The New South Wales Court of Appeal (NSWCA) in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 has dismissed a medical practice’s appeal and upheld the New South Wales Civil and Administrative Tribunal Appeal Panel’s (Appeal Panel) decision that payments from a medical practice to doctors, who worked at the practice, are subject to payroll tax.

This subsequent appeal to the NSWCA arose from an earlier unsuccessful appeal by the medical practice to the Appeal Panel of NCAT.

Our earlier article explores the Appeal Panel’s decision in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2022] NSWCATAP 220.

NSWCA decision

The NSWCA decision was centred around the 4 grounds of appeal filed by the medical practice asserting that, amongst other grounds, the Appeal Panel had failed to consider that some of the grounds of appeal were questions of law.

The NSWCA dismissed the medical practice’s principal ground of appeal and found that the medical practitioners did supply services to the medical practice such that the payments made by the medical practice to its medical practitioners were “relevant contracts” under the Payroll Tax Act 2007 (NSW) (Act) and therefore were deemed to be wages under the Act and subject to payroll tax.

The NSWCA also dismissed the medical practice’s other grounds of appeal on the basis that the respective grounds each did not raise any question of law.

In coming to its decision, the NSWCA also briefly noted that it agreed with the Victorian Court of Appeal’s (VSCA) decision in Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197 (Optical Superstore) that the terms “payable” or “paid” in the context of the relevant payroll tax provisions does not exclude payments to which the payee is contractually or even beneficially entitled.

Significance of decision

This decision by the NSWCA further confirms the VSCA’s decision in Optical Superstore (as discussed in our article) and aligns in practice the approach in both Victoria and New South Wales as to what constitutes a supply of services as well as a payment under the Act, particularly in the context of medical practices.   

This means that if a medical practice makes any payments to a doctor that is a part of its medical centre, such payments will be caught as wages not just under the Act, but also under equivalent payroll tax provisions across the various states which have harmonised provisions, such as Victoria. That is, they will be subject to payroll tax.

The NSWCA helpfully notes that though “artificial”, if a medical practitioner adopts the administratively less convenient approach and only remits a portion of fees received to a medical practice, then the deeming provisions under the Act would not be engaged.

The decision is also significant because, while the factual circumstances here pertained to doctors that contracted with a medical practice, the legal principles could equally apply more broadly to other healthcare professionals who contract with a practice such as dentists, physiotherapists, osteopaths and other allied health professionals.

Our recommendation

Owners of medical or other healthcare practices should review their existing structures to ensure that they are aware of the likelihood of payroll tax being imposed by the relevant state revenue authorities on any payments made to a doctor or other healthcare professional.

For further information, or if you would like to discuss or review existing structures and contractual arrangements between doctors/healthcare practitioners and a healthcare practice owner, please feel free to contact our state taxes team:

Thomas Abraham
Senior Associate
M +61 3 9611 0139 | T +61 438 401 853
E tabraham@sladen.com.au

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au