Payroll tax imposition to affect dental practices and patients

A new way of applying payroll tax to dental practice could result in inflated fees, impacting patients’ ability to afford vital treatment, the ADA has warned.

Just as the Australian Medical Association has warned with doctors and its impact on patients, the move by state revenue offices to update an interpretation of an existing law would lead to financially devastating retrospective payroll tax penalties for dentists, as well as increased dental fees and even practice closures.

The ADA is urging the state and territory governments to rethink new guidance which suggests medical and dental practice operators might need to make provisions for payroll taxes of around 5.45% (NSW rate), dating back five years.

The ADA is committed to do what it can to address the issue and so far, has sought and obtained advice from lawyers who specialise in payroll tax on recent case law and findings, as well as writing to relevant ministers and revenue authorities, and meeting with certain revenue authorities to convey the ADA’s concerns. In addition, the ADA has contacted key parliamentary representatives to highlight that dentists needs to be fully considered and treated no less favourably than GPs around payroll tax audits.

Members can also access a webinar via the CPD Portal called Payroll Tax: How this impacts SFA's between dental clinic operators and dentists

More work is planned to deal with this challenge for members and the profession including:

- Readying materials including a template letter that will form the basis of a campaign where members will be encouraged to contact their state MP to express their concerns.

- Considering what options legal are available for negotiating a more appropriate outcome.

- Additional educational content on the issue.

What this payroll tax change could mean for dentists and patients

Independent contractor dentists working under a service facility agreement may be deemed employees for the purposes of payroll tax, leading to sudden and retrospective liabilities for practice operators, and uncertainties around their self-assessment.

At a time when the Australian Senate is examining access to dental services in Australia, cost-of-living additions like this by state and territory governments will be unpopular with practitioners and their patients who’ll need to pay more to cover the extra costs.

Dentists haven’t passed on fee increases recently. The ADA’s Dental Fees Survey shows that on average, fees charged by general dental practitioners increased by only about 2.14% between 2017 and 2022 – a period in which inflation increased by 14.5%.

“Deemed payroll taxes on non-employee dentists would be a huge blow to those dentists, practice operators and the patients they serve,” said ADA CEO Damian Mitsch.

“Some dentists are already struggling to keep their practices going as we recover from the business impacts of COVID-19 and costs rising with inflationary pressures. Unexpected tax liabilities would only make things worse and may precipitate dental practice closures.”

He added: “We’re calling on MPs to support a payroll tax amnesty for all medical clinics including dental ones, proposed by the NSW Opposition.

“Also, the new interpretations lack clarity, especially for practice operators who had, to their knowledge and according to professional advice, always been complying with payroll tax regulation.

“There are dental clinics that are now contemplating closure or increasing their prices to cover what they may be forced to pay out in future and going back five years.

“This benefits no-one, reduces the access to much needed dental care and further adds to costs faced by families.

“To-date both the Queensland and South Australian Governments have implemented amnesties to support medical GPs - however none have yet contemplated the impact of the measures on other frontline health clinics like dental clinics.

“Governments should ensure dentists are included in any consultations and adjustments to their planned approach,” added Mr Mitsch, “because they are affected in the same way as GPs, and with comparable foreseeable effects on public health.”