Payroll tax for medical centres: what changed in NSW and Victoria, and what to check now

For years, most medical centre owners didn’t think about payroll tax in relation to their doctors. The GPs were contractors. They had their own ABNs and provider numbers, they paid a service fee to the centre, and payroll tax was something that applied to reception and nursing staff once the wage bill crossed the threshold. Then revenue offices started looking closely at how money moved through those arrangements, and the picture changed.

This guide explains why payroll tax became an issue for medical centres, what New South Wales and Victoria have done in response, and what practice owners should be checking in 2026. It isn’t tax advice for your practice. Every arrangement turns on its own facts, so use it to prepare for a conversation with your accountant or tax lawyer.

Why did payroll tax start applying to contractor GPs?

Payroll tax laws in each state include contractor provisions. In broad terms, they can treat payments made under a “relevant contract” for services as wages, even when the worker is not an employee. There are exemptions, and whether they apply depends on how the arrangement actually works.

In many medical centres, the patient’s fee or Medicare benefit is collected into the centre’s account, and the centre then pays the doctor their share after deducting a service fee. Revenue offices examined whether that flow meant the centre was, in effect, paying the doctor for services, and in several cases concluded that it was. Court decisions in recent years supported that approach on the particular facts involved.

The consequence for affected centres could be serious: payroll tax assessed on doctors’ payments, sometimes going back several years, plus interest and penalties. For practices operating on thin margins, particularly those bulk billing heavily, an assessment could exceed a year’s profit.

What did NSW do?

Revenue NSW’s Commissioner’s Practice Note CPN 036v2 sets out two forms of relief for medical centres engaging GP contractors:

1. An exemption for past unpaid tax. Unpaid payroll tax on wages paid or payable to relevant GPs before 4 September 2024 is exempt.
2. An ongoing rebate. For GP contractor wages paid or payable on or after 4 September 2024, a rebate is available where bulk billing thresholds are met.

The thresholds in CPN 036v2 are:

Location	Share of GP services that must be bulk billed
Metropolitan Sydney	At least 80%
Regional NSW	At least 70%

Revenue NSW notes that the relief covers contractor GPs only. It doesn’t extend to employee GPs or to other staff. Centres claiming the rebate need records showing their bulk billing percentages, locations and how the wages were calculated.

What did Victoria do?

On 22 May 2024, the Victorian Premier announced a package for general practice:

• Past periods. A payroll tax exemption on payments to contractor GPs for work completed up to 30 June 2024.
• A further 12 months. Relief to 30 June 2025 for practices that hadn’t already received an assessment on contractor GP payments.
• From 1 July 2025. A payroll tax exemption for payments for bulk-billed consultations by both contractor and employee GPs.

The State Revenue Office publishes medical industry guidance explaining how medical businesses should assess payroll tax for practitioners. If your practice is in Victoria, read it alongside your own arrangements.

What about the other states and territories?

Other states and territories have taken their own approaches, some through amnesties, some through legislative change and some without GP-specific relief. The position has changed several times since 2023, and it may change again. Rather than rely on a summary, check your own state revenue office’s current guidance and get advice from a tax specialist who works with medical practices.

A mid-point worth pausing on: if your practice is carrying a payroll tax assessment or a BAS debt right now and it’s weighing on your cash flow, you can see what finance options exist without a credit check.

How does this connect to bulk billing?

The NSW and Victorian relief is tied to bulk billing. That links payroll tax directly to a practice’s billing model, which is also being shaped by federal policy. The Department of Health, Disability and Ageing says practices in the Bulk Billing Practice Incentive Program, which started on 1 November 2025, bulk bill every eligible service for every Medicare-eligible patient and receive an additional 12.5% incentive on MBS benefits from eligible services, paid quarterly and split evenly between the practice and GP.

For a practice deciding whether to move to full bulk billing, the payroll tax position in its state is now part of the calculation, alongside patient demand, doctor preferences and the timing of the quarterly incentive. Our page on bulk billing and cash flow looks at the timing side.

A practical checklist for 2026

Use this to structure a review with your adviser:

1. Map the money flow. Who collects patient fees and Medicare benefits? Whose account do they land in? Who pays whom, and when?
2. Read your service agreements. Do they reflect how the practice actually operates day to day?
3. Check your bulk billing rates by location and period, if you’re relying on relief tied to bulk billing thresholds. Keep the reports.
4. Separate GP payments from other wages in your payroll tax calculations. Relief for GPs doesn’t cover nurses, reception or allied health.
5. Review past periods. Were any years exposed before relief applied? Is there an assessment, a voluntary disclosure or a risk you haven’t dealt with?
6. Consider allied health and other contractors. The contractor provisions aren’t limited to doctors.
7. Document your position. Keep advice, calculations and correspondence with the revenue office together.
8. Model the cash effect. Any payroll tax you do owe needs to be in your monthly forecast, not discovered at the annual reconciliation.

Illustrative scenarios

Both scenarios are illustrative only and describe no real practice.

A metropolitan NSW clinic bulk bills most of its patients. After reviewing its billing reports with its accountant, it confirms it meets the metropolitan threshold for the relevant period. It sets up monthly reporting of its bulk billing rate so it can see early if it drifts close to the line, and keeps payroll tax on nurse and reception wages separately budgeted.

A mixed-billing Victorian practice is weighing whether to move to full bulk billing. Its adviser models three things together: the change in patient fees, the quarterly BBPIP incentive, and the payroll tax effect of the exemption for bulk-billed GP consultations. The combined picture shows a better year overall, with a cash dip in the first quarter while the incentive catches up. The owners arrange a working capital facility before switching.

What if you’re buying a practice?

Payroll tax exposure travels with the business, or with the entity that owns it. If you’re buying a medical centre, ask for the vendor’s payroll tax position, any assessments or correspondence with the revenue office, and how the doctors are engaged. Our practice due diligence checklist and page on finance to buy a medical practice cover the wider process.

Questions to take to your adviser

• Do our current service agreements and payment flows fall within the contractor provisions in our state?
• Are we relying on relief that depends on bulk billing rates, and are our records strong enough to prove it?
• Is there exposure for past years that we haven’t addressed?
• Would restructuring how fees are collected change our position, and what would it cost to do?
• How should payroll tax be reflected in our monthly cash flow forecast?

Turning a tax headache into a plan

Payroll tax problems in medical centres usually aren’t about bad management. They come from rules that shifted underneath a long-standing way of working. If your practice has been assessed, or you’ve uncovered exposure for past years, the most important thing is a plan the practice can live with. For some owners that’s a payment arrangement with the revenue office. For others, especially where there’s property equity, it’s a loan that clears the debt in one go and replaces it with predictable repayments. We cover those options in more detail on our ATO and payroll tax debt page.

We look at these situations regularly and don’t shy away from them. Asking takes about 60 seconds, and there’s no credit check when you first enquire. We won’t hawk your details to a list of lenders or leave your phone ringing between consults. A real person reads what you’ve told us about your practice and calls you to talk it through. Please fill in the form accurately, including the amount owed, your state and any property available, so we can match you with the right option on that first call.

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