Payroll Tax update

23 August 2023

The Victorian State Revenue Office on Friday August 11 2023 released further guidance on its position regarding the application of payroll tax to medical centres in Victoria. The guidance was delivered to offer clarity to Victorian doctors on the SRO’s long held stance on payroll tax relating to medical centres. It was also designed to align the position of the revenue offices in each state in Australia.

The imposition of payroll tax on medical centres in Australia has been of great concern and we have been closely following the SRO’s position to ensure the medical community is best placed to defend itself against additional taxes.

Perhaps we should preface this discussion by emphasising that there are still important areas that have not been fully clarified by the SRO. Despite this however we feel confident in the “best practice” for any doctors currently operating or looking to create new medical centres in Australia. At this stage, we suggest that the best strategy for doctors is to understand the nuances of the SRO’s guidance and build up your defences by ensuring your agreements and structures possess the least amount of risk of a payroll tax liability.


In order to minimise the likelihood of a payroll tax liability as a practitioner, first and foremost you should be aware of the three specified exemptions offered to you by the SRO:

  1. As a practitioner, you will be exempt where you provide services to the public generally. To qualify for the exemption, you must provide services of the same kind to multiple medical centres or hospitals. It is important to be aware, the SRO suggests that where you work on a full-time basis at a medical centre but also offers a small amount of after hours/on call services, you are unlikely to qualify for the exemption (the SRO does not quantify what an appropriate amount of hours may be). In addition, it is not fully clear yet whether an exemption will apply in a situation where you provide private practice medical services to one medical centre and also operate as an employed practitioner in a public hospital.
  2. You will be exempt where you provide medical services to a practice for no more than 90 days of a financial year. Be aware that any amount of work performed on one calendar day will count towards your 90 days (regardless of whether the work performed is say 1 hour or 7 hours).
  3. Lastly, as a practitioner you will be exempt if your medical services are performed by two or more persons. This exemption applies if the services the medical centre requires you to complete is performed by you, the practitioner, and at least one other person who you employ, or who provides to you (eg a specialist nurse employed by the doctor). To qualify for the exemption, the additional person/s cannot merely provide general business-related services (eg tax, accounting or business advisory services).

Flow of payments

There has been significant debate around which payments relating to a medical centre would be likely caught for payroll tax under various arrangements. On this, we can say with some certainty that where a medical centre collects patient fees on behalf of a doctor and subsequently pays those patient fees to the doctor less a standard service fee, these payments will incur a payroll tax liability. In addition, structures where a medical centre collects patient fees on behalf of a doctor, subsequently pays 100% of those patient fees to the doctor and then later collects a separate service fee payment from the doctor, will also be eligible for payroll tax. Finally, it is our understanding that there is no protection from these scenarios where a corporate entity may be used by the doctor - payroll tax will still apply.

With that in mind however, the SRO has been silent on arrangements where doctors directly collect patient fees from their patients. In this scenario, the doctor generally subsequently pays a service fee to the medical centre based on what they are invoiced. The medical centre would at no point however receive patient fees itself. Whilst we can not advocate with 100% certainty that under this structure, the medical centre will be ineligible for any payroll tax, we can say that this structure offers you the greatest defence at the moment.

Additional formats

Lastly, there are a number of additional factors that you should be aware of when engaging with medical centres to ensure you retain your independence. These include:

  1. Being conscious of how you are represented on the medical centre’s website (you should not be represented a member of the medical centre, in sections such as ‘our team’)
  2. Ensure agreements held with the medical centre are not too restrictive, specifically with relation to:
    1. Restraints of trade
    2. Requirements for a certain amount of hours per week, or set work times
    3. Requirements to apply for leave
    4. Responsibilities within the medical centre
  3. Ensure the medical centre does not include any patient fees in his financial statements. The income of the medical centre should solely be the service fees it receives.

I hope this general advice provides some clarity to our Victorian doctors on the issues you should turn their minds to when it comes to payroll tax. As you can see there are a myriad of factors that the SRO will consider when evaluating whether payroll tax will apply to a medical centre. If you are a doctor in Victoria who either runs a medical centre or practices from a medical centre, we strongly recommend you get in touch with your taxation advisor as early as possible to ensure you understand how this guidance applies to you.

Tony Bongiorno
Director – Bongiorno Group

For further information or to book a complimentary meeting, please phone 03 9863 3111 or email

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