Certainty over Superannuation for Contractors

On the 28^th of October 2011 the ATO released “ATO ID 2011/87”. This Interpretative decision confirms that medical practitioners operating from a medical clinic, are not considered employees and therefore the compulsory 9% Superannuation Guarantee Charge (SGC) is not required to be paid by the clinic.

As always, it is important to know the facts, this ATO ID lists the facts as:

• The medical practitioner entered into an arrangement with the medical clinic.

• The practitioner provided a number of various medical services within the clinic.

• The practitioner was required to complete the work personally and could not delegate.

• The clinic provided the practitioner with furnished rooms in which to treat clients, necessary equipment and materials, and receptionist services.

• Fees paid by the practitioner's clients were not paid directly to the practitioner, but were instead paid to the clinic and deposited into an account maintained by the clinic. The account was subject to a fee splitting agreement.

• Upon the Practitioner providing a tax invoice to the clinic, the practitioner was distributed a set percentage of their client billings as per the agreement. No deductions were made from the amounts distributed to the practitioner.

• The clinic effectively kept the remaining percentage in consideration for their supply of services, premises and equipment.

• The arrangement between the practitioner and the clinic made no provision for annual leave or sick leave.

This is a fairly typical scenario in many medical clinics, and one of the key factors to keep in mind is that this does not relate to practitioners who are being paid wages, they will still be considered employees of the practice and as such subject to the usual employer / employee obligations. This is referring to the standard arrangement of the practitioner who has an ABN and invoices the clinic for a percentage of their billings.

This is a good result for both Practitioners and Practices, as it clears up the issue around the compulsory 9% SGC. There are still some outstanding questions around Payroll Tax and Workcover for these arrangements, but this is a good opportunity to review your contracts in relation to SGC, Payroll Tax and Workcover, to ensure you know your obligations.