Payroll tax remains a significant issue for medical, dental and allied health practices across Australia.

The application and enforcement of payroll tax varies between states and territories, as do rates, thresholds, exemptions and concessions. This can make it difficult for practices to understand their obligations and assess whether payments made to practitioners may attract payroll tax.

With Revenue Offices continuing to scrutinise practitioner arrangements, practices should understand the rules that apply in their jurisdiction and ensure their contractual, financial and operational arrangements are appropriately structured and documented.

Payroll Tax Relief for Medical Practices by State and Territory

Current as at September 2026. Payroll tax rules and Revenue Office guidance are subject to change.

Australian Capital Territory (ACT)

Annual Threshold: $1.75 million
Rate: 6.75% for annual wages from $1.75 million to $20 million (variable rates for annual wages exceeding $20 million)

GP Clinics:

From 1 July 2025, medical practices that engage general practitioners, or other contractors who perform medical services that are bulk-billed or certain services under the Veteran’s Entitlements Act 1986 (Cth) or under the Workers Compensation Act 1951, are exempt from paying payroll tax on wages for those services performed.

New South Wales (NSW)

Threshold: $1.2 million
Rate: 5.45%

GP Clinics:

From 4 September 2024, medical centres can claim a rebate of payroll tax for payments made to GP Contractors if they meet the relevant proportion of general practitioner services under the “prescribed billing arrangements” which are subject to the following thresholds:

• Metropolitan Sydney: 80% of general practitioner services; and
• Other areas: 70% of GP services

Suburb classification can be found on the Revenue NSW website.

The prescribed billing arrangements for general practitioner services include the following:

• Bulk billing arrangement, where a person responsible for paying for the services assigns their right to a Medicare benefit for the service; and the general practitioner accepts the Medicare benefit as full payment for the service.
• Veterans arrangement, for general practitioner services, refers to arrangements under which the general practitioner accepts full payment for services listed under the Department of Veteran Affairs and its relevant Acts of Commonwealth; or approved by the Chief Commissioner of Revenue NSW.

Queensland

Threshold: $1.3 million
Rate: 4.75% for annual wages below $6.5 million and 6.95% for annual wages more than $6.5 million

GP Clinics:

From 1 December 2024, wages paid to contracted GPs are exempt from payroll tax.

Dental Clinics:

An amnesty was provided for payments made to contracted and registered dentists from 1 July 2018 to 30 June 2025. There are currently no exemptions or amnesties available for dental clinics in Queensland.

South Australia

Threshold: $1.5 million (with up to $600,000 deduction)
Rate: 0%-4.95% (variable for annual wages between $0 to $1.7million)

GP Clinics: From 1 July 2024, an ongoing exemption applies to wages relating to bulk-billed services only.

The bulk-billing exemption applies to GP services and does not extend to other staff, pathology or allied health services.

Dental & Specialist Clinics:

Currently, no relief or exemptions apply after 1 July 2024.

Victoria

Threshold: $1 million
Rate: 4.85%

GP Clinics:

From 1 July 2025, a payroll tax exemption applies only to wages paid or payable by a general practice medical business to contractor GPs for medical services performed that are fully-funded consultations. This exemption does not apply to dental or allied health medical centres.

Western Australia

Threshold: $1 million
Rate: 5.5%

Western Australia assesses payroll tax based on a common law employer-employee relationship rather than extended contractor provisions. Doctors who run their own true businesses are generally not counted as taxable wages.

The $1 million payroll tax threshold is subject to a diminishing threshold for employers or groups with Australian taxable wages between $1 million and $7.5 million.

Medical Clinics:

WA does not apply payroll tax to payments made to contracted GPs or allied health practitioners.

Tasmania

Threshold: $1,250,001 million
Rates: 4% for annual wages between $1,250,001 million and $2 million. 6.1% for annual wages above $2 million.

Medical Clinics:

There are no exemptions or amnesties currently available.

Tasmania has not issued public guidance on how payroll tax applies to medical centres.

Northern Territory

Threshold: $2.5 million
Rate: 5.5% for annual wages less than $100 million, 6.5% for annual wages more than $100 million.

Medical Clinics:

There are no exemptions or amnesties currently available.

The Northern Territory has not issued public guidance on how payroll tax applies to medical centres.

Increased Scrutiny - Is your Practice Audit-Ready?

While greater certainty now exists in some jurisdictions, there is no single Australian payroll tax position for medical practices.

Revenue Office audit activity is continuing, with practitioner arrangements, contractor payments and the supporting financial and operational records of practices coming under scrutiny.

Practices that cannot rely on an exemption or concession should review their practitioner arrangements and supporting documentation to identify and address potential payroll tax exposure.

One of the key documents is the Service and Facilities Agreement (SFA).

What is a Service and Facilities Agreement?

An SFA governs the relationship between a practice and an independent practitioner operating their own medical or healthcare business.

Under a typical arrangement, the practice provides the practitioner with facilities and administrative services required to operate their business, and the practitioner pays the practice a service fee in return.

An SFA should clearly document the parties' respective rights and obligations, including the services and facilities provided, practitioner independence, service fees, billing and payment arrangements, patient records and termination arrangements.

Why Service Agreements Matter for Payroll Tax

A well-drafted SFA can help:

• Clearly establish the intended legal and commercial relationship between the practice and practitioner;
• Document how patient fees and service fees are collected and paid;
• Support the practice's payroll tax position;
• Ensure contractual arrangements align with the way the practice operates;
• Reduce the risk of disputes during and after a practitioner's engagement; and
• Support future restructuring, sale or succession.

However, simply having an SFA is not enough.

Revenue Offices may look beyond the title of an agreement when determining whether practitioner payments are subject to payroll tax. The terms of the agreement, the flow of funds between the patient, practitioner and practice, and the way the arrangement operates in practice can all be relevant.

Don't Overlook the Flow of Funds

How patient fees are collected and how service fees are paid can be particularly important.

Practices should review their banking and payment arrangements alongside their SFAs to ensure the documented arrangement is appropriately structured and accurately reflects the intended relationship between the practice and practitioner.

Changes to payment gateways, EFTPOS arrangements, bank accounts, billing systems or administrative processes should also prompt a review of the relevant SFA and payroll tax position.

Make sure your Agreements are Signed

An unsigned or expired agreement can create significant risk.

Practices should ensure SFAs are properly executed before a practitioner commences, rather than treating signatures as an administrative task to be completed later.

Electronic signing, central agreement registers, automated reminders and clear responsibility for practitioner onboarding can help ensure agreements do not remain unsigned or expire unnoticed.

What should Medical Practices do Now?

Medical, dental and allied health practices should:

• Understand the payroll tax rules, rulings and exemptions that apply in their state or territory;
• Assess whether practitioner payments may be subject to payroll tax;
• Ensure every practitioner has a current and signed SFA;
• Review the flow of funds and banking arrangements between patients, practitioners and the practice;
• Check that SFAs accurately document the intended practitioner arrangements;
• Review agreements when billing processes, ownership, structure or operational arrangements change; and
• Seek legal and accounting advice where there is uncertainty or potential exposure.

How Hillhouse can help

Payroll tax and practitioner arrangements are complex, and the position continues to evolve.

Hillhouse Legal Partners works closely with medical, dental and allied health practices to provide practical, commercially focused advice on Service and Facilities Agreements, practitioner arrangements and payroll tax risk.

If your practice does not have current SFAs in place, your agreements have not been reviewed recently, or you are concerned about your payroll tax position, now is the time to act.

Our experienced Health & Medical legal team can help you identify potential risks, strengthen your agreements and implement practical solutions that work for your practice.

Contact Craig Hong, or Zach Sudiro on (07) 3220 1144 or email@hillhouse.com.au.