Opposition Leader Elizabeth Lee called this week on the ACT Government to exempt general practitioners (GPs) from payroll tax, which she said was having a devastating impact on Canberrans’ ability to access essential healthcare, as doctors had warned.

Local doctors were worried that the tax would affect their ability to keep their practices open, and were faced with a difficult choice between their conscience and their income, Ms Lee quoted them as saying. Some GPs were even contemplating leaving the profession or changing the workloads.

“The reality is this: Many Canberrans are going to be swamped with increases in fees just to see their doctor,” Ms Lee said. “This comes at a time when so many Canberrans are already hurting because of the cost-of-living crisis.”

Her motion was defeated on Wednesday by the ACT Government. Chief Minister Andrew Barr and Health Minister Rachel Stephen-Smith accused doctors’ groups like the Australian Medical Association (AMA) and the Royal Australian College of General Practitioners (RACGP) of fundamentally misunderstanding the tax payroll system and of seeking to minimise tax for their members.

Mr Barr said the government would improve access to free healthcare through reforms.

“The Canberra Liberals’ proposal to completely and permanently exempt GP contracts from payroll tax will do nothing to address the fundamental challenges faced by primary care,” Ms Stephen-Smith said. “It goes well beyond what any other jurisdiction is doing, and even what the RACGP has asked for.

“It is a knee-jerk response to an issue that is not actually new to the RACGP and AMA, which have indeed run a campaign of misinformation on this matter.”

The issue

Canberra doctors have been concerned about the payroll tax since April, when the RACGP warned that GPs could be forced to increase their bills by $15 or even $20 a consultation or close their clinics.

What the RACGP considers a new interpretation of payroll tax considers GPs as employees rather than as contractors, following an NSW court decision.

In 2021, the NSW Civil and Administrative Tribunal determined that medical practices must pay payroll tax on tenant GPs (doctors working from medical centres), classifying them as employees (the Thomas and Naaz decision). Other jurisdictions, including the ACT, have agreed with this ruling. But the RACGP states that GPs already pay a payroll tax on staff (receptionists, nurses, trainee doctors), and that most GPs are not employees: they rent rooms from a practice owner, work under independent agreements, and pay a percentage of their earnings to the clinic, rather than being paid a wage.

The government, however, states that there is no change in ACT legislation regarding the application of contractor provisions; the payroll tax dates back to 2018.

“This is not new,” Ms Stephen-Smith said. “This is not a change in interpretation. This is the law, and has been the law for many years.”

Dr Walter Abhayratna, president of the AMA ACT branch, had said the tax would worsen the GP shortage, make healthcare less affordable, and strain the already stretched public hospital system.

Canberra, Ms Lee noted, already had the longest emergency department wait times in the country; people were waiting years on elective surgery lists; doctors and nurses were leaving in droves; and the ACT had one of the lowest numbers of GPs per capita in Australia.

The ACT has the highest average out-of-pocket costs ($49.11) to see a GP compared to other jurisdictions (national average is $40.42), and this would make it worse, Ms Lee said.

A survey last week of Canberra GPs found that one-quarter would consider closing their practice, nearly half would consider selling up, and 80 per cent would have to increase their fees. That day, Ms Lee said, one GP clinic had advised patients they would have to increase their consultation fees by $5 because of the payroll tax.

“This decision by Andrew Barr will make it even harder for existing GP clinics to keep their doors open,” Ms Lee said.

The ACT Government denied that doctors would be faced with $15 or $20 increases. Ms Stephen-Smith said that quantum of fee increases were between $2 and $5; the higher charges were “overblown rhetoric”.

Ms Lee pointed out, however, that for a family of five, that $5 increase would mean paying $25 more.

Most GP healthcare centres would not be liable for any payroll tax, since they fell below the payroll tax threshold of $2 million – the highest of all states and territories, Mr Barr said. Furthermore, he said, some GP clinics have already registered, and have paid payroll tax for a long time.

Payroll tax was levied in every state and territory, and was an important source of government revenue, Mr Barr said.

“We know that it’s been tough for GPs, but we can’t start chipping away at our payroll tax system,” Ms Stephen-Smith said.

If the government granted doctors a tax exemption, Mr Barr said, he would then have to accede to the demands of every other group who did not want to pay tax.

It would lead to pharmacists, dentists, and physiotherapists wanting exemption, Ms Stephen-Smith said.

Government offers incentives for bulk billing

To address the impact of payroll tax on GP medical centres, the ACT Government announced in August that it would waive payroll tax liabilities until June, and not retrospectively access and collect payroll tax debts that would otherwise have been payable. That was the RACGP’s biggest concern, not a complete exemption from payroll tax, Ms Stephen-Smith said.

The government would extend time for compliance until 2025; and offer a two-year moratorium until June 2025 for health care businesses that bulk bill 65 per cent of their patients.

However, the RACGP, the AMA, the GP Alliance, the Primary Care Business Council, and doctors have said the 65 bulk-billing target was unrealistic and unachievable, Ms Lee said.

“The margins for practice owners are so small that any additional expense will cause clinics to close their doors.”

The Chief Minister disagrees, noting that the bulk-billing rate was as high as 69.1 per cent in 2020–21.It is currently the lowest in the nation, at 56 per cent of services; for that, Mr Barr blames the previous Federal Coalition Government for freezing Medicare rebates, making bulk-billing practices less viable.

“To get from 56 to 65 per cent is not that big a leap; every other jurisdiction and local health network is above 70 per cent,” he said. “If you’re bulk-billed, it costs zero, and that is an aspiration worth fighting for.”

“We know that Canberrans are delaying or avoiding seeking care because they can’t afford it – more than the national average,” Ms Stephen-Smith said.

Mr Barr said that Commonwealth Government policy would encourage bulk billing, making healthcare more affordable.

From 1 November, the Federal Labor Government will triple the bulk billing incentive for most common consultations for children under 16, pensioners, and other Commonwealth concession card holders.

This will support 157,000 eligible people at 105 bulk-billing practices in the ACT, and save patients up to $180 per year if their medicine can be prescribed for 60 days, Mr Barr said.

“The ACT Government will continue working with general practice to address their actual challenges and to build a more integrated, patient-centred health system for Canberrans,” Ms Stephen-Smith said.