Issues keep on rolling for medical clinics, car parking fringe benefits and NFPs

Webb Martin Consulting would like to provide an end of year summary regarding various tax issues that have being simmering along over recent years. All of these issues have been evolving for several years and are of widespread application. In this article, we will revisit and discuss the ‘state of play’ regarding when arrangements between medical practitioners and clinics will be subject to payroll tax. We also take a look at FBT issues raised by the ATO’s revised view of what is a commercial parking station and remind NFPs of looming governance obligations in the form of annual income tax exemption self-reviews.

Payroll tax and medical practitioners & clinics – still rolling

It is very frustrating to close out 2022 with no clear statement from any State or Territory Revenue Office as to how and when payroll tax ‘relevant contract’ rules will be applied to medical practitioners (including GP’s, dentists and a variety of other health professionals) engaged under service agreements with medical clinics.

Whilst it is expected guidance will issue in due course the delay to date seriously compromises the ability of taxpayers to approach their business affairs with any certainty.

The Victorian Revenue Optical Superstore litigation (now concluded) and NSW Revenue Thomas and Naaz litigation (currently pending outcome of an appeal) has seemingly delivered a basis to treat service agreements as relevant contracts and to impose payroll tax. This outcome challenges most business models which assumed, as the service agreements indicate a flow of services from a medical clinic to a medical practitioner, no payroll tax liability would exist for the medical clinic on any amounts paid to/received by a medical practitioner under the service agreement. In particular the Optical Superstore litigation disturbed the long held understanding regarding net remittance by a clinic to a practitioner of patient treatment fees less any service payable by a practitioner to the clinic for services provided including right to use premises and administrative and other support.

Despite the ‘certainty’ provided by the litigation many issues remain, including:

  • where patients’ fees are collected directly by a medical practitioner and from which any service fee due to the medical clinic under the service agreement is paid will Revenue seek to argue a liability exists? This is the most contentious outstanding technical issue. It requires anti-avoidance/3rd party wage payment provisions in the-payroll legislation to be overlayed across the interpretation of the relevant contract rules so far supported by the litigation;
  • will all Revenue jurisdictions with equivalent ‘relevant contract’ rules treat service agreements the same way;
  • will any retrospective relief be available, for example, will the position to be applied prospectively and if so from when;
  • what are implications for penalties and interest if no retrospective relief is available; and
  • how do the relevant contract exclusions apply in terms of:
    • when will the ordinarily renders services to the public exemption be available based on the revenue sources routinely derived by the practitioners in the different health industry professions?; and
    • when will the engages two or more persons exemption be available?

We hope the New Year brings clarity around many of these issues. We will keep readers informed as developments occur. Further background can be found in our February 2022 and June 2020 articles.

FBT and what is a commercial parking station – time to apply the new interpretation

In TR 2021/2 the ATO expressed a change in view as to what is a commercial parking station. A commercial car park that may not have a primary purpose of all day parking but that does provide all day parking will now be treated as a commercial parking station. Prior to TR 2021/2 if the primary purpose of a parking station was not all day parking, for example, supported by pricing structures intended to discourage all day pay parking, it was not treated as a commercial car park.

As a result of the change, if such a parking facility is located within the requisite 1km radius of employer provided parking it must now be factored into an assessment as to whether an employer has a car parking fringe benefits liability. At a practical level the change will result in many shopping centre car parks, hotel car parks, hospital car parks and regional airport car parks now being required to be treated as commercial parking stations.

The change took effect on 1 April 2022. Many employers will now be subject to a car parking fringe benefits liability for the 1st time in the 2022/23 FBT year.

The ATO position was seemingly settled until 29 March 2022 when the then Assistant Treasurer, Michael Sukkar, announced a consultation on the intended scope of what is a commercial parking station with a view to reverting back to the long held ATO position.

Following the change of Government in May 2022, it has been unclear what view the Albanese Government held.

In conjunction with our affiliate TaxEd, clarification was sought from both from the Government, Treasury and the ATO as to what position an employer should take in the 2022/23 FBT year.

We can confirm the ATO view, as outlined in TR 2021/2, should be followed for the 2022/23 FBT year and the Government has not, and is not expected to, further review this issue.

In a previous TaxEd article (‘FBT and car parking – get ready’) various considerations that may impact any such liability  were addressed. We recommend readers review the considerations raised in that article.

With the 2022/23 FBT rules settled, employers must revisit the application of the car parking fringe benefit rules in light of the change.

Assuming no exemption is available (noting small businesses with less than $50m turnover are generally exempt) the following compliance considerations arise:

  • whether a commercial parking station is located within a 1km radius of employer provided parking on 1 April 2022;
  • what is the lowest all day parking rate charged by that and other commercial parking stations within the 1km radius; and
  • the number of parking spaces provided by an employer.

Ensuring the most advantageous outcome can also potentially require an employer to seek a valuation of car parking benefits it provides. The valuation approach may produce a beneficial outcome where free or low- cost parking is located in close proximity to the employer provided parking.

Self-assessing income tax entities – compulsory annual self-reviews start soon

Another matter that should be on the governance radar for non ACNC income tax exempt entities (for example income tax exempt NFP sports clubs and community service organisations) is the looming need to lodge an annual self-review with the ATO confirming ongoing entitlement to income tax exemption.

This annual self-review process is likely to impact significant numbers of NFPs.

The details of information required by the ATO and lodgement process are yet to be settled.

Whilst the 1st lodgement will relate to the 2023/24 income year (due after 30 June 2024) it is recommended governing bodies of impacted organisations start to give thought to the issue of entitlement to exemption.

A logical starting point in determining whether an entitlement to income tax exemption exists includes:

  • a review of an organisation’s constitution, objects/purposes and other relevant clauses such as winding up clauses;
  • a review of activities the organisation currently undertakes; and
  • an assessment as to the alignment of the above with the requirements of the income tax exemption relied upon.


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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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