Payroll Tax and Service Agreements – What Medical Practices Need to Know in 2026

Payroll Tax and Service Agreements – What Medical Practices Need to Know in 2026

Home » Zach Sudiro

Payroll Tax and Service Agreements - What Medical Practices Need to Know in 2026

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3 min read

14 Oct 2026

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    Key Takeaways
  • ࠂ
    Payroll Tax rules vary by State – Exemptions, concessions, thresholds and rates differ across Australia, making it essential for practices to understand their state or territory’s requirements.
  • ࠂ
    Service Agreements matter – Current, signed Service Agreements should accurately reflect practitioner arrangements, including billing, service fees and the flow of funds.
  • ࠂ
    Review & reduce risk – Practices should review agreements, payment arrangements and operational processes to identify potential payroll tax exposure and ensure they are appropriately structured and documented.

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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.

$700k Legal Lesson for Lululemon- When ‘Service Emails’ Become Spam

$700k Legal Lesson for Lululemon- When ‘Service Emails’ Become Spam

Home » Zach Sudiro

$700k Legal Lesson for Lululemon - When ‘Service Emails’ Become Spam

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3 min read

28 Apr 2026

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    Key Takeaways
  • ࠂ
    Even “service” or transactional emails can be classified as marketing if they include promotional content.
  • ࠂ
    If a message is commercial in any way, it must comply with the Spam Act 2003 (Cth), including a functional unsubscribe option.
  • ࠂ
    Mischaracterising emails as non-commercial is a growing enforcement focus for regulators.
  • ࠂ
    Separating service communications from marketing content is the simplest way to manage compliance risk.

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What Happened?

Activewear retailer Lululemon Athletica Australia Pty Ltd has been fined $702,900 by the Australian Communications and Media Authority (ACMA) after sending more than 370,000 emails without a functional unsubscribe facility.

The emails, sent between December 2024 and January 2025, were largely framed as transactional updates, including order confirmations and shipping notifications. However, they also contained promotional material and links to sales content.

Why This Was a Breach

Under the Spam Act 2003 (Cth), a commercial electronic message includes any email, SMS or similar communication where one of the purposes is to promote goods, services or a business.

Lululemon argued the emails were primarily factual and therefore not commercial. The ACMA disagreed, finding that:

  • the inclusion of promotional content meant at least one purpose was marketing;
  • the emails were therefore commercial electronic messages; and
  • each email required a functional unsubscribe facility.

This resulted in more than 370,000 contraventions of the legislation.

A Clear Trend from Regulators

This is not an isolated case. The ACMA has taken multiple enforcement actions in recent months where businesses attempted to classify communications as “non-commercial” despite including marketing elements.

The regulator’s message is clear:
If there is any promotional content, the full compliance obligations apply.

What This Means for Your Business

For many businesses, particularly those with automated customer communications, this decision highlights a common risk area.

Blended communications are often used for efficiency, but they create exposure where:

  • transactional emails include marketing banners, offers or links;
  • system-generated messages are not reviewed for compliance; or
  • unsubscribe functionality is overlooked in “non-marketing” templates.

The practical takeaway is simple - intent does not determine compliance, content does.

Practical Steps to Reduce Risk

To minimise exposure under the Spam Act 2003 (Cth):

  • Separate service and marketing messages - Keep order updates, invoices and account notifications free from promotional material.
  • Review all customer communication templates - This includes automated and system-generated emails.
  • Ensure unsubscribe functionality is always present where required - It must be clear, functional and easy to use.
  • Train internal teams - Marketing, operations and IT teams should understand how small content changes can shift a message into “commercial” territory.

Final Word

As noted by the ACMA, the simplest approach is often the best - keep service communications clean and separate from marketing.

For businesses that rely heavily on automated communications, this case is a timely reminder that compliance needs to be built into systems and processes, not added as an afterthought.

Areas of Expertise

Fact Sheet: Service Agreements for Medical Practices

Fact Sheet: Service Agreements for Medical Practices

Home » Zach Sudiro

FACT SHEET: Service Agreements for Medical Practices

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3 min read

2 Apr 2026

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    Key Takeaways
  • ࠂ
    Service and Facilities Agreements (SFAs) define the relationship between a medical practice and independent practitioners, outlining how facilities, services, fees, and responsibilities are managed.
  • ࠂ
    Well-drafted SFAs are critical for legal protection and compliance, particularly in reducing disputes, managing operational responsibilities, and supporting practice valuation or succession.
  • ࠂ
    Regularly reviewing SFAs is essential due to payroll tax risks and regulatory changes, ensuring agreements accurately reflect how the practice operates and protect the business from financial or legal exposure.

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What they are, why they matter, and how to get them right

Running a medical practice involves far more than delivering quality patient care. Behind the scenes, your legal and commercial arrangements play a critical role in protecting your business, managing risk, and ensuring compliance - particularly in today’s evolving regulatory environment.

One of the most important (and often misunderstood) documents in any medical practice is the Service and Facilities Agreement (SFA).

This fact sheet explains what an SFA is, why they matter, and why medical practices should be reviewing their agreements to remain compliant and protected.

What is a SFA?

A SFA (sometimes referred to as a Practitioner Services Agreement or simply a Service Agreement) governs the relationship between a medical practice and the practitioners who operate their own independent business utilising services offered by the medical practice.

A common point of confusion for medical practices is the difference between the relationship between a practitioner engaged under an SFA and employed under an Employment Contract. Some of the key factors that distinguish an employment contract from an SFA include:

  Employment Agreement Service and Facilities Agreement
Role and relationship of the parties The relationship is that of employer and employee.

The practitioner is providing labor to the medical practice in consideration of the remuneration (e.g. wage, salary) paid to the practitioner.

The relationship is that of service provider and practitioner.

The medical practice is providing services and facilities necessary for the practitioner to operate their own independent medical business in consideration of the service fees payable to the medical practice.

 

How are the practitioner and medical practice paid? The medical practice collects patient fees and then pays the practitioner a salary or other agreed remuneration. The preferred approach is for practitioners to collect fees into their own bank account and are invoiced by the medical practice for service fees, rather than the medical practice collecting fees on the practitioner’s behalf.

 

Duties of each party and control over performance of work The medical practice determines the nature of the medical services available at the practice, and practitioner must comply with the policies and instructions of the medical practice while performing medical services. The practitioner has discretion as to the operation of their medical practice without rigorous oversight from the medical practice.
Obligations regarding employee entitlements

 

The medical practice is responsible for superannuation, annual leave, sick leave, long service leave, and other employee entitlements of the practitioner. The practitioner is responsible for superannuation, annual leave, sick leave, long service leave, and other employee entitlements.
How patient records are handled The medical practice will claim control and ownership of patient records and other confidential information at all times. The medical practice does not control or own the patient records, except to the extent needed to provide the services to the practitioner.

 

Does the practitioner represent him or herself as being part of the medical practice’s business? The medical practice is advertised as the provider of medical services and the practitioner is a part of the business. The medical practice is advertised as a place for patients to visit the practitioners.

SFA’s typically set out:

  • how the practitioner uses the medical practice’s facilities and services;
  • how and when fees are collected and distributed;
  • what services the medical practice provides (rooms, staff, IT, equipment, administration);
  • what services the medical practice will not provide the practitioners (specialist equipment);
  • the obligations of each party;
  • insurance requirements of each party; and
  • termination and exit arrangements, including the handling of patient records.

For many medical practices, and SFA underpins the entire business model.

Why SFA’s Matter

A well-drafted SFA helps to:

  • clearly define the legal relationship between the practice and practitioner;
  • support compliance with payroll tax and revenue laws;
  • reduce the risk of disputes during, and after, a practitioners engagement;
  • align operational, financial and regulatory obligations;
  • support practice valuation and future sale or succession; and
  • poorly drafted or outdated agreements can expose practices to significant financial and legal risk.

Service Agreements & Payroll Tax - A Critical Connection

Payroll tax has become one of the most significant issues affecting medical practices across Australia.

Recent various state revenue rulings have made it clear that the substance of the relationship matters more than the label.

Payroll tax risk may arise where:

  • patient fees are collected by the practice and later distributed to practitioners;
  • the medical practice controls billing, pricing or appointment systems;
  • practitioners are not operating independently, but rather for or on behalf of the medical practice; and
  • agreements do not reflect the reality of how a medical practice operates as a service entity.

Even where practitioners are engaged as independent contractors, state revenue authorities may still treat payments as “wages” if the agreement and practice structure do not support genuine independence.

Each state has its own payroll tax thresholds, exemptions, amnesty regimes, and reporting requirements, making regular review of Service Agreements essential. For more detailed information on a specific state’s requirements, please visit the Hillhouse website’s Knowledge Hub: https://hillhouse.com.au/knowledge/

Key Elements Every Medical Service Agreement Should Address

A well-drafted Service Agreement should clearly deal with:

  • Nature of the relationship - confirming the practitioner is an independent contractor, not an employee
  • Fee collection and payments - how patient fees are received, service fees calculated, and funds distributed
  • Services provided by the practice - rooms, reception, IT systems, nursing support, equipment and administration
  • Practitioner obligations - professional standards, compliance, insurances and use of practice systems
  • Leave, absence and locum arrangements - how absences are managed
  • Termination and exit - notice periods, handover obligations, restraint provisions and patient continuity
  • Data, records and confidentiality - ownership of records, privacy compliance and information security.

Common Issues We See in Practice

Some of the most common risks we encounter include:

  • outdated agreements that no longer reflect how the practice operates;
  • template agreements not tailored to medical practices;
  • inconsistencies between agreements and actual operational and billing arrangements;
  • poor alignment with payroll tax requirements;
  • unclear exit provisions leading to disputes; and
  • misalignment between Service Agreements and shareholder or lease arrangements.

These issues often only come to light during:

  • payroll tax audits;
  • practice sales or restructures;
  • Partner or practitioner exits;
  • disputes between medical practices and practitioners; and
  • ATO or state revenue reviews.

What Medical Practices Should Do Now

To protect your practice, we recommend:

  • reviewing all current Service Agreements;
  • ensuring agreements reflect how the medical practice business actually operates;
  • assessing payroll tax exposure with legal and accounting input;
  • checking consistency across service, lease and shareholder documents;
  • updating agreements to reflect legislative and regulatory changes; and
  • reviewing agreements whenever there is a change in ownership, structure or billing practices.

Proactive review is far more cost-effective than addressing issues after a problem arises.

How Hillhouse Legal Partners Can Help

Hillhouse Legal Partners has over 30 years’ experience supporting medical and healthcare practices across Australia. Our team regularly advises on the drafting and review of Service Agreements, payroll tax risk management, practice structuring and restructuring, medical practice compliance, and practice acquisitions and exits.

We understand the commercial realities of running a medical practice and provide clear, practical advice focused on solutions - not legal jargon.

Need a Service Agreement Review?

If your Service Agreements haven’t been reviewed recently or if you’re unsure whether they align with current payroll tax and compliance requirements NOW is the time to act.

Let our experienced team help ensure your agreements protect your practice, support compliance, and position your business for long-term success.

Rising Threat of Sophisticated Intellectual Property Scams

Rising Threat of Sophisticated Intellectual Property Scams

Home » Zach Sudiro

Rising Threat of Sophisticated Intellectual Property Scams

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3 min read

25 Mar 2025

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    Key Takeaways
  • Scams relating to IP rights and particularly Trade Marks are increasing and becoming more sophisticated aiming to manipulate businesses into making payments or revealing personal or sensitive information.
  • Always exercise a degree of caution when receiving letters or emails from unknown firms or departments relating to your IP.
  • To stay safe, contact your trusted legal adviser if you are unsure as to the authenticity of any correspondence, or wish to register, or renew Trade Marks and other IP rights.

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As we enter the new year, businesses are seeing a concerning rise in the sophistication of scams targeting Intellectual Property (IP) rights.

This article serves as a reminder for businesses to stay vigilant against these emerging scams and offers practical guidance on how to identify and deal with them.

The Increasing Threat: How Scams Are Being Presented

It is becoming increasingly common for businesses with registered IP, such as Trade Marks, to receive unsolicited emails from firms offering IP services. These emails often exploit the fact that contact details for registered IP holders are publicly available through IP Australia’s Trade Mark search register.

These communications typically urge businesses to pay for Trade Mark renewal services, often creating a false sense of urgency. While legitimate IP practitioners may use publicly available registers to find new clients or remind businesses of upcoming deadlines, the cost of such services can often be inflated and subject to negotiation.

However, scammers are also targeting these public registers, particularly focusing on new Trade Mark applications or existing registrations nearing important dates, such as renewals. Recently, we’ve seen more sophisticated scams where fraudsters impersonate government agencies or established legal firms, a trend that IP Australia has flagged as a growing concern (Scams related to managing IP Rights, IP Australia).

link: https://ipaustralia.gov.au/about-us/doing-business-with-us/fraud-and-corruption/scams-related-to-managing-ip-rights

Recognising Scam Red Flags

A recent example of a scam involved an individual posing as an IP practitioner, claiming they had been contacted by a third party to file a Trade Mark application. The scammer then offered to file an urgent Trade Mark application for the business – threatening to file the application on behalf of the third party if the business didn’t act quickly. The email also included threats of legal action and cease and desist orders if the business did not pay for IP services.

Common warning signs of IP-related scams include:

  • False or misleading information
  • Documents with watermarks designed to impersonate government bodies or law firms
  • Urgent requests for action, such as filing a Trade Mark application or paying an inflated invoice

Scammers often target businesses during key periods, such as when new IP rights are being filed or when renewals are approaching. Businesses should be especially cautious during these times.

How to Protect Your Business

If you receive a suspicious email, follow these steps to safeguard your business:

  1. Do not respond to unsolicited communications without first verifying the sender. A simple Google search of the claimed firm or checking the IP Australia Trade Mark register can help confirm the legitimacy of the message.
  2. Consult your trusted legal adviser or an official source if you have doubts about any correspondence concerning IP rights.
  3. Be cautious when considering overseas legal services in relation to IP matters, as some scams involve services from international firms.
  4. Exercise caution – always verify before responding to any requests or paying invoices.
  5. Contact your IP solicitor if you’re unsure whether an email is a scam. They can help confirm if the correspondence is legitimate.

How We Can Help

At Hillhouse Legal Partners, we’re here to help you navigate and protect your intellectual property. Whether you have questions about your IP rights, need professional guidance with applications, or are due for a renewal, we’ve got you covered. Reach out today to Zach Sudiro, John Davies, or Craig Hong.  We’re here to provide the support you need to keep your business safe and thriving.

Updated QRO Public Ruling Provides Further Clarification On Payroll Tax For Medical Centres

Updated QRO Public Ruling Provides Further Clarification On Payroll Tax For Medical Centres

Home » Zach Sudiro

Updated QRO Public Ruling Provides Further Clarification On Payroll Tax For Medical Centres

Author: Zach Sudiro

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2 min read

29 Feb 2024

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    Key Takeaways
  • Payment Structure Impact: Payment arrangements where patient revenue is not directly paid to practitioners may result in such payments being deemed as wages for payroll tax. This may include scenarios involving shared bank accounts in the names of the practitioner(s).
  • Case-Specific Evaluation: The Queensland Revenue Office will continue to evaluate practitioner payments and arrangements between medical centres and practitioners on a case-by-case basis. Medical centres should review agreements to ensure compliance, especially where they are using or considering using intermediary bank accounts.

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In our previous article we discussed the revised Public Ruling issued by the Queensland Revenue Office (QRO) in September 2023. This clarified that if assigned Medicare benefits and any out-of-pocket patient fees (patient revenue) are paid directly to a practitioner as a sole trader, these will not be deemed “wages” for payroll tax purposes. 

The QRO has since further revised the Public Ruling, re-affirming the position that patient revenue that is not paid directly to a practitioner may be deemed wages, and providing further commentary in a new example 14. 

If a banking arrangement involves an initial payment by the patient to a bank account not belonging to the practitioner, followed by subsequent payments by the medical centre or a third party to the practitioner, then these subsequent payments may be deemed wages. For example, where there is a shared bank account in the name of the practitioners who work at the practice, into which all patient revenue is paid, and from which the practitioner’s share of the patient revenue is paid out to each practitioner.

It is important for the medical centre to consider whether, under their current arrangements, the practitioner is able to access patient revenue paid to them directly or such access is subject to and conditional upon any approval or direction of the medical centre. The revised Public Ruling states that the QRO will continue to assess such payments, and arrangements between practitioners and medical centres, on a case by case basis. 

We recommend that businesses that operate a medical centre consider the terms of their current Agreements and arrangements with practitioners, particularly where they have considered or are using an intermediary bank account. Please contact Director, Craig Hong to discuss further on email or 07 3220 1144.