Calling a doctor an independent contractor does not automatically remove a medical practice’s GST, payroll tax or superannuation obligations.
Each obligation arises under different legislation and applies its own tests. The wording of a practitioner agreement is important, but it is not the only consideration. The actual arrangement must also be examined, including who engages the patient, controls appointments and fees, issues invoices, receives patient payments, provides rooms and staff, and pays or remits money to the practitioner.
For practice owners, the practical risk is that the legal agreement, patient-facing documents, banking arrangements and accounting records do not tell the same story. When those elements are inconsistent, unexpected GST, payroll tax and superannuation liabilities can arise.
This article focuses particularly on medical practice payroll tax in Victoria, while also explaining the federal GST and superannuation rules relevant to medical centres across Australia.
Are All Medical Services GST-Free?
No. A service is not automatically GST-free simply because it is performed by a doctor.
A medical service is generally GST-free if:
- a Medicare benefit is payable for the service; or
- it is supplied by or on behalf of a medical practitioner or approved pathology practitioner and is generally accepted within the medical profession as necessary for the appropriate treatment of the recipient.
If neither test is satisfied, the supply may be taxable.
This distinction can affect services such as:
- medico-legal reports;
- insurance examinations;
- pre-employment medical assessments;
- medical reports commissioned by third parties;
- cosmetic procedures where no Medicare benefit is payable;
- training and education services; and
- administrative or management services.
The GST treatment must be considered for each type of supply. A medical practice should not apply a GST-free code to every item of income merely because a medical practitioner was involved.
Why the Recipient of the Service Matters
Identifying the recipient of the supply is central to determining whether a medical service is GST-free.
The recipient is generally the person or entity that engages the practitioner to provide the service. In many consultations, the patient is the recipient. In other arrangements, the recipient may be an employer, insurer, government agency, compensation scheme operator or another business.
Where a practitioner supplies services to a medical centre and the medical centre supplies medical services to its patients, there may be two separate supplies:
- a supply from the practitioner to the medical centre; and
- a supply from the medical centre to the patient.
The supply to the patient may be GST-free where the medical-service requirements are satisfied. However, the practitioner’s supply to the medical centre will not necessarily receive the same GST treatment. Multi-party arrangements involving insurers, statutory compensation schemes and Australian government agencies can also qualify for specific GST-free treatment, subject to the relevant conditions.
Contracts, patient forms, invoices and banking arrangements should make it clear who is supplying what to whom.
Is GST Payable on a Medical Centre’s Service Fee?
A common medical-practice model involves a practitioner engaging the clinic to provide rooms, reception staff, billing support, equipment, software and administration services.
In this arrangement, the clinic generally supplies facilities and administrative services to the practitioner. That supply is ordinarily taxable if the clinic is registered or required to register for GST, even though the practitioner’s treatment of the patient may be GST-free.
For example, if the agreement provides for a service fee of 30% plus GST, the clinic’s tax invoice and accounting records should reflect:
- the practitioner’s gross patient receipts;
- the contractual service fee;
- GST on the service fee; and
- the net amount remitted to the practitioner.
The agreement should clearly state whether the percentage is GST-inclusive or GST-exclusive. Remittance statements, tax invoices, accounting entries and BAS reporting should all follow the agreed treatment.
Confusion can arise when practices record everything passing through the bank account as medical income. Patient receipts collected on a practitioner’s behalf, the clinic’s service-fee income and money later remitted to the practitioner may represent different accounting and GST components. They should not be combined without analysing the underlying arrangement.
Can Payments to Contractor Doctors Attract Payroll Tax?
Yes. A doctor may be an independent contractor at common law, yet payments connected with their services may still be treated as wages under Victorian payroll tax legislation.
Under Victoria’s relevant-contract provisions, a principal may be deemed an employer, the contractor may be deemed an employee, and payments under the relevant contract may be deemed wages. These rules can apply where the practitioner contracts through a company, trust, partnership or as a sole trader.
The State Revenue Office’s PTA-041 ruling specifically addresses medical centres, including dental clinics, physiotherapy practices, radiology centres and similar healthcare providers. It explains that payroll tax liability depends on the full facts and circumstances of the arrangement.
A relevant contract can arise where a medical centre conducts a business of providing patients with access to health services and engages practitioners to deliver those services. Factors such as patient bookings, branding, fee setting, billing, practitioner obligations and the flow of patient receipts can all be relevant.
Patient-Fee Remittances May Be Deemed Wages
Medical practices sometimes collect patient fees into the clinic’s bank account and later remit the practitioner’s share after deducting a service fee.
It should not be assumed that these remittances fall outside payroll tax merely because:
- the patient paid the money;
- the clinic describes itself as a collection agent;
- the practitioner is entitled to the money under the agreement; or
- payment is directed to the practitioner’s company or trust.
Where the agreement is a relevant contract, payments connected with the practitioner’s work may be deemed wages under the contractor provisions. The legal and factual arrangement must be reviewed in full.
Changing the bank account used to receive patient fees will not necessarily change the underlying payroll tax outcome if the clinic continues to operate in the same manner. Payment flow is important, but it is only one part of the broader analysis.
Do Any Victorian Contractor Exclusions Apply?
Not every contractor arrangement results in payroll tax. Victoria’s legislation contains exclusions that can remove certain contracts from the relevant-contract provisions if all applicable conditions are satisfied.
Potential exclusions may apply where:
- the services are required for no more than 90 days in the financial year;
- the services are of a kind the contractor ordinarily provides to the public generally;
- the work is performed by two or more people engaged by the contractor; or
- another statutory exclusion applies.
The exclusions are technical and fact-dependent. The SRO recommends first determining whether the worker is a common-law employee, then whether the contract is a relevant contract, and finally whether an exclusion applies.
An ABN, a contractor invoice or a company structure does not prove that an exclusion is available. The clinic should retain evidence supporting any exclusion it relies upon, particularly where a practitioner works at the clinic throughout most of the year.
Victorian Exemption for Fully Funded GP Consultations
From 1 July 2025, Victoria provides a payroll tax exemption for wages paid or payable by a GP medical business to employee and contractor GPs where those wages relate to qualifying fully funded items of GP work.
The exemption is intended to support GP practices that fully fund, including through relevant bulk-billing arrangements, eligible patient consultations. It does not provide a blanket payroll tax exemption for every payment made to a GP.
The SRO calculates the exempt amount using a proportional formula based on:
- total wages paid or payable in relation to GP work;
- amounts received for fully funded GP work; and
- total amounts received for all GP work.
The exempt portion should not be included in monthly or annual payroll tax lodgements, but the practice must retain its calculations and supporting evidence. The remaining non-exempt component continues to require consideration as taxable wages.
This exemption does not automatically extend to:
- privately billed consultations;
- specialists;
- dentists;
- allied health practitioners;
- nurses or administrative staff; or
- medical services outside the statutory definition of qualifying GP work.
Mixed-billing practices need reliable billing data that distinguishes fully funded consultations from privately billed and other non-qualifying work.
Payroll Tax Registration, Thresholds and Grouping
Payroll tax generally becomes relevant where an employer’s or business group’s total Australian wages exceed the applicable state or territory threshold.
Grouping rules can combine the wages of related businesses when determining whether the threshold has been exceeded and how payroll tax is calculated. A medical group cannot necessarily assess each clinic, service entity or employing entity in isolation.
A practice should review:
- wages paid to employees;
- payments deemed to be wages under contractor provisions;
- payments to practitioners;
- superannuation and certain fringe benefits;
- contractor exclusions;
- exempt GP wages; and
- wages paid by related or grouped entities.
Payroll tax is imposed separately by each state and territory. A practice operating in more than one jurisdiction must consider the rules and thresholds applicable in each location.
Can Contractor Doctors Be Entitled to Super?
Yes. Payroll tax and superannuation apply different tests, so a payment can have different outcomes under each regime.
Under the extended definition of employee for superannuation guarantee purposes, some independent contractors are treated as employees when they are paid mainly for their personal labour, skills or time rather than to deliver a specific result.
This can apply even if the practitioner:
- has an ABN;
- issues invoices;
- is described as a contractor; or
- signs an independent-contractor agreement.
The substance of the arrangement matters.
The treatment may differ where the clinic contracts with a genuine company, trust or partnership, or where the practitioner has an effective right to delegate the work. However, these factors should be reviewed against the full arrangement rather than used as a checklist to reach a preferred outcome.
Payday Super from 1 July 2026
Payday Super commenced on 1 July 2026. It did not change which workers are entitled to super, but it changed when qualifying superannuation contributions must be paid.
Where a medical practice has a superannuation obligation for an employee or eligible labour-based contractor, the contribution must generally:
- be paid for each payday; and
- reach the worker’s super fund within seven business days after payday, subject to limited exceptions.
For a contractor paid by invoice, the payday is generally the date the invoice is paid. If the contractor is eligible for super, the contribution ordinarily needs to reach the fund within seven business days of that payment.
Medical practices should review their contractor register, payroll processes, invoice-payment cycles and super-clearing arrangements. Under Payday Super, a quarterly review may identify obligations too late.
What Changed in the 2026–27 Federal Budget?
The 2026–27 Federal Budget did not remove Victorian payroll tax from contractor-doctor arrangements. Victorian payroll tax continues to operate under Victorian legislation and is administered by the Victorian State Revenue Office.
The most significant federal change affecting medical-practice payroll processes from 1 July 2026 is Payday Super. It requires more frequent superannuation payments for employees and eligible contractors but does not replace or override state payroll tax rules.
Practice owners should therefore treat GST, payroll tax and super as three separate reviews:
- GST: What is being supplied, by whom and to which recipient?
- Payroll tax: Is there an employee relationship or relevant contract, and does an exclusion or exemption apply?
- Super: Is the practitioner an employee under the ordinary or extended superannuation definition?
A Practical Compliance Checklist for Medical Practices
Medical practices should regularly review:
- practitioner, service and facility agreements;
- who contracts with the patient;
- appointment and patient-registration forms;
- responsibility for setting fees and issuing invoices;
- bank accounts receiving Medicare and patient payments;
- practitioner remittance statements;
- GST codes for consultations, reports, products and service fees;
- tax invoices for clinic service fees;
- contractor payroll tax treatment;
- Victorian contractor exclusions;
- grouping and payroll tax thresholds;
- evidence supporting the fully funded GP exemption;
- superannuation treatment of practitioners and locums;
- Payday Super payment deadlines; and
- reconciliations between practice-management software, Medicare receipts, bank accounts, accounting records and BAS returns.
The contract, patient experience and accounting records should reflect the same arrangement. If they do not, the practice should investigate the inconsistency rather than relying solely on the wording of the agreement.
Frequently Asked Questions
Q1. Are all services provided by doctors GST-free?
No. A medical service may be GST-free where a Medicare benefit is payable or where the service satisfies the professional and appropriate-treatment requirements. The recipient of the supply and the nature of the service are important. Certain reports, examinations, cosmetic procedures and third-party services may be taxable.
Q2. Does a medical centre charge GST on the service fee paid by a doctor?
Generally, yes, where the centre is registered or required to register for GST and provides taxable rooms, reception, billing or administration services to the practitioner. The agreement should clearly state whether the service fee is GST-inclusive or plus GST.
Q3. Are payments to contractor doctors subject to payroll tax in Victoria?
They can be. A contractor agreement may be a relevant contract under Victoria’s payroll tax provisions, causing payments relating to the practitioner’s work to be deemed wages. The outcome depends on the entire arrangement and whether an exclusion or exemption applies.
Q4. Does paying patient receipts directly to the doctor avoid payroll tax?
Not necessarily. Changing payment flows alone may not change the underlying legal and commercial arrangement. Patient engagement, contracting, billing, clinic control and the complete payment arrangement must all be considered.
Q5. Are all payments to GPs exempt from Victorian payroll tax?
No. From 1 July 2025, an exemption applies to the proportion of GP wages attributable to qualifying fully funded GP work. Privately billed and other non-qualifying work is not automatically exempt, and the practice must retain supporting calculations.
Q6. Does an ABN mean a doctor is not entitled to super?
No. A contractor may still be treated as an employee for superannuation purposes if they are paid mainly for their personal labour or skills. An ABN and contractor invoice do not determine the outcome by themselves.
Q7. How does Payday Super affect contractor doctors?
If a contractor doctor is eligible for super, contributions must generally be made for each payday and reach the fund within seven business days. Where payment is made against an invoice, the invoice-payment date is generally treated as the payday.
Q8. Does the Victorian GP exemption apply to specialists and allied health practitioners?
Not generally. The exemption applies to qualifying wages connected with fully funded GP work performed through a GP medical business. It does not generally cover specialist services, dental practices or allied health businesses.
Medical Practice Accounting and Compliance Support
Medical-practice compliance requires more than checking whether an agreement uses the word “contractor”. The contracts, patient engagement, billing processes, bank accounts and accounting records must be considered together.
Kintax Accountants can assist medical practices with:
- medical-centre bookkeeping and reconciliations;
- GST classification and BAS reporting;
- practitioner remittance accounting;
- payroll records and Payday Super processes;
- Victorian payroll tax calculations;
- contractor payment reviews;
- fully funded GP exemption calculations; and
- coordination with the practice’s lawyer where contractual advice is required.
Contact Kintax Accountants
Phone: 0399393692
Email: info@kintax.com.au
Office: Level 1, 287A Spring Street, Reservoir VIC 3073
Enquiries: Request a consultation
Based in Reservoir, Kintax Accountants assists medical practices, doctors and healthcare businesses throughout Melbourne’s northern suburbs and greater Melbourne with accounting, bookkeeping, GST, payroll and tax compliance.
Important information: This article provides general tax, accounting and payroll tax information only. It does not constitute legal advice, financial product advice or advice tailored to a particular medical practice. Payroll tax rules vary between states and territories, and the outcome depends on the complete contractual, operational and payment arrangement. Legal advice should be obtained on practitioner agreements and contractual relationships.
