Independent Practitioner and Payroll Tax

The typical arrangement for practice to engage independent practitioner is using a tenancy/agency model.

However, the recent case Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197 highlighted the underlying issues of the misconception of how to use this model correctly.

The main points of correctly using this model are as follows:

• No need to declare the practitioner billings in activity statements;
• Deposit the practitioner billings in a separate/trust account, and reflect as a liability in the balance sheet;
• Return all billings to the practitioner and issue a tax invoice for providing the management service;
• No timesheet needed for the practitioner; and
• It is critical to write a concise legal agreement/arrangement between the parties.
• Last but not least, document, document, and document.