This article is about the NSW Thomas and Naaz litigation (NCAT in 2021 through to the NSW Court of Appeal in 2023) and the earlier Victorian Optical Superstore decision. It is written for locums and contractor doctors, not for medical centres. For advice on whether a specific workplace engagement attracts payroll tax, speak to a medical-industry accountant or tax lawyer.

The short version

The NSW Court of Appeal confirmed in 2023 (Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40, after NCAT and its Appeal Panel) that payments from a medical centre to doctors it described as independent contractors can be wages for payroll tax. It built on the 2019 Victorian Optical Superstore case. Together they established that the relevant-contract provisions in each state's Payroll Tax Act can apply to the classic bulk-billing-plus-service-fee model.

Most Australian states now treat these arrangements as caught by payroll tax in typical fact patterns. GP-specific relief has since been layered on in several states: Victoria (from 1 July 2025), NSW (a rebate from 4 September 2024), Queensland (a permanent exemption from 1 December 2024), South Australia (from 1 July 2024), and the ACT (from 1 July 2025), each structured differently and mostly conditional on bulk-billing. The outcome for locums: medical centres restructured their contracts, service fees moved up, and the economics per session changed.

Why workplaces restructured

The liability that Thomas and Naaz crystallised sits on the workplace, not the locum. A GP contract worth $500,000 in gross patient billings through the practice, with a 30% service fee, was typically $150,000 for the practice and $350,000 for the doctor, with no payroll tax payable because the doctor was a contractor. Post-Thomas-and-Naaz, Revenue NSW and equivalents treat the $350,000 as wages for payroll tax. On payroll tax at 5.45% with a $1.2M threshold, a busy medical centre with 10 contractors suddenly looked at $100,000+ of annual exposure.

Three restructures emerged. First, practices moved to an employment model: GP becomes an employee on a percentage of billings, practice bills Medicare directly, PAYG tax comes off at source, super paid by the practice. Second, practices increased the service fee from 30-35% to 40-50% to cover the payroll tax that is now payable. Third, some GP practices kept the old model and accepted the exposure, pricing it into higher overheads.

The Victoria 1 July 2025 exemption

Victoria legislated a payroll tax exemption for payments to GP contractors effective 1 July 2025. The exemption has specific conditions: the GP must be a general practitioner, the patient must be bulk-billed, or the GP's share of the patient fee must meet the prescribed arrangement. The exemption does not apply outside GP work; other states run their own separate GP relief schemes (NSW, QLD, SA, ACT).

If you work in Victoria as a GP, the direct-billing model can operate in 2025-26 without payroll tax exposure to the practice, meaning your service fee should not have moved up to cover it. If you work in the same model in NSW, QLD, WA, or NT, the payroll tax exposure still sits on the practice and the service fee will reflect it. Sessional flags the state + profession + model per workplace and shows the corresponding exemption status on your invoice view.

Specialists, dentists, and allied health

The relevant-contract test in each state's Payroll Tax Act is not GP-specific. Specialist rooms, dental practices, physiotherapy clinics, psychology practices, and allied health clinics that use a contractor model face the same exposure. Specifically: a specialist centre in NSW that bills patients directly and pays specialists a percentage sits in the Thomas and Naaz pattern. The VIC exemption does not cover specialists, only GPs.

This is why, if you work across professions (RN who is also an NP, dentist who also does cosmetic work), Sessional tracks model per workplace rather than per profession. The payroll-tax exposure attaches to the contract, not the service.

What to check before signing

Which state is the workplace in?
Is the model pure service-fee, percentage-of-billings, or hybrid?
Who bills the patient: you, or the workplace?
If the workplace bills, who is the payee on the Medicare benefit?
If a service fee applies, is it stated ex-GST or GST-inclusive?
Does the workplace pay super on your share (s12(3) SGAA; see the super guarantee tracker)?

The answers determine whether the headline rate you were quoted reflects what you will actually bank. Sessional's direct billing breakdown computes this for you at shift-create time.

Common questions

What is Thomas and Naaz?

A NSW case decided through the Civil and Administrative Tribunal (NCAT [2021] NSWCATAD 259), its Appeal Panel ([2022] NSWCATAP 220), and finally the NSW Court of Appeal ([2023] NSWCA 40), which held that payments from a medical centre to contractor GPs were "wages" for NSW payroll tax under the relevant-contract provisions of the Payroll Tax Act 2007 (NSW). The medical centre (Thomas and Naaz Pty Ltd) was liable for payroll tax on payments to GPs it described as independent contractors. The decision is binding in NSW and persuasive elsewhere; most states now apply the relevant-contract test to medical-centre contractor arrangements, with GP-specific relief layered on top (see below).

What is Optical Superstore?

The 2019 Victorian case that set the precedent Thomas and Naaz built on. The Court held that amounts paid by the optical retailer to optometrists contractors were "wages" subject to payroll tax. Together with Thomas and Naaz, the two cases form the basis for the current direct-billing payroll-tax doctrine.

I am the locum, not the workplace. Why does this affect me?

Because many workplaces restructured their contractor arrangements after 2022 to mitigate payroll tax exposure. The most common change: shifting from a service-fee model (you bill the patient, you pay the workplace a fee) to a pure employment model (the workplace bills the patient, you get paid a percentage-of-billings). The rate you bank per session can swing 5-15% depending on which side of the restructure you land. Sessional tracks the model per workplace so you can see what actually hits your bank.

Does the Victorian 1 July 2025 GP exemption change this?

For GPs, yes, and Victoria is not alone. From 1 July 2025 Victoria exempts GP wages from payroll tax to the extent they relate to fully-funded (bulk-billed) items, so the relief is proportional to the practice bulk-billing share. Several other states added their own GP relief: NSW (Bulk Billing Support Initiative rebate from 4 September 2024), Queensland (permanent GP exemption from 1 December 2024), South Australia (bulk-billing exemption from 1 July 2024), and the ACT (designated-medical-practice exemption from 1 July 2025). The relief is GP-specific, so specialists, dentists, and allied health remain exposed. Sessional tags state and profession at workplace level and surfaces the relief on your invoice view.

Does this affect specialists and allied health too?

Yes. The relevant-contract test in the Payroll Tax Act is not profession-specific. Specialist rooms, physiotherapy clinics, psychology practices, and dental practices that use contractor models face the same exposure. The exemption in VIC is GP-specific. A NSW specialist clinic with contractor radiologists sits in the same position as a NSW GP practice with contractor GPs.

What does this mean for my service-fee negotiation?

The workplace will likely ask for a larger service fee (commonly 40-50% of gross, up from 30-35% pre-Thomas-and-Naaz) to cover the payroll tax it now pays on your income. Sessional's direct billing breakdown shows gross billings, service fee, your net, and the implied effective take-home rate so you can see exactly what the shift is worth in your hand before signing.

Note

Guidance, not advice. Speak to a medical-industry accountant or tax lawyer for advice on a specific contract or restructure. Relevant-contract determinations are fact-specific.