$795,000. That’s what one Sydney medical centre was hit with in payroll back tax after the landmark Thomas and Naaz case. If you run a medical practice in Brisbane with contractor GPs, specialists, or allied health professionals, you need to understand how the new medical practice payroll tax ruling affects you.
The good news? Queensland has brought in permanent relief for GP practices. The challenge? Not every medical practice qualifies, and the rules are far more complex than most practice owners realise.
Key Takeaways
- Queensland GP practices are now permanently exempt from payroll tax on payments to contractor and employee GPs from 1 December 2024.
- Specialists and allied health practices still face payroll tax liability on contractor arrangements, with potential back taxes of up to five years.
- The Thomas and Naaz court case established that typical contractor arrangements can trigger payroll tax obligations.
- Proper structuring and expert advice can help you avoid six-figure tax bills and penalties.
What Changed in the New Medical Practice Payroll Tax Ruling
For decades, medical practice owners believed their contractor arrangements were safe from payroll tax. That belief was shattered in 2021 when the Thomas and Naaz court case confirmed that payments to contractor practitioners could be classified as wages subject to payroll tax medical practice obligations.
The ruling sent shockwaves through Australia’s healthcare sector. Over 7,400 medical practices suddenly faced potential payroll tax exposure, with some practices facing backdated bills dating back five years. The financial impact was immediate and severe; practices that had never registered for payroll tax found themselves owing hundreds of thousands of dollars, plus penalties and interest.
Queensland responded with an amnesty period from 1 July 2018 to 30 November 2024, giving GP practices temporary relief. Then, in December 2024, the Queensland Government made the exemption permanent through the Revenue Legislation Amendment Bill 2024, offering certainty to general practice medical businesses across the state.
But here’s what many practice owners don’t realise: the exemption only covers GPs and GP registrars. If you operate a specialist practice, dental clinic, physio practice, or employ allied health professionals under contractor arrangements, the payroll tax for medical practices still applies.
How Payroll Tax for Medical Practices Works in Queensland
Payroll tax is a state-based tax on wages. In Queensland, businesses pay 4.75% on their total Australian wages once they exceed the tax-free threshold of $1.4 million annually (for 2025-26).
Traditionally, medical practices didn’t worry about payroll tax because doctors worked as independent contractors running their own businesses. The practice provided rooms and administrative support, but the doctors billed patients directly – or so the thinking went.
The revenue authorities saw it differently. Under Queensland’s Payroll Tax Act 1971, payments made under a “relevant contract” are treated as wages, even if the practitioner operates their own ABN or company structure.
A relevant contract exists when:
- The practitioner provides medical services to patients
- The medical centre gives patients access to those services
- The medical centre engages the practitioner to serve patients on its behalf
- The centre has operational or administrative control over the practitioner
That last point, operational control, catches most practices. If you roster doctors, require them to follow your protocols, advertise their services, collect Medicare payments on their behalf, or control how they interact with patients, you’ve likely got a relevant contract on your hands.
The Queensland GP Exemption Explained
From 1 December 2024, Queensland medical practices don’t pay payroll tax on wages paid to:
- GPs registered in the specialty of general practice
- GP registrars on an accredited training pathway
The exemption applies whether the GP is an employee or contractor, and covers services provided in-clinic or via telehealth. It’s automatic, so you don’t need to apply for it.
If your practice registered for the amnesty by the November 2023 deadline, you’re covered from 1 July 2018 onwards. Most practices no longer need to make voluntary disclosures, with the Queensland Revenue Office confirming this simplified approach in February 2025.
Why This Matters for Your Medical Practice in 2026
Queensland’s permanent exemption for GPs represents a massive financial win for general practices. A practice paying five contractor GPs $200,000 each annually would save $47,500 per year in payroll tax, money that can go towards better patient care, staff wages, or equipment upgrades.
But if you’re running a specialist practice, the numbers work in reverse. That same calculation means you could be liable for $47,500 annually in payroll tax you might not have budgeted for. Multiply that by five years of potential back taxes, and you’re looking at $237,500 plus penalties and interest.
The Queensland Revenue Office can audit payroll tax compliance for the current financial year plus the previous four years. With the Thomas and Naaz precedent firmly established, revenue authorities across Australia have ramped up compliance activity targeting medical and healthcare practices.
Here’s what’s at stake:
- Immediate liability on current contractor payments
- Backdated assessments for up to five years
- Penalties for failure to register and lodge returns
- Interest charges on unpaid amounts
- Ongoing compliance costs for payroll tax registration and lodgement
And it’s not just specialists facing exposure. GP practices operating in other states face different rules. NSW, Victoria, and South Australia only offer partial exemptions based on bulk-billing thresholds, while Western Australia uses entirely different tests.
How to Protect Your Medical Practice from Payroll Tax Exposure
The first step is understanding your current position. Review your contractor arrangements with all practitioners (GPs, specialists, nurses, allied health professionals) and assess whether these arrangements create relevant contracts under the payroll tax medical practice rules.
Look at your service agreements, paying particular attention to:
- How practitioners are rostered or scheduled
- Who collects patient fees and Medicare payments
- What operational control the practice exercises
- Whether the practice advertises practitioner services
- Payment structures and revenue-sharing arrangements
For Queensland GP practices, confirm you’re correctly claiming the exemption in your payroll tax returns. Even though the exemption is automatic, you need to report it properly to avoid compliance issues.
For specialist and allied health practices, here’s where professional advice becomes critical. Some practices have successfully restructured their arrangements to fall outside the relevant contract provisions, typically by:
- Implementing genuine tenancy arrangements where practitioners rent rooms directly
- Ensuring practitioners collect their own Medicare payments
- Removing operational control elements from agreements
- Establishing a clear separation between the practice business and practitioner businesses
But here’s the catch: Queensland has anti-avoidance provisions that can unwind restructures designed purely to avoid payroll tax. The structure needs to reflect genuine commercial reality, not just tick boxes on paper.
Smart practice owners are taking these steps now:
If You Run a Queensland GP Practice
Verify you’re claiming the exemption correctly and keep your service agreements on file. Document that your practitioners are GPs or GP registrars registered with AHPRA.
If You Run a Specialist or Allied Health Practice
Engage an accountant who specialises in medical practice structuring to review your exposure. Don’t wait for a revenue office audit letter, by then, your options are limited, and the financial damage is done.
If You’re Expanding Across State Borders
Understand that each state has different payroll tax rules for medical practices. Victoria, NSW, and SA offer bulk-billing exemptions with specific thresholds you must meet.
Tax Planning Strategies That Work for Medical Practices
Beyond payroll tax, 2026 brings opportunities for medical practice owners to strengthen their financial position. Smart tax planning can offset some of the payroll tax burden, or help you invest the savings from Queensland’s GP exemption.
Maximise your 10 tax deductions for medical professionals, including continuing professional development, medical indemnity insurance, and equipment purchases. These deductions reduce your overall tax bill and improve cash flow.
Consider your business structure carefully. Many practices operate through companies or trusts, which can offer asset protection and tax planning flexibility. But the wrong structure can create compliance headaches or fail to deliver the expected tax benefits. This is where understanding how accountants save businesses money becomes crucial; the right advice pays for itself many times over.
Take advantage of instant asset write-offs and depreciation for medical equipment. Practices investing in diagnostic equipment, fit-outs, or IT systems can often claim significant deductions that reduce taxable income in the year of purchase.
Don’t forget superannuation strategies. Medical practice owners can make concessional contributions up to $30,000 annually, reducing their taxable income while building retirement savings. For high-income practitioners, this represents substantial tax savings.
Getting the Right Support for Your Medical Practice Tax Obligations
The payroll tax landscape for medical practices has fundamentally shifted. What worked five years ago might expose you to significant financial risk today.
Queensland’s permanent GP exemption offers real relief for general practices, but you need to claim it correctly and understand its limitations. For specialist and allied health practices, the exposure remains real and substantial.
Spark Accountants specialise in helping Brisbane medical practice owners navigate complex tax obligations, structure their businesses efficiently, and implement strategies that protect their financial position. Our team understands the nuances of payroll tax for medical practices and stays current with every ruling and exemption across Queensland and Australia.
Whether you need a payroll tax review, business structure advice, or comprehensive accounting and tax services, we’ve got you covered. Book a consultation today and get certainty around your payroll tax position.
