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15 March 2023

RACGP: No more crocodile tears, Australia’s leaders must act on Sick Tax

The Royal Australian College of General Practitioners (RACGP) is calling on the state and territory governments to step in and save the future of general practice care after a legal challenge against a new payroll tax interpretation was dismissed.

It comes following the Supreme Court of NSW Court of Appeal rejecting an attempt to appeal the controversial Thomas and Naaz tribunal ruling. In that ruling the tribunal found that tenant GPs, who pay a percentage of their earnings to a clinic rather than being paid a wage, count as employees for payroll tax purposes. This disrupts established business models for practices, which now face the unenviable choice of charging patients more or shutting up shop.

RACGP President Dr Nicole Higgins called for action.

“Enough is enough, our state and territory governments must act,” she said.

“This is the latest nail in the coffin threatening patient access to general practice care. We have been keenly awaiting this appeal and the decision just more bad news for hardworking GPs and practice teams. Practices already pay payroll tax like everyone else on staff including nurses and administrative workers, but this new tax obligation on tenant GPs is untenable. Unless governments act to exempt practices from this new obligation patients will be charged more, and some clinics will be forced to shut up shop. The entire health system will suffer for years to come, particularly in rural and remote areas.”

RACGP Vice President Dr Bruce Willett said the situation was urgent.

“There is no capacity in general practice to absorb this additional tax burden after the dreaded Medicare freeze and 30 years of inadequate indexation,” he said.

“Practices have always and will continue to pay payroll tax for their employees including nurses and receptionists. The new tax obligation is payroll tax on Medicare payments made to doctors with tenancy arrangements in a practice. This additional Sick Tax is likely to result in patients paying something like an additional $15 per consultation.

“Practices will have to pass on these payments to patients so any increases that may come from the federal Government are likely to be revenue negative once these additional factors are taken into account.  Premiers and Chief Ministers are saying that the hospital systems are failing because the federal Government is taking money out of general practice and primary care. At the same time, they’re all attempting to take an extra 5% out of primary care towards state government coffers. It really does look like crocodile tears.”

A recent survey of almost 1,300 GPs and practice staff found that just 3% of practices are in a position to absorb the costs associated with GPs becoming liable for the tax and almost one in five respondents said that their practice would close should state and territory governments change the current payroll tax interpretation and start considering tenant doctors as employees. An incredible 78% of respondents said they would be forced to raise fees, meaning patients would be paying more for every GP consult.


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