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CATEGORY FINANCE

SFAs and Payroll Tax: Let’s Break Down the Basics (Part 2 of 2) In our last article (found in last month’s issue) , we covered the basics of what a Services and Facility Agreement (SFA) is, what has changed recently that makes an SFA in the medical and dental sector very important to review and what it could mean for your practice if yours is set up incorrectly.

I n today’s article, we’re going to cover how you can ensure that your SFAs are correctly set up to minimise the potential risk of receiving an adverse assessment by the ATO. As with our last article, we sat down with Julian Whitehead of Whitehead Legal for his expert advice on SFA setup and have distilled the process below. Conduct an audit of current SFAs Due to the additional scrutiny on SFAs, it is time to go over them with a ne-tooth comb and ensure everything is up to scratch. Your SFA essentially re ects the relationship between your practice and the practitioner, so it is imperative that this re ection is accurate. To ensure compliance and minimise risk, it is recommended that you conduct a legal review of your current contracts and arrangements with practitioners, as this is an area where your practice can become unstuck if the ATO nds anything that is not necessarily compliant. Start by auditing your existing SFAs, or if your SFAs are more than 12 months old, enhancing your existing SFAs or drafting new ones. How to conduct an SFA audit We’ll elaborate on these four points below, but the key items to review are: 1. How the practice is implementing the patient fee ow (how payments are made to both practice and practitioner) 2. Ensuring there is no deemed control (more on that later) 3. Reviewing any employee bene ts (perceived or otherwise) 4. Being aware of payroll tax thresholds in your state and potential exemptions, which could safeguard you from an adverse payroll tax assessment. 1. Review how payments are made In our last article, we touched on how the ow of patient fees can dictate whether a practitioner is classi ed by the ATO as an

employee being paid a wage, which could impact a practice’s payroll tax assessment. To recap, the traditional ow of funds was as follows: Patient pays dentist’s fee to the dental practice > fee goes into the dental practice’s centralised account > dental practice pays the dentist their fee (generally 40%) and retains the balance (as its services fee). is structure has the potential of exposing practices to adverse payroll tax assessments and non-compliance of their state’s speci c payroll tax statute. Alternative patient fees ows are being explored, one being where the practitioner (e.g. dentist) receives 100% of the fees paid by a patient and the practice (e.g. dental practice) invoices the practitioner for its portion of the services fee; the practitioner can then remit the services fee to the practice. It is advisable to seek guidance from your accountant when considering an alternative patient fee ow. 2. Ensure no deemed control is one is very important, so we’ll take a bit of time to explain it thoroughly. Firstly, let’s

legally de ne the phrase: deemed control is any condition enforced by the practice that limits what a practitioner can do. It could be something like placing limits on where else practitioners can/cannot practice or any other condition that attempts to limit the practitioner’s freedom to practice in any way. Any clause in an SFA that does this can be interpreted as the practitioner being employed by the practice and, in an investigation, will only assist in the case against the practice. It is for this reason that conditions of a controlling nature should be carefully considered when drafting SFAs. To this end, Whitehead Legal strongly recommends that the SFA states, amongst other important terminology, that the practitioner has “unfettered control and independence” over patient-related clinical services. is phrase (and the four words in quotation marks) is particularly important to use verbatim, as it enhances protection for your practice (on the proviso that you, as the practice owner, actually relinquish the control within your practice and not just document it within your SFA). Recent case law suggests that practice restraints should

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