The Victorian Labor government is facing calls to eliminate a new payroll tax on general practitioners (GPs) after doctors’ groups warned that it could result in higher fees for patients or widespread closures of medical clinics. The State Revenue Office (SRO) of Victoria ruled on August 11 that medical clinics in the state would be subject to a new retroactive payroll tax. As a result, one practice owner in Victoria has been forced to close two clinics after receiving a bill of $800,000 (US$519,000), according to a joint statement from the Royal Australian College of GPs (RACGP), the Australian Medical Association Victoria (AMA Victoria), and the Australian GP Alliance (AGPA). The practice owner stated, “I have to close down. It’s going to happen not only to me. Unless there’s an exemption, we’ll see a catastrophic closure of medical centres—more than half will be wiped out.”
Currently, medical clinics pay payroll tax for their employees, including receptionists, trainee GPs, and nurses. However, the tax has not been applied to GPs because most doctors are not employees but instead lease rooms from a practice owner and work under independent agreements. Shadow Health Minister Georgie Crozier warned that the new tax would result in higher patient fees, fewer bulk billing clinics, and increased pressure on hospitals and emergency health services. She criticized the government, stating, “This is a desperate cash grab by a government that is broke. It will have huge ramifications for Victoria’s beleaguered health system and leave Victorians without vital health services.”
RACGP Victoria Chair Dr. Anita Munoz called on Premier Daniel Andrews to intervene and stated that GP practices operate on thin margins. She warned that without intervention, more practices would be forced to close or raise fees, leading to more patients seeking treatment at overcrowded emergency departments and increased spending on hospitals. This move comes as the state government announced that it would not provide payroll tax relief for businesses in the next financial year, prioritizing health spending and a budget surplus.
In New South Wales (NSW), the government has also introduced a similar tax ruling, along with South Australia and Queensland. However, the NSW government has paused its payroll tax audits for 12 months and committed to halting any penalties and interest on outstanding payroll tax debts. Despite this temporary reprieve, practice owners Mathew Simpson and Dr. Tonya Coren stated that it did not solve the issue. The couple was recently presented with a $450,000 retrospective tax bill and argued that the tax bill was another setback as their clinic was still recovering from the pandemic and had been damaged by severe flooding.
The governments of South Australia and Queensland have announced amnesties for GP clinics following negotiations with the RACGP. This decision came after the Supreme Court of the NSW Court of Appeal rejected an attempt to appeal the Thomas and Naan v NSW Chief Commissioner of State Revenue ruling, which determined that tenant GPs counted as employees for payroll tax purposes.
According to a poll conducted by newsGP, only 3% of general practices across Australia would be able to absorb the costs if GPs were considered employees for payroll tax purposes. Meanwhile, 78% would be forced to raise their patient fees. RACGP President Dr. Nicole Higgins criticized the state governments for prioritizing their own tax revenues at the expense of general practice funding. She warned that patients would suffer the most if they lost access to local GPs and essential care.
Dr. Higgins revealed that her practice in Mackay, Queensland, would need to raise its fees and end bulk billing in order to cover the new tax. She explained, “For example, we will lose the bulk billing incentive if we stop bulk billing our children, so we need to be able to compensate for that and then add the equivalent of probably 5 percent on top of our fee to account for the payroll tax.”