(First published in Australian Doctor Magazine - March 2020)
Key takeaway: It is critical to review your processes now and ensure that all your Medicare compliance requirements are being properly satisfied and documented, in order to avoid any detrimental audit outcome.
Since the High Court of Australia’s decision not to grant special leave to appeal the Optical Superstore Victorian payroll tax case, it appears that state revenue authorities are ramping up their investigation of medical, dental, optometry and other allied clinics.
In the absence of an alternate court outcome, it appears larger practices could face significant payroll tax exposure on payments of net amounts collected on behalf of their contractor doctors, with a five-year retrospective window for claims.
This is a growing area of concern for some and we have heard of six-figure assessments by state revenue offices against general practices, in circumstances where the practice has no recourse against the contractor doctors.
While it is too soon to make definitive declarations, this activity could require changes to contracting arrangements in practices: rearrangement of how funds flow between patients, doctors and the practice itself.
Ray of hope
If the recent bushfires, then floods and now the COVID-19 outbreak weren’t enough to stretch the resources of general practice, we are now seeing increased compliance audit activity from the Federal Government focused on GPs and practice owners.
It is not difficult to see why many practitioners may feel ‘under attack’ in the current environment.
This audit activity has focused on three key areas:
1. Medicare audits
The Federal Government originally announced increased Medicare audits back in 2018. While recently the Department of Health has suggested these audits will be scaled down as the health system deals with the COVID-19 crisis, they are unlikely to disappear, particularly amid the upheavals around the new temporary telehealth items.
In the past few years, we have seen very substantial repayments being made to Medicare, due to non compliant activities. There has also been suspensions or permanent bans on using certain billing codes for some doctors and, in extreme cases, jail sentences for fraud.
Audit activity is not focused solely on over-billing — it is easy to be caught out with documentation requirements around standard billing practices and procedures.
Keeping on top of all your compliance requirements is now a major component in protecting yourself from an adverse audit outcome.
Some quick measures to improve your armour in this area include:
- Review and ensure that all your substantiation requirements for any patient consultations have a fully compliant trail of documentation and record-keeping.
- Review all your billing processes to ensure they are being correctly measured and processed with appropriate billing codes.
- Practice owners should also consider having support mechanisms (process manuals, staff training, etc.) in place to ensure that all team members have a good understanding of Medicare compliance requirements.
- Seek support from your trusted colleagues, specialist advisers and insurers, especially at the early stages of an audit.
- Where and when appropriate, try to negotiate with the auditor on the final assessment amount, including holding discussions around flexible repayment options to assist with your cashflow
2. Pathology rental audits
Growing number of practice owners who sublease space to providers of pathology and diagnostic imaging services have recently been receiving ‘information requests’ from the Department of Health in respect of their current rental-arrangements.
This audit activity is directed at instances of 'worryingly high rents'. In some cases, this has been rent being paid for collection centres that don’t actually collect specimens.
The revised Red Book requirements should be reviewed for all existing rental agreements, as these rules provide guidance on the prohibited practice provision laws that are currently enforceable, as well as an outline of the department’s compliance and enforcement strategy in this area.
Breaching these rules not only carries substantial financial penalties but includes criminal offence provisions.
Some quick measures to improve your armour in this area include:
- Consider obtaining a market rental appraisal on the leased out space.
- Review your current rental agreement and ensure that the rent is no more (or less) than 20% of the market value as per the current Red Book guidelines.
- Review and ensure that all supporting documents inr elation to the rental arrangement are properly kept in case of an audit.
Key takeaway: It is critical to review your current rental arrangements for pathology subleases.
3. Payroll tax audits
We are urgently seeking clarity around arrangements that will remove the ongoing exposure to payroll tax obligations, in the absence of further court action.
Key takeaway: If contacted by a state revenue office, seek advice on your position before responding.
If there is any ray of hope in the midst of these troubling areas, we note that the recent federal and state governments' support measures will provide some temporary financial relief in the following areas:
- Cashflow boost to employers, including:
- Tax-free payments of up to $100,000 on PAYG withholding credits.
- 50% wage subsidy (capped at $21,000) on each apprentice/trainee wages.
- Payroll tax concessional measures available for most states, including NSW, Victoria, Queensland and WA.
- Instant asset write-off deductions of up to $150,000.
- Assistance with ATO payment deferrals by up to four months.
- Improved ability to change your GST reporting to a monthly basis to fast track access to GST credits.
- Remission of interest and penalties applied to tax liabilities incurred after 23 January 2020.
- Low-interest payment plans on existing and ongoing tax liabilities.
- Additional lending support packages introduced by the banks.
If you have any questions regarding the above, contact Associate Director of Business Services and Taxation, Sam Gadani at sgadani@prosperity.com.au. Alternatively, we have Specialist Health Sector Advisers in each of our offices. If you would like to speak to one in your location, call 1300 795 515.
