Updated Oct 2026
Payroll tax is one of the biggest cost and compliance pressures facing dental practice owners, particularly those who work with associate dentists under contractor, service or facility agreements.
Revenue authorities in several states now apply the same contractor payroll tax principles to dental practices that they first applied to medical centres.
How we got here
The 2019 Optical Superstore decision in Victoria established that payments flowing through a practice to practitioners can be taxable wages. This was reinforced in NSW by the Thomas and Naaz decision (2021), which confirmed that amounts collected on behalf of doctors and passed on to them can be payments "for or in relation to" work performed for the practice.
The NSW Court of Appeal dismissed the final appeal in March 2023. Revenue NSW, the Victorian State Revenue Office and the Queensland Revenue Office (QRO) now apply these principles in their public rulings and audit programs.
What has changed
- The dental amnesty in Queensland has ended. Clinics that registered and made a voluntary disclosure by 30 June 2025 were relieved of payroll tax on payments to contracted dentists up to that date. All dental clinics are now expected to meet their obligations from 1 July 2025, unless an exemption applies.
- Relief for medical practices has not extended to dentists. The NSW audit pause for general practitioner (GP) medical centres has ended, and audits resumed on 4 September 2024. The bulk billing rebate is available only to GP centres that meet bulk billing thresholds. Dental practices do not qualify. Queensland's exemption for GPs from 1 December 2024 also does not cover dentists.
- NSW guidance continues to evolve. The 2026–27 NSW payroll tax rate is 5.45% on taxable wages above the $1.2 million threshold. Revenue NSW updated its contractor guidance in June 2026 and notes that healthcare businesses often overlook payments to contractors.
For practices that haven't yet reviewed their associate arrangements, the safest assumption is that the same contractor rules apply to dental practices as to medical centres.
Why it matters beyond the tax bill
Payroll tax rarely sits on its own. It adds to rising wage and occupancy costs, workforce shortages, and the admin load on your practice manager. It can also surface in due diligence, which matters when you are planning a buy-in, a sale or succession. A clear view of your contractor arrangements now means fewer surprises later.
Questions to ask about your dental practice
The flow of funds and the way your practice operates are critical.
Consider:
- Payment flow: Are patient fees collected by the practice and remitted to the associate dentist, or do patients pay the associate directly through separate merchant terminals?
- Infrastructure: Does your dental practice provide the use of rooms and facilities as a distinct service fee, or as a commercial lease?
- Autonomy: Must associates use your facilities and systems, or do they have full discretion over how they run their own business
- Patient ownership: Are the patients legally attributed to the associate dentist or to your overarching dental practice?
- Operational control: Does your dental practice exercise control over the associate dentist’s hours, leave, or treatment protocols?
How Prosperity can help
- Payroll tax audit risk review: We analyse your service agreements, internal processes and patient income flows to identify exposure. Our recommendations help you stay compliant and avoid unexpected, backdated liabilities.
- Broader practice advisory: We help with structuring, service entity arrangements, outsourced bookkeeping and payroll, workforce solutions, and succession and transaction planning.
To discuss your practice or if you have any questions regarding the above, contact Ashley Quinton at aquinton@prosperity.com.au or Brendan Campbell at bcampbell@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.
