Case Study: Payroll Tax Savings

Client Background

Our client is a successful dental clinic group operating multiple clinics across Victoria. In addition to their own clinics, they also held strategic investments in other dental practices. Like many healthcare businesses, they faced complex payroll tax obligations due to their structure and the nature of practitioner relationships.

The Challenge

The client faced a significant payroll tax assessment following an audit by the State Revenue Office (SRO). The audit raised several critical issues that threatened to impose a substantial financial burden on the business:

• Aggregated Payroll Grouping: The SRO sought to aggregate all clinics under common control, significantly increasing the payroll tax base
• Management Fee Inclusion: Management fees paid between entities were incorrectly included in the payroll tax calculations
• Practitioner Receipt Calculations: The SRO's calculations included errors based on total practitioner receipts rather than actual wages

The initial assessment threatened the financial viability of several clinics and would have resulted in a payroll tax liability of over $365,000.

Our Solution

TT Accountancy took a comprehensive and strategic approach to challenge the assessment:

1. Detailed Practitioner Assessment

We conducted a thorough, case-by-case assessment of each dental practitioner's relationship with the clinics. This involved analyzing contracts, working arrangements, and the true nature of each practitioner's engagement.

2. Clinic Exclusion Applications

We successfully applied for exclusions of certain clinics from the payroll grouping rules, demonstrating that they operated independently despite common ownership.

3. Practitioner Fee Exemptions

By carefully documenting the independent contractor status of many practitioners, we argued for exemptions of practitioner fees from payroll tax calculations.

4. Regional Rate Applications

For clinics operating in regional Victoria, we secured the application of lower regional payroll tax rates, providing immediate savings.

5. Error Identification and Correction

Our team identified critical calculation errors in the SRO's assessment, including the incorrect inclusion of GST and patient receipts in the payroll tax base.

6. Strategic Negotiations

We negotiated extensions for the objection process, allowing time to gather comprehensive documentation and build a robust case for our client.

The Results

Through our comprehensive approach and deep understanding of payroll tax legislation, we achieved:

• Complete reversal of incorrect practitioner fee inclusions
• Successful exclusion of two clinics from the payroll group
• Application of regional tax rates where applicable
• Correction of all calculation errors
• Establishment of clear guidelines for future compliance

Key Takeaways

This case demonstrates several important lessons for businesses facing payroll tax audits:

• Expert Knowledge Matters: Deep understanding of payroll tax legislation and exemptions can lead to significant savings
• Documentation is Critical: Proper documentation of practitioner relationships and business structures is essential
• Challenge Assessments: SRO assessments can contain errors and should be carefully reviewed
• Proactive Planning: Regular payroll tax reviews can prevent costly surprises during audits