Taking another look at the Optical Superstore litigation

In June 2020, we took a look at an emerging payroll tax issue (‘PRT’) that resulted from the Optical Superstore litigation – you may wish to have a look at our previous article here.

There has been much discussion about what the litigation means and how (and how broadly) it will be applied by Revenue Office’s around Australia to operating models routinely used in the medical/health services industry.

It’s fair to say that the picture is still somewhat unclear, but one would expect it won’t be for much longer.

A couple of developments since the Optical Superstore litigation are also worth noting.

Thomas and Naaz case

In September 2021, the NSW CAT handed down a decision Thomas and Naaz v Chief Commissioner of State Revenue (2021) (NSW CATAD 259) (‘Thomas and Naaz’) whereby the principles determined in Optical Superstore litigation were held to apply to a more traditional medical centre/GP operating model (agreed fee split, administration and collection services provided by medical centre with net of administration fee paid to GP). This decision and set of facts is closer to arrangements that are routinely used in the medical/health services industry. The Revenue NSW case summary can be viewed here. The case is on appeal and is yet to be heard.

ATOID 2011/87 withdrawn

Another case and related development was the High Court decision of early 2021 to not grant leave for an  appeal in the matter of  Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 . (‘Moffet’). We won’t revisit the case in this article but you can take a look at our previous summary from November 2020 – click here. The point we wish to highlight is that in August 2021 the ATO withdrew ATO ID 2011/87 ‘Superannuation Guarantee Charge: employment status of a medical practitioner operating from a medical clinic’. ATO ID 2011/87 had provided comfort that superannuation guarantee obligations did not apply to arrangements of the type used in the medical/health services industry. The decision in the Moffet case was given as the reason for the withdrawal. The ATO noted “…the position stated in the ATO ID is no longer current. It is inconsistent with the view…” expressed in Moffet.

The state of play?

Where are we at:

  • it is expected a uniform position in relation to the PRT profile of operating models used in the medical/health services industry will soon be adopted and announced by most Revenue jurisdictions. The position is likely to confirm the Optical Superstore and Thomas and Naaz outcomes;
  • whilst it may be hoped any position would only be ‘prospective’, that outcome is unlikely, and similarly, any concessional approach to penalties/interest on retrospective exposures may also prove to be wishful thinking; and
  • consideration of whether any change to the nature of arrangements may have a bearing on the PRT outcome will need to be closely considered in light of the final Revenue Office(s) position, legislative provisions and existing and future cases. For example:
    • whether simply changing the flow of money (e.g. where patient fees are paid directly to a medical practitioner or Medicare rebates assigned) alters the outcome. This type of change may be challenged by Revenue under 3rd party wage payment/ deeming provisions contained in PRT legislation;
    • whether any reduction in administrative or operational control by a medical centre over practitioners that practice at the centre would be sufficient to take an arrangement outside the scope of the ‘relevant contract’ provisions; and
    • whether the Revenue Office position confirms that a simple ‘service entity’ structure where a practitioner merely procures administrative services (and possibly rooms) from a service entity (of which the practitioner may directly or indirectly hold an equity interest) is not a relevant contract (meaning the flow of payments would not matter).Exactly how and where a line in the sand gets drawn between a simple service entity arrangement and the type of arrangements considered in the cases will prove most interesting.

As always, as this issue develops we will keep our readers informed.


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This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. Webb Martin Consulting Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.

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