Changes to payroll tax - implications for medical practices in Victoria

From 1 July 2025, a change to the Payroll Tax Act 2007 (Vic) will provide an exemption for ordinary and multi-disciplinary GP medical businesses in Victoria from paying payroll tax in connection with wages or payments paid for work performed in relation to bulk-billed, fully-funded items. Practices will need to review their current payroll tax obligations, and to determine whether their payments to doctors qualify for the exemption under the new clause.

‘Relevant contracts’

Under the common law, if a practitioner is engaged as an employee, their wages are subject to payroll tax.

If a practitioner is not engaged as an employee under the common law definition, they may still be deemed an employee for the purposes of the Payroll Tax Act 2007 (Vic) (Act), given the broad definition of a ‘relevant contract’ under the Act. In the event that these practitioners are deemed employees, any payments made by the practice to the practitioner (including the doctor’s percentage share of patient fees and Medicare rebates) constitute wages under the extended definition, which are subject to payroll tax.

In Commissioner of State Revenue (Vic) v The Optical Superstore Pty Ltd (2019) VSCA 197, the Victorian Court of Appeal observed that the term ‘relevant contract’ under the Act can apply to arrangements between medical practices and practitioners, in circumstances where the practitioner provides services to both the medical practice and to patients. This authority adopts a broad view of what constitutes a ‘relevant contract’ for work.

Changes from 1 July 2025 in Victoria

As of 1 July 2025, new clause 19(B)(1) of the Act will provide an exemption for ordinary and multi-disciplinary GP medical businesses from paying payroll tax in connection with wages paid to a relevant GP, for work performed in relation to fully-funded items. Fully-funded items include Medicare benefits paid or payable, Medicare incentive payments and the reasonable cost of any consumable used to administer a vaccine (e.g. vaccines, dressing and needles).

The exemption is intended to support general practice medical businesses in Victoria which bulk-bill their services. That is, the exemption only applies to practices that are liable, or deemed to be liable, for payment of payroll tax.

The payroll tax exemption does not apply to privately billed fees or to non-GP practices, such as hospitals; the exemption only applies to wages or payments paid in relation to bulk-billed, fully-funded items.

New clause 19B(2) of the Act provides a formula for calculating the exempt wages.

What does this mean for you?

Practices should review their current structure and contracts to ensure that they are compliant with payroll tax obligations, and to carefully determine whether their payments to doctors qualify for the exemption under clause 19(B)(1) of the Act.

We also recommend that practices seek appropriate accounting advice on these changes.

For further information, please contact our authors.