Payroll Tax Compliance for Healthcare
Payroll tax is a state-based tax levied on wages paid by employers. For medical practices, determining payroll tax liability can be complex due to the various engagement models used for medical practitioners, including tenant doctor arrangements, contractor agreements, and employment.
Increased Audit Activity
State Revenue Offices have significantly increased their audit focus on medical practices. Recent cases have resulted in assessments exceeding $250,000 plus penalties and interest.
Key Compliance Factors
Relevant Contracts
Payments under employment-like contracts may attract payroll tax. The substance of the relationship, not just its label, determines liability.
Contractor Provisions
Many state payroll tax laws extend to payments for services performed under contractor arrangements, particularly where there is a significant degree of control or integration.
Grouping Provisions
Related entities may be grouped for payroll tax purposes, potentially affecting threshold calculations and liability.
State-by-State Thresholds (2025-26)
| State/Territory | Monthly Threshold | Annual Threshold | Rate |
|---|---|---|---|
| NSW | $100,000 | $1,200,000 | 5.45% |
| VIC | $83,333 | $1,000,000 | 4.85% (regional 1.2125%) |
| QLD | $108,333 | $1,300,000 | 4.75% (4.95% above $6.5m) |
| WA | $83,333 | $1,000,000 | 5.5% (6% above $100m) |
| SA | $125,000 | $1,500,000 | 0% to 4.95% |
Note: Thresholds and rates may change. Always verify current figures with your state revenue office.
Reducing Payroll Tax Risk
- Structure Review: Ensure your practice structure genuinely reflects independent contractor or tenant doctor relationships.
- Documentation: Maintain clear, comprehensive agreements that reflect the true nature of the relationship.
- Operational Consistency: Ensure day-to-day operations align with contractual arrangements.
- Regular Review: Periodically review arrangements to ensure ongoing compliance with evolving legislation and case law.
- Professional Advice: Seek experienced legal and accounting advice before establishing or modifying arrangements.
Concerned About Payroll Tax Compliance?
Our team can review your current arrangements and provide guidance on structuring your practice to minimise payroll tax risk while maintaining compliance.