Unpaid Trust Distributions: ATO's Rulings vs. Recent AAT Decision and What It Means for 2023
It has long been the ATO’s practice to treat a trust’s unpaid present entitlements (“UPE”) to a company as a loan for th...
The Queensland Revenue Office released their public ruling on the 22nd of December regarding payroll tax on medical centres in light of the recent Victoria and NSW cases. The ruling explains the government's interpretation of the relevant contract provisions contained in the Payroll Tax Act 1971 (QLD).
Amnesty
The ruling was originally to apply from its release date, however, the QLD Government released a payroll tax amnesty for contracted general practitioners (GPs) on the 8th February 2023. The amnesty will apply to GPs up to 30 June 2025 and for the previous 5 years (i.e. 2018-25). The amnesty is limited to payments made to GPs and is not available to:
In order for the amnesty to apply, medical practices will have to make an application. Full details on applying for the amnesty are yet to be released. An expression of interest has been released which is required to be completed by the 30th of June 2023 to be eligible.
The expression of interest form can be found here.
Public Ruling PTAQ000.6.1 Relevant contracts—medical centres
In the ruling, the commissioner accepts the outcome from the Thomas & Naaz Pty Ltd case and the Optical Superstore case, where the payments made to medical practitioners from the medical centre came within the relevant contractor provisions, resulting in the payments being taxable wages for payroll tax purposes.
Thomas & Naaz Pty Ltd & the Optical Superstore
The facts of these cases are typical to the majority of how medical centres operate, being:
The courts concluded that without the practitioners providing their services to the patients, the medical centres would not be able to operate their business. As a consequence, the practitioners were not only providing their services to the patients but also to the medical centre.
Relevant Contract
The ruling states that the relevant contract provisions can apply:
If a medical centre engages a practitioner to practice from its medical centre, or holds out to the public that it provides patients with access to medical services of a practitioner, it is likely the relevant contract provisions will apply to the contract with the practitioner unless an exception (i.e. exemption) applies.
The contract between the practitioner and the medical practice will be a relevant contract where the contract provides that the practitioner is engaged to supply work-related services to the medical centre by servicing patients for or on behalf of the medical centre. Whether the terms are expressed or implied.
Exemptions
The exemptions to the relevant contractor provisions include:
The exemption may be available where the commissioner is satisfied that the practitioner who provides the services under the contract ordinarily performs services of that kind to the public generally.
The provision of services to patients on behalf of a single medical centre would not qualify for this exemption. The practitioner must provide services of the same kind to other medical centres or hospitals (who are not members of the same group for payroll tax purposes) to qualify for the exemption.
Amount of Wages Payment
The taxable wages for the medical centre per the ruling are the amounts paid by the medical centre to the practitioner, where the payment is in relation to work performed under the contract. When the amount the practitioner is entitled to is recognised, and the money is paid or payable to the practitioner, it will constitute taxable wages.
The amount of the payment is not affected by whether the money is paid from amounts received by the medical centre on behalf of the practitioner, even where the practitioner is beneficially entitled to the money.
Restructure
Medical centres may need to consider restructuring the way they conduct their business if they do not want to recoup the cost by increasing their fees.
We're here to help
Please reach out to our Ulton Tax Advisory Team if you wish to discuss your situation.
Resources
QLD Government - Payroll tax amnesty for contracted general practitioners
Public Ruling PTAQ000.6.1 Relevant contracts—medical centres
https://www.treasury.qld.gov.au/resource/ptaq000-6/#heading--29
Thomas & Naaz Pty Ltd vs Chief Commissioner of State Revenue (2021) NSWCATAD 259
Commissioner of state Revenue vs The Optical Superstore (2019) VSCA 197
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