Medical Practice Payroll Tax

The New Medical Practice Payroll Tax Ruling: What Changed and What It Means

Quick answer

There isn't one single new ruling, there's an ongoing chain of state responses to the Thomas and Naaz case, which confirmed that payments a medical centre makes to contractor GPs can count as wages under each state's relevant contracts provisions. Since that decision, Queensland, NSW, South Australia, Victoria and the ACT have each introduced their own guidance, and most have moved from a temporary amnesty to an ongoing exemption or rebate for GP wages tied to bulk billing. The rules differ by state and change periodically, so what applies to your practice depends on where it operates and its current bulk-billing rate.

Illustration of a medical practice owner and payroll specialist reviewing a payroll tax ruling affecting contractor GP payments across Australian states

If you run a medical centre with contractor GPs, you've probably heard some version of "there's a new payroll tax ruling that affects doctors." That's true, but it understates what's actually happened. A single NSW case reshaped how every state revenue office looks at contractor GP payments, and the response since has been a rolling series of state-by-state rulings, amnesties and exemptions rather than one fixed rule. Here's what the case actually decided, how each state has responded, and what it means for a practice reviewing its contractor arrangements today.

The Case That Started It: Thomas and Naaz

Thomas and Naaz Pty Ltd operated medical centres in Western Sydney. Like a large share of Australian general practices, it engaged GPs as contractors rather than employees. Under the billing arrangement, GPs retained roughly 70% of patient and Medicare billings, with the remaining 30% or so paid to the practice as a service and administration fee. Revenue NSW assessed payroll tax of close to $800,000 on the basis that the payments flowing to the GPs were, in substance, wages.

The matter went through three stages: the NSW Civil and Administrative Tribunal in 2021, the Tribunal's Appeal Panel in 2022, and finally the NSW Court of Appeal, which in March 2023 refused leave to appeal, finding no error of law in the earlier decisions. At every stage, the finding held: even though the money originated from patients and Medicare rather than the practice's own funds, the payments the practice made to the GPs were captured as wages under the state's relevant contracts provisions, and none of the statutory exemptions applied on the facts. Thomas and Naaz built on an earlier Victorian case, The Optical Superstore Pty Ltd v Commissioner of State Revenue, where the High Court refused special leave to appeal in February 2020, which had already established a broad reading of "relevant contract" for service-fee and tenancy-style arrangements more generally.

Why "Relevant Contracts" Matters

Payroll tax legislation in most Australian states and territories includes "relevant contract" provisions, modelled on section 32 of the Payroll Tax Act 2007 (NSW), that can deem payments under certain contracts for services to be wages, even where no formal employment relationship exists. A handful of statutory exemptions apply, including where the contractor provides services to the public generally as part of their own independent business, but Thomas and Naaz confirmed these exemptions are read narrowly. Factors that count against an exemption include the practitioner being unable to refuse patients allocated to them, payments flowing through the practice rather than directly between patient and practitioner, and any exclusivity restriction on the practitioner working elsewhere.

This matters beyond general practice. The same relevant contracts logic can apply to allied health clinics, specialists, and other service-based businesses that engage contractors on a similar fee-split model, which is worth keeping in mind even if your practice isn't GP-led.

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How Each State Has Responded Since

Following Thomas and Naaz, state and territory revenue offices moved to clarify how relevant contract provisions apply to medical centres specifically, generally starting with a temporary amnesty and, in several states, followed by an ongoing exemption or rebate tied to bulk-billing levels. The table below summarises the general shape of each state's position as at September 2026. Ruling numbers, thresholds and dates are updated periodically, so treat this as a starting point and confirm the current wording directly with the relevant revenue office or your accountant before relying on it.

State	Guidance issued	General position as at September 2026
NSW	Revenue NSW Commissioner's Practice Note on relief for medical centres	Relief for unpaid payroll tax on GP payments before September 2024, and an ongoing rebate for contractor GP wages where bulk-billing rates meet a set threshold. GP wages only, not nursing, reception or allied health staff.
Queensland	Queensland Revenue Office public ruling on relevant contracts for medical centres	A temporary amnesty for contracted GPs was followed by a permanent exemption for GP wages, given legislative effect through 2024 and 2025.
South Australia	RevenueSA revenue ruling on the medical industry	An amnesty covering liabilities to 30 June 2024 was followed by an ongoing bulk-billing-proportional exemption for GP wages, covering both employee and contractor GPs.
Victoria	State Revenue Office Victoria revenue ruling on relevant contracts for medical centres	Relief extended through to mid-2025, then an ongoing exemption for GP wages tied to fully bulk-billed consultations.
ACT	ACT Revenue Office guidance for designated medical practices	A temporary amnesty was replaced by a permanent exemption for GP wages tied to bulk-billed, DVA and workers compensation services.
WA, Tasmania, NT	No GP-specific ruling identified	Ordinary relevant contract rules continue to apply, so each contractor arrangement needs individual review against the general law rather than a published concession.

This table summarises general, publicly reported positions and is not exhaustive or legal advice. Exemptions typically apply to GP wages specifically, and usually not to nurses, reception staff, allied health practitioners or specialists engaged on a similar model. Always check the current ruling on your state or territory revenue office's own website, since thresholds, dates and ruling versions are revised from time to time.

What This Means for Contractor Agreements

Even in a state with a published exemption or rebate, that relief is generally narrow, usually GP wages only, usually conditional on a bulk-billing threshold, and usually silent on every other role in the practice. Nurses, reception staff, practice managers, allied health practitioners and non-GP specialists engaged as contractors can still fall within the ordinary relevant contract rules, regardless of what applies to the GPs alongside them. A practice that has confirmed its GP arrangements are covered by a state exemption hasn't necessarily reviewed the rest of its contractor base.

It's also worth checking whether any historical exposure was actually extinguished by an amnesty or merely paused. Some states' relief measures wrote off unpaid tax up to a certain date; others simply paused enforcement while the practice's position was reviewed. Those aren't the same outcome, and it's worth confirming which one applies to your practice's own history before assuming the matter is closed.

Multi-state practice? Each jurisdiction needs its own review

A practice operating across more than one state can be exempt in one and fully exposed in another under the same contractor model. Our medical practice payroll outsourcing service reviews contractor arrangements against each state's current rules, not a single national assumption.

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Reducing Payroll Tax Exposure

There's no fixed template that guarantees a contractor arrangement sits outside the relevant contract provisions, because every state revenue office looks at the substance of how the arrangement actually operates, not just the wording of the agreement. That said, the factors that came up repeatedly across Thomas and Naaz and the rulings that followed it include whether the practitioner can genuinely refuse patients and set their own hours, whether billing and payment flow directly between the patient and the practitioner rather than being collected and redistributed by the practice, whether there's any clause restricting the practitioner from working at another practice, and whether the practitioner operates a genuinely independent business, with their own ABN, their own invoicing, and the practical ability to engage someone else to do the work.

None of these on their own is decisive, and a contract that looks correct on paper can still be assessed on how it actually operates day to day. This is exactly the kind of structural question worth reviewing alongside your accountant or through a payroll configuration review, ideally before a revenue office review raises it for you, since retrospective assessments carry both the tax shortfall and interest.

Payroll built around real compliance, not assumptions

We run payroll for medical practices across Australia, and structure our own service around getting the fundamentals right for each state your practice operates in, rather than treating payroll tax as a once-off question.

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Frequently Asked Questions

What is the new medical practice payroll tax ruling?

There is no single new ruling. Since the Thomas and Naaz decision confirmed that payments medical centres make to contractor GPs can count as wages under the relevant contracts provisions in each state's payroll tax legislation, most state and territory revenue offices have issued their own guidance and relief measures on how that applies to medical centres, and several have since replaced temporary amnesties with ongoing exemptions or rebates for GP wages tied to bulk billing. The detail differs by state, so a practice needs to check its own jurisdiction's current position rather than assume one national rule applies.

What did the Thomas and Naaz case decide about payroll tax for GPs?

In Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue, the NSW Civil and Administrative Tribunal, its Appeal Panel, and then the NSW Court of Appeal in 2023 all found that payments a medical centre made to contractor GPs, even though the money originated from patient and Medicare billings, were payments under a relevant contract for the performance of work. None of the statutory exemptions applied on the facts of that case, so the payments were treated as wages for payroll tax purposes and the medical centre as the deemed employer.

Which states have payroll tax relief for medical practices?

As at September 2026, Queensland, New South Wales, South Australia, Victoria and the ACT have each introduced some form of exemption or rebate for contractor GP wages, generally tied to a minimum proportion of bulk-billed consultations, after first offering temporary amnesties. Western Australia, Tasmania and the Northern Territory have not introduced an equivalent GP-specific exemption, so ordinary relevant contract rules continue to apply there. Details, thresholds and dates differ by state and are updated periodically, so always confirm the current position with the relevant revenue office.

Does payroll tax apply to bulk-billing GP payments?

It can, unless a specific state exemption or rebate applies. Several states now link relief specifically to bulk-billing proportion, on the reasoning that a high rate of bulk billing indicates the practitioner isn't genuinely setting independent fees for their own business. Where a practice's bulk-billing rate sits below the relevant state's threshold, or the state has no such exemption, contractor GP payments are assessed under the ordinary relevant contract rules, which is exactly what happened in Thomas and Naaz.

How can a medical practice reduce payroll tax exposure on contractor GPs?

There's no guaranteed structure, since every state revenue office looks at the substance of the arrangement rather than just the paperwork, but common factors reviewed include whether the practitioner can refuse patients and set their own hours, whether payments flow directly between patient and practitioner rather than through the practice, whether there's any exclusivity clause preventing the practitioner working elsewhere, and whether the practitioner genuinely operates an independent business with their own ABN, invoicing and ability to engage others. This needs to be assessed against current legislation and rulings in each specific state, so it's worth treating as a conversation with your accountant or the relevant revenue office rather than a one-off checklist.