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Dr Aaron Chambers and Dr Maria Boulton before the media .

The empowering story of Dr Aaron Chambers ’ journey into the political fray .

Paul Smith AusDoc editor .

agree it ’ s an existential threat ?” “ Yes .” “ Practices going bankrupt ?” “ Yes , if they start backdating their demands . If not , then it will just make the practice financially unviable and the government ’ s hopes for bulk-billing concession card holders will sink . Practices won ’ t be able to afford it .”

Much ink has been spilt on payroll tax and general practice . The exchange quoted above was a recent conversation with the boss of one of the major corporates , someone not prone to saying wild things .

Practices are being targeted for audits . The true scale of the enterprise remains unclear , the alarm it is causing less so .

During a packed Sunday morning session of the RACGP ’ s practice owner conference in Adelaide back in May , the audience was warned .

“ There are a lot of Facebook sites ; there are a lot of arguments about where the silver bullet is … There are plenty of ideas [ about ways to escape ],” said Paul Copeland , a director of William Buck , an accounting and advisory services firm .

“ The worst thing you can do is to keep your head in the sand . If you continue to ignore it , that will be at your peril .”

This is worth stressing because there is a hope of some legislative fix involving mass exemptions for the sector based on its special status providing healthcare .

So a fairy godmother will sprinkle fairy dust on state and territory Treasury ministers who will suddenly recognise a dark future of angry voters if electorates are decimated of GP practices .

There are some reasons why that may not happen .

Yes , it ’ s partly about the hunger for tax dollars , of course . State governments like the cash even if the cash they extract from GP practices probably won ’ t pay for a new tertiary hospital election pledge anytime soon .

The other element , one also described by the corporate boss , is the message sent if GP practices are given special treatment .

What about dental practices or opticians or pharmacies or the other private specialist clinics ? What about the slippery slope ?

And pollies , from the treasurers down , are generally bewildered as to why GP practices aren ’ t paying payroll tax already . There are 7000 GP practices in Australia . Has it been some kind of industry dodge ?

To many in the RACGP audience , the taxman ’ s doorknocking is the fallout of the Thomas and Naaz case : that civil case that has rumbled through the courts that involved a group of practices in NSW owned by Dr Jawahar Thomas .

They were originally audited way back in 2018 , with NSW tax officials deciding the arrangement the group had with its 40 doctors and other practitioners should see them classed as employees for payroll tax purposes .

The subsequent appeals against the resulting $ 800,000 tax demand reached the NSW Supreme Court of Appeal this year , where three judges declared in favour of the

Chief Commissioner of State Revenue .

The MBS billings that the group paid to the GPs — 70 % under this particular structure — were considered taxable wages for payroll tax purposes .

These were not doctors carrying on their own practice — buying in administrative support services to support their work . In the context of the tax , they were employees clocking in and clocking off .

It ’ s been bad news . But the reason it ’ s bad news is that it ’ s a bad test case — Dr Thomas ’ arrangements , at least those that Mr Copeland made clear at the conference , are in many ways not reflective of a typical practice .

Under the Dr Thomas cashflow structure , the money flowing to the group was being treated as revenue from patients , not the billings of doctors .

The doctors themselves were under fairly onerous obligations in the service agreements that had been drawn up .

In fact , there were many elements of the business that , to the judges , made an employer – employee model explicit .

“ The problem is that the government and the courts [ are ] now basing their decisions [ to make tax demands ] on this ruling ,” Mr Copeland said .

“ But they ’ re not using the best example . You ’ ve a lot of practices out [ there ] where only the service fee is recognised as revenue ; patient fees are isolated to separate bank accounts , and importantly , they have much clearer service agreements in place .” On this basis , there is some hope , then . Some careful restructuring may allow the great escape .

But it ’ s complicated . During the conference session , Ben Ryan , a senior associate at Avant Law , went through some of the options .

There is the obvious cashflow fix : don ’ t make any payments from the practice to the doctor . Allow the MBS / patient cash to flow straight into the doctor ’ s account , with the doctor clearly paying a fee for the practice ’ s administrative services .

For those not already doing that in a way that a tax official can see when going through the books , it requires accountancy advice and new contracts — which

‘ The problem is that the government and the courts are now basing their decisions to make tax demands on this ruling .’

isn ’ t always cheap , obviously .

The cash flow fix has other potential consequences : it creates headaches for those dreaming of pushing GPs away from fee-for-service .

If the Federal Government ’ s voluntary patient enrolment scheme does start offering $ 2000 a go for a practice to keep a frequent flyer patient out of hospital , can they do that without forcing the practice to make payments to the doctors caring for them ? It is the sort of thing that can put the entire registration dream in peril .

There are more radical options for escaping payroll tax , like restructuring the practice as a partnership . The issue here , as described to the conference audience , is what happens if one of the partners has a night of fun at the casino and decides to raid the practice finances because of a misplayed hand of Texas hold ’ em ? PAGE 6