Pittwater Life November 2023 Issue

Business Life: Money
with Brian Hrnjak
Business Life
Doctors finding new payroll
tax medicine hard to swallow
This month we touch on
an issue that’s likely to
be giving your doctor
a case of heartburn… It
never fails to amaze me that
in 2023 we are yet to arrive
at a harmonised position,
across all sectors of business
and government, as to what
defines a person’s status as an
employee versus a contractor.
This question of status
has been asked for a long
time now and has grown in
importance along with the
dominance of professional
and service industries in
our economy. At its core the
issue is not that complicated:
the person engaging the
contractor wants to transfer
the risk of undertaking a
task to them, pay them for
the service and then move
on. The contractor wants
to receive a fee for service,
deduct whatever expenses
are appropriate in providing
the service and deal with
their profits as they see fit.
Neither party seeks to be
entangled by each other’s
workers compensation
insurance, public liability,
superannuation, payroll tax or
industrial issues; each party
should provide for their own –
otherwise you’d just hire them
in the first place.
An employee on the other
hand is hired by the employer;
they are provided with the
tools and equipment to
perform their tasks, they are
paid (mainly) on a time-based
system and undertake their
work at the direction of the
employer. The employer takes
the risks for their output, pays
them a regular wage based
on the applicable industrial
framework and incurs the
liability for superannuation
guarantee payments, workers
compensation insurance,
payroll tax and PAYG
withholding.
It would be so easy if
everyone could just stick
to their definitions, but
sometimes employers and
contractors blur the lines
between the two when it suits
them, sometimes by mistake
–and then there are the
governments that occasionally
move the goal posts.
Why this issue is giving
your doctor and other health
professionals heartburn is
that Revenue NSW released
a ruling on payroll tax in
August this year targeting
medical centres that applies
to a range of practitioners
(doctors, dentists, specialists)
as well as allied health
(physios, optometry etc.).
The preamble to the ruling
also neatly describes the nub
of the problem: “A contract
between a principal and a
contractor may be a ‘relevant
contract’ under the contractor
provisions in Division 7 of
Part 3 of the Payroll Tax Act
2007 (‘the Act’). If the contract
is a relevant contract, the
principal who engages the
contractor is deemed to be an
employer (section 33 of the
Act), the contractor is deemed
to be an employee (section
34 of the Act) and payments
made under the contract for
the performance of work are
deemed to be wages (section
35 of the Act).”
You need to briefly suspend
your views on payroll tax
(as an ill-conceived piece
of tax legislation that acts
as a brake on employment)
to consider that, yes, you
would need a range of antiavoidance
provisions to make
sure that people didn’t rort
the system. But when you as
a single taxing agency start
‘deeming’ things you run the
risk that you may be going
beyond the original intent of
the legislation, the common
law, or, the rules as they stand
at the federal level and in the
other States.
In this case the ruling
wants to prescribe that a
64 NOVEMBER 2023
The Local Voice Since 1991