‘This is the nail in the coffin’: GPs sound the alarm over $20 fee hike following tax ruling

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Patients are set to pay up to $20 more to see a GP after a two-state payroll tax ruling that doctors warn will “kill off bulk-billing” and that the federal health minister has labelled concerning.

In a move doctors described as a tax grab, the Victorian and NSW state revenue offices published rulings last Friday that confirmed for the first time that many independent GPs working in medical centres would be subject to payroll tax.

Dr Charlotte Hespe, who runs a GP clinic in Sydney’s inner west, has been forced to hike doctor consultation fees in response to state government tax changes, in lieu of closing her doors.Credit: Edwina Pickles

Practices pay payroll tax for reception staff, nurses and employee doctors, but it had been widely accepted across the industry that independent GPs, who constitute about 90 per cent of the GP workforce, are not subject to payroll tax.

That was because most GPs are not employees: they lease rooms from a practice owner and usually work under independent agreements.

Three peak groups for doctors – the Royal Australian College of General Practitioners (RACGP), the Australian Medical Association and the Australian GP Alliance – are urging NSW Premier Chris Minns and Victorian Premier Daniel Andrews to abandon the changes, saying they will lead to practices closing and push up the cost of seeing a doctor, making it unaffordable.

The Victorian and NSW governments both insist the ruling does not represent a change, but GPs, doctors groups and accountants disagree.

Federal Health Minister Mark Butler has raised concerns about the payroll tax changes.Credit: Alex Ellinghausen

“State governments are ripping funding from general practice to boost their own tax revenues,” said RACGP president Dr Nicole Higgins.

“It is the patients who will be hurt most when they lose their local GPs and access to essential care.”

The State Revenue Office of Victoria is trying to recoup $800,000 in payroll tax from several clinics, while one practice in regional NSW was recently given 21 days to pay a $450,000 retrospective tax bill. The RACGP says these practices will most likely have to close.

It comes at a time when GPs are reporting that patients are delaying or avoiding GP appointments due to the cost-of-living crisis. The average out-of-pocket fee is $40.10 in Victoria and $41.06 in NSW, according to data from online healthcare directory Cleanbill.

Federal Health Minister Mark Butler raised concerns the “record $6.1 billion investment in strengthening Medicare could be impacted by new payroll tax obligations being imposed by state governments on general practice at the same time”.

“Payroll tax is ultimately a matter for the states to manage, and I encourage them to consider the feedback from GPs,” he said.

Professor Charlotte Hespe, who runs a practice in Glebe in Sydney’s inner west and is chair of RACGP NSW, said her practice has already started paying payroll tax for GP contractors. It has increased its fees by $20 to cover this cost, along with rising wages and utility bills.

“This is the nail in the coffin,” she said. “It will make accessing primary care inaccessible to many people on a standard wage, let alone those who are really poor.”

“It will kill off bulk-billing,” warns Melbourne GP Rodney Aziz.Credit: Tamara Voninski

Dr Rodney Aziz, a GP from Melbourne’s inner east who owns practices across Victoria, said most clinics would have to increase out-of-pocket fees by between $15 to $20 to cover the tax.

“It is a devastating blow for the entire industry,” he said.

He said no clinic would be able to absorb the payroll tax for GPs – which is 4.85 per cent for Melbourne businesses and 5.45 per cent for Sydney businesses – without raising their fees.

“It will kill off bulk-billing. It’s a massive cost for clinics that operate on very thin margins.”

The peak bodies have asked the governments to agree to no retrospective payroll tax obligations for GP contractors, and a three-year amnesty from payroll tax obligations for GP contractors, to allow the federal government to finalise its health funding reforms. The ACT, South Australian and Queensland governments have agreed to these allowances, in whole or in part. The West Australian government has said that GPs are exempt from payroll tax.

A spokesperson for the NSW government said they were aware of concerns raised within the medical industry and would continue to liaise with the peak bodies, but that Revenue NSW was “not engaged in a targeted audit campaign directed at general practices”.

“Revenue NSW is not offering any payroll tax amnesties to general practices or other participants in the medical industry and accordingly there is no guarantee that particular practices will not be the subject of compliance activity in the next two years,” they said.

“A revenue ruling was issued by Revenue NSW on Friday 11 August. This is not a change in policy, but provides practical guidance on the application of payroll tax to medical centres.”

A Victorian government spokesman said payroll tax was assessed the same way across industries and professions. “There has been no change to the law or the application of the tax in relation to GPs or medical centres,” he said.

Australian Medical Association Victorian president Dr Jill Tomlinson.Credit: Penny Stephens

Australian Medical Association Victorian president Dr Jill Tomlinson said the state taxes would “completely wipe out” the federal government’s triple bulk billing incentive, which is due to come into effect in November for GPs who don’t charge out-of-pocket costs for children, concession cardholders and pensioners.

“This is a tax on Medicare that will increase the cost of seeing a GP and threaten the viability of going to the GP.”

Belinda Hudson, a director at accounting firm William Buck, said it was common for clinics to collect patient fees on behalf of GPs, retain a component for administration costs and then pass on the remainder to doctors.

“It was generally accepted that these payments were outside payroll tax, but we now know this is often not the case,” she said.

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