From 13 March 2022 healthcare professionals and practices will need to be registered with PRODA to access Medicare Online and ECLIPSE. However, uncertainty remains around when Revenue NSW’s will release its guidance document on the application of payroll tax for medical practices, as the High Court confirms the importance of contractual terms of agreements.
With Provider Digital Access (PRODA) accounts becoming mandatory from 13 March 2022 to access Medicare Online and ECLIPSE, many healthcare professionals and practices are unclear about the implications this has for their businesses, particularly in respect to payroll tax.
For anyone who is not familiar with PRODA, it is as an online identification system for individuals and organisations to verify their identities when accessing online government services such as HPOS (Health Professional Online Services).
While PRODA has been around for many years, the Department of Human Services is now making PRODA compatible software compulsory for access to HPOS, meaning all Medicare billing will need to be lodged online using PRODA accounts.
This in itself is not controversial, as healthcare professionals and practices who are currently without PRODA compatible software will only need to ensure their patient management software providers are in the process of becoming compatible.
However, in the wider context of how healthcare professionals and practices are structured, the move to compulsory PRODA registration and data transfers to the Department of Human Services has raised questions about how this information may be used by the Australian Tax Office or State Revenue authorities.
The Australian Tax Office (ATO) and State Government Revenue authorities already have significant data matching programs in place and powers to compel taxpayers to produce documents to verify accurate reporting of tax compliance.
As a result, healthcare professionals and practices which are structured correctly and have their business activities correctly documented are unlikely to be adversely impacted by PRODA compatible software becoming compulsory.
There remains considerable uncertainty about the payroll tax position of many medical practices, as Revenue NSW are yet to release their guidance document on the application of payroll tax for medical practices.
To complicate matters further, the High Court has recently confirmed the importance of contractual terms between parties when determining if an employee or independent contractor arrangement exists.
Two recent cases, Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1, and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 lend support to the argument that the terms of a contract are crucial when determining if an employee or contractor relationship exists.
The importance of these cases for payroll tax purposes are immediate, as they have primacy over State Government rulings such as the recently issued PTA038.2 ruling, released on 2 February by the Queensland Government.
PTA038.2 was issued to clarify the factors that revenue authorities would look at when determining whether a worker is an employee.
Whilst CFMMEU vs Personnel Contracting and ZG Operations v Jamsek have wide ranging implications for businesses it is important to remember that payroll tax legislation attaches employer obligations to common law independent contractor relationships should a payroll tax exemption not be available.
In response to the ongoing payroll tax compliance activity and recent High Court cases healthcare professionals and practices should review all current agreements with independent contractors and service agreements with medical professionals to ensure all terms of these agreements reflect the true legal character of each relationship.
If you would like to speak with one of the Cutcher & Neale Advisors regarding your potential payroll tax liability, please do not hesitate to get in touch.
