Australian GP Alliance asks Treasurer on tax: ‘Why the hell are you doing it in the first place?’

Tim Pallas’ latest offer to GPs could undermine a state government tax in a move that’s prompted more anger and confusion.

A deeply unpopular tax on GPs has been thrown into chaos with Treasurer Tim Pallas quietly offering to waive fees for doctors facing the prospect of going under.

In a letter to peak doctor groups, obtained by the Herald Sun, Mr Pallas pledged to use his extraordinary powers to wipe fees in cases where a practice is facing closure due to the government’s retrospective payroll tax extension.

The move, which threatens to undermine the tax, has prompted more anger and confusion, as some struggling doctors would be forced to pay up while others were bailed out.

Mr Pallas’s pledge comes just weeks after doctors launched a campaign against the Allan government’s “draconian” tax grab by plastering posters across their clinics and enlisting patients to sign petitions.

Tim Pallas has quietly offered to waive fees for doctors facing the prospect of going under. Picture: David Geraghty

“As Treasurer I have previously used my ‘ex gratia’ powers to reduce or waive tax liabilities for organisations facing insolvency, where it is in the public interest to do so,” Mr Pallas said in the letter.

“This government has no interest in any GP clinic closing their doors, and I would be inclined to use my ‘ex gratia’ power to prevent that happening were any GP clinic to become insolvent as a result of a payroll tax liability (and the clinic had engaged with the SRO in good faith to try and reach a settlement).”

General practices already pay payroll tax on employees, including receptionists, nurses and training doctors, but it hasn’t applied to GPs because most doctors are not employees – they lease rooms from a practice owner and work under independent agreements.

Peak doctor groups say Mr Pallas’s offer didn’t go far enough, renewing calls for the Allan government to scrap the tax for good.

Australian GP Alliance (AGPA) deputy chair Mukesh Haikerwal said the government’s logic was flawed.

“The letter was disappointing because it’s basically saying that we’re coming after the tax but if we’re sending you broke, we’ll bail you out,” Dr Haikerwal said.

“The question is: why the hell are you doing it in the first place?

Dr Mukesh Haikerwal said the letter was disappointing. Picture: Jake Nowakowski

“This is a regressive tax that’s not actually going to raise the funds they’re expecting because they will end up paying ten-fold in providing services through the public hospital as a result of denying people local care from local experts.”

The Herald Sun is aware of one business owner that was recently hit with a tax bill of almost $800,000 across their three practices. 

A recent survey by the Royal Australasian College of General Practitioners (RACGP) found nearly 80 per cent of practices would need to charge higher consulting fees to pay back the tax.

Opposition Leader John Pesutto is urging Victorians facing financial strife due to state-imposed taxes to ask for a bailout. Picture: Josie Hayden

Victorians facing financial strife because of the state-imposed taxes are being urged to write to Mr Pallas to ask for a bailout.

Opposition Leader John Pesutto issued the callout on Tuesday saying Mr Pallas’s letter suggested a “corruption of Victoria’s tax system”.

“Basically Tim Pallas is saying that if our taxes under Jacinta Allan are sending you broke, then write to us and we’ll let you off the hook,” he said.

“Is Tim Pallas going to decide to spare you this harmful payroll tax because he likes you, or because you’re a Labor Party supporter, or maybe you live in a marginal Labor seat?

“He’s given no indication of what criteria he is going to employ to determine whether he decides to spare doctors this payroll tax. That’s not how our tax system should work.”

But outside parliament on Tuesday, Mr Pallas questioned the concerns raised by peak doctor groups that some clinics would go under.

Mr Pallas said not one GP had become insolvent during his time in government.

“There’s no evidence to demonstrate that and certainly no insolvency proceedings initiated by the SRO to demonstrate that that’s real, but if that is true I thought it was important that I spell out exactly what options would be available to GPs,” he said.

“They are the same options that are available to any other business that’s encountering difficulties.”

Mr Pallas said he really used his powers to wipe tax payments but has done so in the past for other industries, including construction businesses.

“The government looks at the fairness of the situation to make sure that we’re not extracting unreasonably from people who’ve not been able to be prepared and make adequate provision for it,” he said.

Mr Pallas said he would not scrap the payroll tax on medical services.

“If I make a special exception for GP practices, then I have to make other exceptions for other business in very similar material circumstances to GP practices,” he said.

“It would not be fair to every other taxpayer if I were to make a special exemption for GPs.”

But RACGP Victoria chair Anita Munoz said general practice was “seriously under threat”.

“The Treasurer’s offer does not provide the surety that general practices in Victoria need,” Dr Munoz said.

“While the Victorian Treasurer has offered to step in when general practices are facing insolvency due to this payroll tax grab, our practices and their patients need support much earlier than that.

“The Queensland government has committed to not pursuing retrospective liability and issued (a ruling) which shows support for independent practitioners working in general practice. We want the Victorian government to provide that same support and clarity.”

Opposition health spokeswoman Georgie Crozier said the “unfair tax” needed to be scrapped entirely.

“This is a clear admission by the government that it knows this retrospective health tax will close down GP clinics and drive up the cost of basic health care,” she said.

Mr Pallas said since 2014, there had been an average of less than nine investigations of medical services per year, and five investigations in this current financial year. 

In a statement on Monday, Mr Pallas said: “There has been no change to the way payroll tax is assessed or enforced in any sector – including payments made by medical centres to GPs.” “We will continue to work constructively with GPs, and encourage any clinic with an issue about an assessment to talk to the State Revenue Office.”