If you own or manage a medical centre in Australia, the landscape around contractor doctors and payroll tax has fundamentally shifted. Following the landmark Thomas and Naaz ruling and subsequent crackdowns by state revenue offices, the way your clinic engages with GPs and specialists is under a microscope.
For years, standard practice was to engage doctors as independent contractors. The clinic provides the rooms and administrative support, takes a service fee, and passes the rest of the billings to the doctor. However, state revenue authorities are increasingly classifying these arrangements as "relevant contracts," meaning the payments made to your doctors could be deemed taxable wages.
Here is a look at what revenue offices are scrutinising in 2026 and why the paperwork sitting in your filing cabinet might not be enough to protect your practice.
The "Flow of Funds" Matters Just as Much as the Contract
One of the biggest misconceptions in medical accounting is that simply having a document titled "Independent Contractor Agreement" protects a clinic from payroll tax.
During an audit, revenue authorities look past the title of the agreement and examine the actual operational reality of the clinic—specifically, the flow of funds.
Whose bank account do patient fees and Medicare rebates land in first?
Does the clinic collect the funds and remit a percentage to the doctor, or does the doctor collect the funds and pay the clinic a service fee?
Does the clinic control the doctor’s hours, leave, or roster?
If the clinic collects the patient fees on behalf of the doctor and then pays the doctor their share, revenue offices have successfully argued that this constitutes a payment for services rendered to the clinic, potentially triggering payroll tax liabilities.
2026 State-by-State Shifts
The rules of the game are also changing depending on where your clinic is located. We are seeing a complex web of state-specific legislation in 2026. For example:
New South Wales: Recent changes have introduced payroll tax rebates, but these are strictly tied to clinics meeting specific bulk-billing thresholds (e.g., 80% in metro areas and 70% in regional areas).
Victoria: New exemptions and amnesty conditions are rolling out, changing how clinics need to report and structure their agreements moving forward.
Other States: Similar harmonisation efforts and audit activities are increasing nationwide.
Navigating these state-by-state thresholds requires a deep understanding of both your clinical software data (like Bp Premier or MedicalDirector) and your accounting ledger.
The Danger of "Set and Forget" Paperwork
Many practice owners drafted their service agreements years ago and haven't looked at them since. Standard templates downloaded online or provided by a colleague rarely reflect the nuances of your specific practice structure. If your written agreements do not perfectly align with how money actually moves through your clearing accounts, your clinic is at risk of retrospective tax bills and severe penalties.
How Santoro Grieco Can Help Protect Your Practice
At Santoro Grieco, we specialise in medical tax accounting. We understand the precise intersection between your clinical billing software, your business structure, and your tax obligations.
Because every medical centre operates differently, there is no one-size-fits-all answer to payroll tax. That is why we are currently offering free, no-obligation reviews of medical centre service agreements for clinic owners.
We can help you identify potential red flags in your flow of funds, review how your Medicare billing reconciliations are interacting with your contractor payments, and ensure your practice is structured for long-term compliance and profitability.
Don't wait for an audit letter to find out if your agreements are compliant. Contact the team at Santoro Grieco today to book your free service agreement review and secure your clinic’s financial future.
Disclaimer: This article is for general educational purposes only and does not constitute financial, legal, or tax advice. Payroll tax legislation is complex and highly dependent on individual circumstances and state jurisdictions. You should always seek independent professional advice tailored to your specific medical practice before making any structural or financial decisionss