Executive Summary
A Tenant Doctor™ arrangement is a model in which a medical practitioner conducts their own independent practice from premises occupied by a Facilities Service Provider. The Facilities Service Provider supplies administrative services. The practitioner is not an employee or contractor of that entity. This guide outlines how those arrangements are documented, what characterisation turns on, and why wording in a contract is not enough on its own. We are exclusively licensed to use the Tenant Doctor™ trademark in legal documents within Australia.
What You'll Learn
- •Key Requirements - The essential elements for establishing a compliant arrangement
- •Implementation Guide - Practical steps for structuring agreements and operations
- •Risk Mitigation - Strategies to protect the Facilities Service Provider entity from common legal and tax pitfalls
- •Characterisation - Why liability turns on the facts of the arrangement and the legislation and rulings in the relevant State or Territory
What is a Tenant Doctor?
A Tenant Doctor™ arrangement is a model in which a medical practitioner conducts their own independent practice from premises occupied by a Facilities Service Provider. The Facilities Service Provider supplies administrative services. The practitioner is not an employee or contractor of that entity. The practitioner pays for premises and administrative support under a service agreement.
This framework has gained significant importance in the context of payroll tax compliance. Under a typical arrangement, practitioners pay a service fee for the use of facilities and support, often structured as a percentage of their gross billings (e.g., a 65/35 split, where the practitioner retains the larger portion). The success of this model hinges on whether the arrangement is, in substance and form, a genuine independent business relationship.
Characterisation, not labels
Whether a Facilities Service Provider is liable for payroll tax turns on the facts of the arrangement and the legislation and rulings in the relevant State or Territory. Wording in a contract is not enough on its own.
Where the arrangement is genuine and correctly documented, the Facilities Service Provider entity may be deemed not eligible for payroll tax on amounts paid to independent practitioners. That outcome is fact-specific. It is not automatic. We draft and review the documents. We do not guarantee an assessment outcome.
Key Features of Compliant Tenant Doctor Arrangements
1. Operational Independence
Practitioners must maintain complete operational independence. This includes having their own branding, patient records, and clinical autonomy. They are neither employees nor contractors of the service entity but operate as independent business owners.
The case of Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue highlighted that excessive control by a practice over its practitioners was a critical factor that resulted in significant payroll tax liabilities.
2. The Service Entity Relationship
The service entity must function strictly as a landlord and administrative facilitator, not an employer. This separation was reinforced in Commissioner of State Revenue v Optical Superstore Pty Ltd, where financial arrangements too closely resembling employment triggered payroll tax obligations.
The service entity provides non-clinical support, such as reception, IT, and premises management, while maintaining clear boundaries from the practitioner's clinical practice.
3. Taxation and Contractual Clarity
Where the arrangement is genuine and correctly documented, the Facilities Service Provider entity may be deemed not eligible for payroll tax on amounts paid to independent practitioners. That outcome is fact-specific. It is not automatic. A correctly documented Tenant Doctor™ arrangement can separate the practitioner's clinical practice from the Facilities Service Provider's administrative services. That can support a payroll tax non-eligibility analysis. It does not remove clinical responsibility from the practitioner, and it does not guarantee any payroll tax outcome. Clear contracts still matter, but wording alone is not enough.
4. Privacy Compliance
Under the Privacy Act 1988 (Cth), independent practitioners operating as Tenant Doctors are classified as APP (Australian Privacy Principles) Entities. This means they directly manage patient data and bear full responsibility for privacy compliance, including data security and patient consent.
Critical Court Cases Shaping the Model
Several landmark cases have shaped the legal landscape for these arrangements:
1. Hollis v Vabu Pty Ltd [2001]
The Control Test: High Court Authority
This High Court decision established that the degree of control exercised over how work is performed is a crucial factor in distinguishing independent contractors from employees.
2. Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259
The Modern Warning: Recent NSW Decision
This case serves as a stark warning about misclassification. The tribunal found that excessive control over practitioners, including mandating working hours, resulted in deemed employment relationships and significant payroll tax liabilities.
3. Commissioner of State Revenue (Vic) v The Optical Superstore Pty Ltd [2019] VSCA 197
The Financial Arrangements Test: Victorian Authority
This case demonstrated that financial arrangements, such as guaranteed minimum payments, can override contractual labels and trigger payroll tax obligations if they resemble wages.
4. CFMMEU v Personnel Contracting & ZG Operations v Jamsek [2022]
The Primacy of Written Contracts
These pivotal High Court decisions established the primacy of the written contract. Where a comprehensive agreement is in place, its terms are decisive in characterising the relationship, provided it is not a sham.
Why Payroll Tax Compliance Matters
The distinction between a properly structured Tenant Doctor arrangement and other models carries significant financial implications. State revenue office audits have intensified, and misclassification can result in:
- • Retrospective payroll tax assessments spanning up to five years
- • Penalties of up to 75% of the unpaid tax
- • Interest charges compounding daily
- • Potential personal liability for directors under certain circumstances
The Thomas and Naaz case demonstrates these are not theoretical risks; practices have faced assessments exceeding $250,000 in base tax alone.
Best Practices for Implementation
Best practices for implementing a compliant Tenant Doctor model include the following critical elements:
1. Draft Clear and Comprehensive Agreements
Service agreements must explicitly define the tenant-like relationship and avoid employment terminology. Following Hollis v Vabu, even using terms like 'contractor' can be ambiguous if the substance of the relationship reflects employment.
2. Maintain Separate Branding and Identity
Tenant Doctors should maintain distinct professional identities, including separate websites, business cards, and patient communication materials, providing tangible evidence of independence.
3. Structure Appropriate Fee Arrangements
Service fees should be based on a percentage of gross billings, not fixed amounts. The principles from Optical Superstore show that guaranteed minimum payments increase the risk of a deemed employment relationship.
4. Ensure Operational Practices Reflect Independence
Administrative staff must act as facilitators, not supervisors. Practices must avoid mandating working hours, directing clinical protocols, or controlling patient allocation.
Implementation Checklist
A comprehensive implementation framework should ensure:
Conclusion
The Tenant Doctor model offers a legitimate and effective structure for medical practitioners seeking operational autonomy. However, its benefits depend entirely on proper implementation and ongoing compliance with legal requirements. Success requires more than adopting a label; it demands careful structuring, clear documentation, and consistent operational practices that genuinely reflect practitioner independence. Given the significant financial and legal risks of misclassification, professional advice is essential.
Frequently Asked Questions
What is a tenant doctor arrangement?
A Tenant Doctor™ arrangement is a model in which a medical practitioner conducts their own independent practice from premises occupied by a Facilities Service Provider. The practitioner pays for premises and administrative support under a service agreement and is not an employee or contractor of that entity.
How does a tenant doctor differ from a contractor?
A key distinction is the level of integration and independence. A true tenant doctor should operate a genuinely independent business, potentially with the ability to work from multiple locations, control their own patient base, and use separate banking.
Are tenant doctor arrangements payroll tax compliant?
When properly structured, a Tenant Doctor™ arrangement is directed at the Facilities Service Provider being deemed not eligible for payroll tax. We draft and review the documents. We do not guarantee an assessment outcome. The result turns on the facts and the legislation and rulings in the relevant State or Territory.
Need specialist legal advice?
If you are unsure about compliance, seek specialist legal advice. Contact Hamilton Bailey for support with Tenant Doctor™ arrangements. We draft and review the documents. We do not guarantee an assessment outcome.
Book Appointment NowThis article provides general guidance based on current legal and regulatory frameworks as of June 2025. Individual circumstances require specific professional advice.