Payroll Tax and Allied Health: Restructuring Contractor Models After Thomas & Naaz
The payroll tax landscape for allied health practices in Australia has shifted decisively, and many multi-practitioner groups are exposed without knowing it. Following the Thomas and Naaz line of decisions and Revenue NSW Ruling PTA 041, payments a practice makes to contractor practitioners can be treated as taxable wages — even when those practitioners hold their own ABN, invoice the practice, and consider themselves independent.
This is a capability and evidence piece, not a promise of a specific result. It sets out what the case law actually decided, why allied health groups sit squarely in scope, and the compliant restructuring options a group can weigh — plus where a management partner like HealthPlex fits when the theory has to become billing systems, banking and agreements that hold up under review.
Why allied health practices are now in scope
State revenue offices have applied the “relevant contract” provisions of payroll tax legislation to healthcare businesses with growing confidence. Revenue NSW’s Ruling PTA 041 makes the position explicit: medical and allied health centres that engage practitioners to serve patients “for or on behalf of” the centre are likely party to a relevant contract, and the payments flowing to those practitioners are deemed wages once grouped Australian wages cross the threshold.
The pivotal authority is Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40. The operator ran three medical centres and charged practitioners an administration fee of 30% of the Medicare benefits they earned, in exchange for rooms, administrative and nursing support and billing. Revenue NSW assessed the arrangement, and the Tribunal upheld payroll tax of $795,292 on those payments. On 14 March 2023 the NSW Court of Appeal dismissed the operator’s application for leave to appeal — the practitioners’ clinical work was found to be an inseparable part of the centre’s own business, and the matter is now settled law.
The GP relief does not cover allied health
Some practice owners assume the relief announced for general practice protects them too. It does not. Revenue NSW’s Bulk Billing Support Initiative, available from 4 September 2024, gives a payroll tax rebate on contractor GP payments only — and only where the centre bulk bills at least 80% of GP services in metropolitan Sydney, or 70% elsewhere. Revenue NSW states plainly that the rebate does not extend to non-GP specialists or allied health service providers.
That means physiotherapy, psychology, podiatry, exercise physiology and similar groups sit in scope with no equivalent shield. If your model collects patient fees centrally and pays practitioners a share of billings, you should assume you are exposed until an adviser confirms otherwise. Our companion note on payroll tax and allied health unpacks how the deeming provisions read against typical clinic arrangements.
How a compliant restructure can work
The lesson from Thomas and Naaz cuts both ways. The Court of Appeal accepted that where practitioners are genuinely paid directly by patients and remit a fee to the centre — rather than the centre collecting and splitting billings — the arrangement can fall outside the relevant contract net. Substance, not the label on the agreement, decides the outcome. These are the levers an allied health group can test with its advisers:
Patients pay the treating practitioner directly, and the practitioner remits a defined service and facilities fee to the practice — the inverse of the billings-split model that triggered the deeming provisions in Thomas and Naaz.
Genuine practitioner-services agreements should document patient ownership, clinical autonomy and the freedom to service the public generally — and day-to-day operations must actually align to those terms, because PTA 041 tells auditors to look through a mislabelled tenancy.
PTA 041 sets out exemptions worth testing engagement by engagement — services ordinarily provided to the public generally (which requires a determination from the Commissioner) and contracts of no more than 90 days in a financial year — while true employees stay correctly on the payroll.
A private ruling on a restructured model, paired with provisioning for prior-year exposure rather than assuming it away, turns an unquantified liability into a managed one — the difference between an assessment you can survive and one you cannot.
Why execution, not theory, is where groups stall
Reversing the money flow is simple to describe and hard to run. It means new billing systems, separate banking, practitioner onboarding and governance that all move together — and an arrangement that looks compliant on paper but operates the old way fools no auditor. This is precisely the territory HealthPlex works in. Through our allied health management model, we help groups redesign practitioner arrangements, systems and compliance frameworks so the documented model and the lived model are the same thing.
The same operating discipline underpins the way we run coordinated, outcomes-focused care across our network — the approach we describe in our note on value-based care in workers’ compensation. For owners weighing whether to rebuild in-house or hand off the back office, our perspective on clinics joining networks sets out how a managed partnership absorbs the operational and compliance load while principals stay focused on clinical care.
What this means for practice owners
If your group collects patient fees centrally and pays practitioners a share, assume you are in scope until proven otherwise, and do not rely on the GP-only relief to cover you. Restructuring is achievable, but it is a programme — agreements, systems, banking and governance moving in step — not a single clause change. Get advice specific to your facts, cost the prior-year position honestly, and build the operating model to match the paper. Groups exploring that path can talk to HealthPlex or see how our network operates across our clinics and locations.
Payroll tax and allied health: common questions
Does payroll tax apply to allied health contractors?
It can. Under the relevant contract provisions explained in Revenue NSW Ruling PTA 041, payments to practitioners engaged to serve patients for or on behalf of a practice are deemed taxable wages once grouped Australian wages exceed the threshold ($1.2 million in NSW for 2025–26, taxed at 5.45%), regardless of the practitioner holding an ABN.
What did Thomas and Naaz actually decide?
In Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40, a medical centre operator charged practitioners 30% of their Medicare billings for rooms and support. The Tribunal upheld payroll tax of $795,292 on those payments, and on 14 March 2023 the NSW Court of Appeal dismissed the operator’s application for leave to appeal, settling that such payments are taxable wages.
Do the GP payroll tax reliefs cover allied health?
No. Revenue NSW’s Bulk Billing Support Initiative (available from 4 September 2024) rebates payroll tax on contractor GP payments only, and only where the centre bulk bills at least 80% of GP services in metropolitan Sydney or 70% elsewhere. Revenue NSW confirms it does not extend to non-GP specialists or allied health providers.
Does a tenancy or room-rental agreement remove the liability?
Only if it reflects genuine practice. PTA 041 directs revenue offices to look at substance, not labels. A model where practitioners are paid directly by patients, own their client relationships and operate independently can fall outside the provisions — but an arrangement that merely relabels a relevant contract will not.
What exemptions can an allied health group test?
PTA 041 includes exemptions such as services ordinarily provided to the public generally (which requires a determination from the Commissioner) and contracts of no more than 90 days in a financial year. Each practitioner engagement should be tested individually against the facts, with advice, before any exemption is relied upon.
Alex W. writes on healthcare operations, compliance and workforce strategy for HealthPlex, drawing on the group’s experience managing allied health practices at scale across NSW, ACT and QLD.
General information about payroll tax as it applies to allied health practices in Australia; not legal, tax or financial advice. Payroll tax rulings, thresholds and exemptions change and vary by state — confirm current details with the relevant state revenue office and your own advisers before acting.