “Medical Centre”  Income tax rulings and laws. Our position has been confirmed by KPMG on the 3rd October 2023 see: What Queensland’s updated payroll tax ruling means for medical centres. 

I apologise for this analogy, no offense is intended, however, this is the only way I think I make this point clear: this is like biologically comparing a man (Administrative Business) to a woman (“Medical Centre” Business). It is clear their needs are different. A medical practitioner (most likely) does not need to be concerned with a man who does not need a pap smear.  

The same applies at law, how you publicly identify yourself will significantly influence what laws apply to you. 

If you identify as an “Administrative Business” there are different and simpler Fair Work, income, and payroll tax rules you need to abide by, and you will be free of the “Medical Centre” payroll tax ruling or, in the alternative, a “pap smear”. 

The ATO’s Service Entity Ruling that is based on the 1978 Phillips case is how traditional group “Administrative Business” practices were established. Notably the each payroll tax office ruling refers to this arrangement but not the Phillips case. This may explain why many legal and accounting advisers miss the plain authority that sets these guidelines. 

Traditionally, service entities were established to prevent an innocent independent sole trader practitioner from being collectively sued for malpractice by another practitioner, who are both sharing their back office expenses such as staff, premises, and IT infrastructure. Each would separately brand and market their own practice with separate ABN’s on separate letterheads and tax invoices. No patient would think they were part of the same organisation. 

Owners (sometimes referred to as associates) typically achieve this via a service entity arrangement. These are commonly referred to as service entities, usually a trust or company. 

For taxation and legal purposes, only a medical or healthcare “practice” registered with AHPRA can provide a clinical service. For no further payroll or income tax liability to apply, a genuine service entity can only provide administrative services to the public and exclusively to tenant doctors and no one else. It should not  directly or indirectly employ or contract practitioners to provide clinical services to the public, such as wound care. using the same publicly available and traceable website, business name and ABN. 

Accordingly, service entities should not employ registrars or locums and pay them using the service entity’s bank account or ABN. 

For example, QLD AHPRA states “Subdivision 4 Advertising

133 Advertising

(1) A person must not advertise a regulated health service, or a
business that provides a regulated health service, in a way
(a) is false, misleading or deceptive is false, misleading or deceptive or is likely to be
misleading or deceptive;” 

Back in 2000, the Australian Medical Association (AMA) worked hard to define the concept of an independent contractor and created a corporatisation kit for medical practitioners. The kit specifically discussed contractual arrangements with corporations.

Therefore, it is not possible to refer to a genuine service entity or “tenant doctor” arrangement activities as a “practice”. This would be outside of the purpose of the entity and its legal scope, resulting in a technical AHPRA breach.

The AMA’s position on Corporate “Independent Contractors” highlights why there is a payroll and or income tax problem in Australia. They do not clearly understand the genesis and evolution of an “Administrative Business” established by an independent group of solo practitioners, that is subsequently bought by a Corporate that is change into a “Medical Business” because they only purchase the Clinical services related to the entity and not the administration business as a whole. 

“Your contractual status in relation to the Corporate, as a general

principle, will be either that of independent contractor or employee. Both

may appear under different guises. For example, an independent

contractor to the Corporate may be either a tenant doctor or a practice


This is a very complex legal question and the law is currently in a state

of flux regarding the proper tests for determining independent contractor

or employee status. Nevertheless, the ramifications of whether one is an

independent contractor or employee are significant and your legal

adviser should be specifically consulted on this issue. 

The overwhelming majority of Corporate contracts will define your status as

that of independent contractor.

Source: Corporatisation Of General Practice Decision Support Kit For Doctors, Page 22  

Significant Contractor Laws concerning Commercial and Taxation have been enforced since 2001

Words Matter:“Tenant Doctor” 


The initial recommendation we propose is to avoid using the term “Contractor,” irrespective of whether the individuals are classified as “Independent” or “Dependent” Contractors. This action increases the likelihood of attracting regulatory scrutiny. For further details, refer to: Refrain from employing the “C” Contractor terminology throughout your organisation including contracts, manuals and how you refer to your practitioners!: Don’t use the “C” Contractor Word!

We recommend the term “Tenant Doctor”. It refers for example, to a medical practitioner who operates within a medical practice under a tenant-like arrangement. This can involve the practitioner renting space and support staff, including administration and  nurses, from a service entity and paying a service fee based on their gross billings, often on a fee-split basis. The fee-split arrangement is a common financial model where the tenant doctor pays a percentage of their gross billings to the medical practice service entity. For example, a common fee-split is 65/40, meaning the tenant doctor pays 40% of their gross receipts to the service entity.

In summary, a “Tenant Doctor” is a medical practitioner such as a GP who operates within a medical practice under a financial arrangement that resembles an exclusive tenancy with a service entity, paying fees to the service entity based  on their billings, rather than being an employee or independent contractor of a “medical business”. 

There is urgent need to ensure you have named your business correctly if it is really not a “Medical Centre” or practice. Secondly that each of your practitioners has an independent a separate website see: Why every GP needs their own website. For a legally reviewed, cost effective website visit pages.health.

The most important one was the High Court decision Hollis v Vabu, where an independent contractor was not held liable for a medical costs for a knee injury when a cyclist courier hit a pedestrian. See: For taxation and medico-legal reasons, advertising your practice as a “Medical Centre” or “Clinic” or “Practice” may be a bad idea.  

This is why we keep saying do not call yourself a “Medical Centre”  or practice if you are really not one see : For taxation and medico-legal reasons, advertising your practice as a “Medical Centre” or “Clinic” or “Practice” may be a bad idea.

There are over 21 key areas of law “Medical Centres” and practices need to abide by see: The regulatory history of independent contractor law affects medical and healthcare practices.

The significance of the name “Tenant Doctor” name is multifaceted, reflecting its relevance in the context of Australian medical practice, legal considerations, and privacy obligations. The term “Tenant Doctor” is used to describe a specific arrangement within medical practices in Australia, where doctors operate independently from the service entity that their practice operates from, akin to a tenant in a serviced office arrangement. 

This model has implications for payroll tax, privacy policies, and the legal and operational framework within which these medical professionals work.

Legal and Tax Implications

The discussion around “Tenant Doctors” is particularly relevant in light of recent developments in payroll tax legislation and its application to medical practices.

Traditionally, doctors working from medical centres have been considered independent contractors. However, with evolving legal interpretations and the application of payroll tax to certain contracts, the term “Tenant Doctor” has emerged to describe these arrangements more accurately 3

This shift is significant because it affects how service entities structure agreements with doctors to mitigate potential payroll tax liabilities. The distinction helps clarify that while doctors may not be employees in the traditional sense, their contractual arrangements could still attract payroll tax under certain conditions 3

Privacy and Compliance 

From a privacy perspective, “Tenant Doctors” are considered “APP Entities” under the Australian Privacy Act, meaning they are responsible for their own privacy obligations. This includes ensuring compliance with the Australian Privacy Principles (APPs), particularly in managing sensitive patient information 2

The need for tenant doctors to have their own privacy policies is emphasised, highlighting the importance of transparency, consistency, and control over privacy practices. This is especially pertinent as tenant doctors often work across multiple practices and may have their own staff or contractors, necessitating clear privacy guidelines that extend to all aspects of their operation 2

Operational Independence

The term also underscores the operational independence of tenant doctors from the medical practices where they work. This model allows for flexibility but also requires tenant doctors to be more proactive in managing their legal, tax, and privacy responsibilities. The arrangement can offer benefits such as autonomy over one’s practice and the potential to mitigate legal risks for the medical practice. However, it also places the onus on tenant doctors to ensure they are compliant with relevant laws and regulations, including those related to privacy and payroll tax 2,3

In summary, the mention of “Tenant Doctor” highlights the evolving landscape of medical practice arrangements in Australia. 

It underscores the need for these medical professionals to navigate legal, tax, and privacy considerations carefully, reflecting broader trends in the healthcare industry towards more flexible and independent modes of operation.

Where to from here?

Poor advice or implementation of advice is to blame

It is possible to comply with taxes. Legitimate and ethical practices have been established to avoid negative consequences in terms of Fair Work, Payroll, and Income taxes. However, it is like investing in solar panels, there is immediate and long term payoff if you set it up correctly.

Remember that the investigators and ultimately the courts will establish the facts using the evidence you provide, regardless of your level of cooperation. Regrettably, the high occurrence of non-compliance with payroll taxes is a result of well-crafted contracts that lack full implementation in practice.

Respectfully, a number of lawyers and tick-and-flick accountants simply provide templated advice without actually gathering evidence (which adds to fees but provides peace of mind) when reviewing your business model, financial statements, tax returns, tax invoices, accounting, and business systems. If they have not, instantly you know you have a problem with your agreements.

This is the main reason for non-compliance. 

The courts interpret your agreements based on the law and the concrete evidence you provide. Many agreements are created without sufficient written evidence from a reliable third party to support their claims.

A lack of comprehensive education among legal and financial professionals, regardless of their impressive profiles, has resulted in this widespread issue. This continues to be a challenge.

A case in point is, around the nation, a recent payroll tax amnesty in one state alone, over half of the practices within the state are not compliant

The unnecessary need for separate (direct) practitioner banking is another example where legal and tax advisers need more education.  

We believe this solution does not work from a practical or compliance perspective; see Payroll Tax Win:Direct Banking

At a recent GP conference, it was reported that many medical centres urged practitioners to sign contracts, establish separate bank accounts, and grant practice managers access for monitoring.

In the last 12 months, there appear to be a variety of intricate and perplexingly fragmented solutions entering the market that are not in accordance with existing, cost-effective, and comprehensive payroll and income tax tested solutions that have been in place since 2001.

Before spending valuable time and money, It is crucial to inquire if any of these remedies are endorsed in writing by a knowledgeable medical and health tax agent and solicitor.

A number of proposed solutions are causing significant cash flow, reconciliation fraud, staff morale, recruitment, and retention problems see: Payroll Tax: The Flow of Separate “Banking” Funds Myth Busted?!

Educate yourself for free and start asking the right questions 

You do not need to come to us.

For a FREE guide and webinar on what you have to consider, why and what to do next, this article may assist you: Medical and healthcare payroll tax is killing bulk billing, where to from here? 

If you structure it correctly, you can avoid charging a “Sick Tax” and keep bulk billing without any employment compliance concerns.

If you’re a practitioner, make sure to move your practice to a compliant service facility provider promptly.

To fast track any concerns, make a free 30 minute appointment for more  information. 

Stay hungry, humble, curious and focused!

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 *