Payroll Tax (Succession Planning) for Medical Businesses or Facilities Service Providers
We are aware of the recent focus of Australian Tax Authorities (Federal and State) in relation to Tax Bills being sent to medical practices and businesses regarding alleged outstanding sums owed to the relevant Tax Authority.
What are the Authorities looking for in their Determination?
This is occurring predominately due to the Tax Authority(ies) having analysed the business structure of a particular medical business and/or Facilities Service Provider and have determined that, for example, the Tenant-Doctors(TM) operating their independent business’ from a particular premises were, in the opinion of the relevant Authority, employees of the medical business’ physical premises.
Evidence commonly used by the Tax Authority may include, but not limited to:
Lack of a valid and binding Service Agreements outlining the relationship between the Landlord and Tenant-Doctor;
Lack of appropriate accounting systems in place;
Lack of marketing material, be it Signage or Advertising or similar;
Lack of a clear Offer to the Public in relation to the Tenant-Doctor’s offered services, such as a Website;
Lack of a definite separate business identity from the landlord and/or Facilities Service Provider, such as Letterhead, Business Cards and/or Website; and
Lack of registration of the commercial lease
amongst a number of additional important criteria.
Why are your Service Agreements Different?
It should be noted that our firm has a genuine professional respect for the traditional service agreements drafted by law firms for their clients.
However, we had to acknowledge that the traditional ‘way of doing things’ is no longer feasible in the current legal climate; often these agreements largely do not address State and Federal tax provisions.
Inevitably this has led to the current audit climate.
Unlike traditional service agreements, our Tenant-Doctor Service Agreements continue to be updated and carefully curated to meet the commercial and compliance needs of the service entity and practice.
For example, our Service Agreements are neither employment or contractor agreements. This format avoids the mischaracterisation of arrangements, which many corporate and Medical Practitioner contractor-agreements have fallen afoul in recent Court rulings.
Our Tenant-Doctor Service Agreement has the capacity to be conveniently and cost-effectively updated for a low-fixed price with legal, accounting and taxation oversight. This is critical if a practice seeks to have an agreement that meets the ATOs new ‘Safe Harbour’ contracting rules.
Through the use of technology platforms, our firm is able to ‘Sign-Off’ on our Tenant-Doctor Service Agreements in conjunction with the Client’s (approved) accounting and compliance systems, in a methodical and time-efficient manner.
What is it going to cost?
Our fees are based on a scale/range, subject to the number of Medical Practitioners requiring a Tenant-Doctor Service Agreement at a single location/Premises.
We have a reduced upfront Cost for the first year, and then in the second year onwards we charge a small annual subscription fee (payable monthly) where we will review the Service Agreements on a quarterly basis, and recommend amendments where required.
For example:
For a Single Medical Practitioner operating a Solo Practice, the approximate Upfront First Year Fee is $1,800.00 (plus GST), with subsequent years charged at approximately $396.00 p.a. (plus GST).
For a Premises with ten (10) Medical Practitioners, the approximate Upfront First Year Fee per Medical Practitioner is $630.00 (plus GST), with subsequent years charged at approximately $396.00 p.a. (plus GST) per each Medical Practitioner.
The above prices are subject to the client engaging an Approved accountant/accounting firm which is able to provide us with evidence that the said accountant/firm are familiar with the rules and regulations in relation to independent contracting as outlined in recent Case Law and Government rules/regulations, as well as being able to provide our firm with written advice that the Client has complied with (medical business-specific) accounting standards, per recent Case Law.
If a Client requires our firm to customise the service agreement, additional legal fees will be charged, above and beyond the fees mentioned in the above.
Do I only need your legally binding Tenant-Doctor’s Service Agreement?
No. In order for a Tenant-Doctor (or similar business structure) to maintain on-going legal compliance it has been deemed by relevant Authorities that the Tenant-Doctor or Healthcare Provider should have their Service Agreement prepared conjointly with an Accounting Professional to ensure the commercial and accounting nature of the Agreement’s are upheld.
The predominate reason that we are able to offer an effective and low-cost Tenant-Doctor Service Agreement is due to our dependance on being provided the required accounting data from an Approved Accounting Compliance Tool (“AACT”).
At the present time there is only one such AACT program that has been able to satisfy all of the criteria set by the relevant Tax Authorities, Case Law and Legislation/Regulations.
If, and when, alternative AACT programs become available and upon successfully passing a legal audit, administered by Hamilton Bailey, of all of the relevant legal criteria per the above; we will add them to our list of approved providers.
Why do I need my Accountant to ‘Sign-Off’ on the Service Agreement?
Principles reiterated in a draft Australian Tax Office contractor guide (Dec 2022), outlined that agreements that do not satisfy the above-mentioned criteria may not be suitable in accessing the new Safe Harbour Rules for Contractor Agreements.
Furthermore, if the Authorities reasonably deem the overall legal and tax structure as not appropriate per the terms outlined in the Service Agreement, then the agreement may be treated as a ‘sham contract’.
Our Tenant-Doctor Service Agreements were drafted to be able to comply with the Safe Harbour Rules, which require an Accountant representing the entity to Sign-Off in relation to the ‘Tenant-Doctor Service Agreement’.
It is in our understanding that an Accountant would usually not be in a position to ‘Sign-Off’ on a Service Agreement without being satisfied that all of the criteria set by the relevant Authorities in relation to independent contracting rules and regulations have been met.
We will be providing further detailed information on our new HBL website, which we are currently in the process of updating, and will be operational in the coming weeks.
In the mean time, please feel free to email our office your request for further information in relation to our Service Agreements on either the below Contact Form, or to: services@hamiltonbailey.com
Contact form - Service agreements
If you would like to discuss your interest in Service Agreements, please complete the form below and one of our staff members will contact you to discuss your matter.