18 August 2023

Victorian Premier urged to stop tax grab and save GP practices

Doctors’ groups are calling on Victorian Premier Daniel Andrews to save GP practices at risk of closure across Victoria due to a new application of payroll tax.

The Royal Australian College of GPs (RACGP), Australian Medical Association Victoria (AMA Victoria) and the Australian GP Alliance (AGPA) have written to the Victorian Premier calling for independently contracted GPs to be exempt from payroll tax and for the government to urgently confirm that general practices are not being targeted for retrospective tax collection.

“We are writing today to seek your urgent intervention… we have recently become aware of several Victorian general practices who are currently at risk of closure due to the application of this tax,” the letter states.

One Victorian practice owner with two clinics servicing over 107,000 patients who received a bill for nearly $800,000 said: “I have no choice. I have to close down. It’s going to happen not only to me. Unless there’s an exemption, we’ll see a catastrophic closure of medical centres, more than half will be wiped out.”

General practices already pay payroll tax on their employees, including receptionists, GPs in training and nurses. But it hasn’t applied to GPs because most doctors are not employees – they lease rooms from a practice owner and work under independent agreements.

The threat of extra payroll tax became a concern for practice owners after court judgements in New South Wales considered GPs at certain medical practices as employees for payroll tax purposes. South Australia and Queensland announced amnesty periods after the RACGP and AMA pointed out that any extra tax burden on general practices would force them to raise fees or close. Western Australia has also confirmed that it does not intend to change the way its existing payroll tax provisions apply to general practice.

A poll of practices across Australia found only 3% would be able to absorb the costs associated if GPs were considered employees for payroll tax purposes – 78% would be forced to raise fees.

RACGP Victoria Chair Dr Anita Munoz: “I’m calling on Premier Daniel Andrews to stop ignoring this problem. GP practices operate on very thin margins, and if our Premier doesn’t intervene fast, we’ll see more and more practices forced to close, or to raise fees. This will mean more patients going to overflowing emergency departments and spiralling spending on hospital services. Whatever little extra payroll tax revenue could be made from GPs will be rapidly negated by much higher spending on hospitals. It will also be devastating for the patients who lose the GPs they know and love, and the communities that rely on general practice care to keep people healthy, and out of hospital.”

RACGP President Dr Nicole Higgins said: “The Federal Government is making major investments and reforms to make GP care more accessible and affordable – such as tripling bulk-billing incentives. But at the same time, state governments are ripping funding from general practice to boost their own tax revenues. GPs and their patients are caught in the middle, and it is the patients who will be hurt most when they lose their local GPs and access to essential care.”

AMA Victoria President Dr Jill Tomlinson said: “The Victorian Government’s payroll tax on GPs hurts patients by making primary healthcare less affordable and harder to access. The tax completely wipes out the positive impact of the triple bulk billing incentive announced in this year’s Federal Budget.

“Devastatingly, if the State Government doesn’t announce a payroll tax amnesty for general practices and if it doesn’t cease its application of retrospective payroll tax clawbacks on them, this will lead to the closure of some practices; something we are already starting to see. 

“General practice is the most efficient part of our healthcare system, and the Victorian Government needs to get serious about supporting and investing in primary healthcare, rather than imposing new taxes on it.”

AGPA Deputy Chair Dr Mukesh Haikerwal said: “Charging payroll tax on Medical Professional Fees is effectively a 9% tax on Practice income. Practices are not in a position to absorb the tax and many will become unviable. They will either have to close or charge patients a fee to cover the additional costs for past and future tax liabilities. When they charge a patient a fee, they can no longer bulk bill, and while Medicare will reimburse them for the patient rebate, they will need to have the money up-front to see a GP. Many patients will not be able to do this and will not be able to easily access primary health care.

“To save primary healthcare in Victoria it is essential that the state government exempts Medical Professional Fees from payroll tax.”

Media enquiries

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