My Medicare Patient Initiatives Risk Creating Significant Payroll and Income Tax Nightmares
Michael Wright time to get it right! :)
Thanks to The Medical Republic for interviewing me in order to highlight this critical issue.
Anything that prevents third parties from interfering in the doctor-patient relationship and creating a tax nightmare is in the public's interest.
The My Medicare initiatives need to clarify their incentives.
A key review recommendation suggests directing all current WIP provider payments to general practices rather than individual health professionals to enhance flexibility and agility in workforce recruitment and retention, particularly in rural and remote areas.
The review suggests implementing blended funding models that integrate incentive payments with fee-for-service models. This approach aims to address the growing need for managing complex chronic diseases and promoting multidisciplinary care.
The incentive, if adopted, will start to blur the lines between what is a practitioner and what is an AHPRA-defined general practice. See their advertising rules. Illegally, these initiatives may force practice owners (i.e. service entity owners) to work outside of their scope unless all practitioners become employees or subcontractors.
This is contrary to how the overwhelming majority of practitioners and practices operate in Australia.
Systemic Implications of the New Initiative:
1. Increased Medico-Legal Risks:
This initiative would systematically elevate medico-legal risks for the service entity
owners, potentially jeopardising practice viability.
2. Financial Burden:
The heightened medico-legal risks could lead to increased costs, which may result in
higher taxes and patient out-of-pocket fees across Australia.
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3. Healthcare System Consequences:
These financial pressures would likely overburden emergency departments and fragment care, compromising the overall quality and accessibility of healthcare services.
In summary, the new initiative poses significant risks to the sustainability of general practices, could drive up healthcare costs, and may exacerbate the strain on emergency departments, ultimately fragmenting patient care.
Understanding the Risks of Government Grants and Policies
If any state or federal government grant or policy encourages a third-party organisation, such as a service facility entity/Medical Centre/Practice, to instruct tenant doctors on how to practice medicine, it could lead to serious tax complications. The potential tax burden may outweigh the benefits of the additional funding offered.
This oversight can suddenly result in tenant doctors being treated as independent “subcontractors” deemed as employee-like contractor doctors for tax purposes, exposing them to significant payroll, income tax, and Fair Work liabilities.
Key Points to Consider:
1. Tax and Fair Work Liabilities in Medical and Healthcare Practices
Recent court decisions and state revenue office rulings indicate that medical and healthcare practices may face significant tax and Fair Work liabilities if arrangements classify doctors as contractors or employees rather than independent tenant doctors who rent consulting rooms and staff support.
Any such arrangement may make them liable for additional PAYG income tax, superannuation/employment obligations, and State-based taxes that may involve employees and/or relevant contracts.
2. Tenant Doctor Arrangements: Service Entity Role: The role of a service entity should be limited to providing facility and administrative support without influencing the Tenant DoctorsTM medical practice itself. It should not dictate patient care plans or treatment methods, as this could blur the lines between administrative support and employment. For the same reason, a service entity should NEVER employ GP registrars in their service entity. It changes the entire purpose of the entity from an administrative business to a medical business!
3. Contract Review: Incomplete advice is dangerous. This issue goes beyond payroll tax. It is essential to have all business structures, arrangements, and contracts carefully and comprehensively reviewed to ensure they align with genuine "Tenant DoctorTM" arrangements and recent rulings and laws. Recently, the ATO has stated that simply labelling your contractors, for example, as a “Tenant Doctor”, is not enough.
4. ATO and Regulatory Compliance Risk: Ensuring compliance with tax laws and regulations is vital. To provide national clarity and certainty, we have sought independent legal advice and have applied for a national ATO class submission for our clients to help clarify these issues and prevent further confusion among government departments, health funders, patients, and practitioners. After we confirm, we will pass this information on to the States for them to consider.
Proactive Measures to Avoid Policy Failure in Healthcare Initiatives
By addressing these concerns proactively, healthcare initiatives like My Health can prevent potential policy failures that could inadvertently create payroll and income tax issues for both patients and practitioners.
Before rolling out new initiatives, we encourage any health department around Australia to seek broader legal and tax consultation on how a healthcare initiative affects local practice and practitioners.
We are not lawyers; please seek independent legal and accounting advice. I'm sharing this information for general discussion purposes only.