Why well-drafted contracts matter more than ever
August 2025 | NSW focus
Introduction
“Agreements are like clothes. They should fit the people they serve.”
Medical, dental and allied health practices depend on arrangements with employees, independent practitioners and external service providers. Yet contracts are often signed once and left unchanged despite major shifts in employment law, privacy obligations, commercial arrangements and state payroll tax enforcement. A written agreement should accurately describe what happens in practice—not merely give the relationship a convenient label.
External supplier agreements
A practice manager should maintain a central register of contracts for technology and practice management systems, cloud hosting, telephony, cybersecurity, cleaning, security, maintenance, equipment, insurance and professional memberships. Each agreement should identify the services and service levels, pricing and annual increases, responsibility for data security and privacy, incident reporting, insurance, subcontracting, termination rights, transition assistance and renewal dates. Particular attention should be given to access to patient records, business continuity, cyber incidents and the return or secure destruction of information at contract end.
Employment agreements
Employment contracts should identify the role, duties, remuneration, applicable modern award or enterprise agreement, hours, leave, superannuation, confidentiality, intellectual property, performance processes and termination provisions. A contract cannot displace the National Employment Standards or minimum award entitlements. Practices should regularly review award classification, penalty rates, overtime, recordkeeping, wage increases and long service leave. The Fair Work Act framework also requires careful attention to fixed-term contracts, casual employment, flexible work and dismissal obligations.
Practitioner service agreements: contractors and licensees
Many practices engage GPs, specialists, dentists and allied health professionals under service, facilities or licence arrangements. Agreements should clarify who supplies clinical services to patients, who owns the patient relationship, the nature of facilities and administrative support, billing and collection arrangements, the practice service fee, professional independence, records access, privacy, professional indemnity, complaints, termination and post-termination transition. A percentage of gross billings does not, by itself, establish independent contractor status. Likewise, an ABN, invoice or practitioner company does not settle employment, superannuation or payroll tax treatment. The parties’ actual rights and obligations, and the way the arrangement operates, are critical.
Payroll tax: a major contractual risk
NSW payroll tax is not confined to ordinary employees. Under the relevant-contract provisions of the Payroll Tax Act 2007 (NSW), amounts connected with practitioners’ services can be deemed taxable wages even where the practitioner is genuinely self-employed for other legal purposes. Revenue NSW’s ruling PTA 041 addresses medical centres and practitioners. Factors requiring careful review include whether the practice provides patients access to practitioners’ services, whether practitioners serve patients on behalf of the centre, contractual obligations, billing flows and whether a statutory exemption applies. Merely renaming an agreement a ‘licence’ or directing payments through a practitioner entity will not necessarily remove exposure.
Contractor exemptions and evidence
Possible NSW exemptions include a practitioner performing services for 90 days or fewer in a financial year, ordinarily providing the same type of services to the public generally, or services being performed by two or more persons in qualifying circumstances. These are technical tests and should not be assumed to apply. Any part of a day may count as a full day for the 90-day test. Records should include signed agreements, service days, invoices, billing reports and evidence of work for unrelated practices where relevant. The ‘public generally’ exemption can require a Commissioner determination, subject to applicable administrative rules. Grouping rules and the overall Australian wages threshold also require consideration.
NSW GP bulk-billing payroll tax relief
NSW introduced targeted relief for contractor GP payments. Certain unpaid payroll tax on relevant GP wages before 4 September 2024 was exempted, subject to legislative conditions; this did not create an entitlement to refunds of tax already paid. For relevant contractor GP payments from 4 September 2024, an ongoing rebate may apply where the medical centre meets the prescribed bulk-billing proportion: generally at least 80% of GP services in metropolitan Sydney and 70% elsewhere in NSW. Eligibility is measured by qualifying services, not simply by the number of patients or practitioners. This relief does not extend to employee GPs, non-GP specialists, dentists, nurses or allied health practitioners. Practices should verify current eligibility, supporting records and the operation of the rebate before relying on it.
Employment status, superannuation and other obligations
The employment/contractor distinction can differ depending on the legislation being applied. Under the Fair Work Act, the applicable test may require consideration of the real substance and practical reality of the relationship, including how it is performed. Sham contracting is unlawful. Separately, superannuation guarantee obligations can extend to certain individuals engaged principally for their labour, even if described as contractors. Workers compensation, PAYG withholding and GST require their own analysis. Contractual indemnities or statements that a practitioner is responsible for all tax do not necessarily eliminate the practice’s statutory liabilities.
Patient records, restraint clauses and termination
Practitioner agreements should establish lawful custody, access and transfer arrangements for health records, consistent with privacy and health records legislation, clinical continuity and patient choice. Restraints of trade must be appropriately limited and enforceable; overbroad non-compete provisions can be challenged. Termination clauses should address notice, outstanding billings, service-fee reconciliation, access to systems, patient communications and continuity of care. Practices should avoid assuming they ‘own’ patients or can prevent a patient from choosing their treating practitioner.
A practical contract audit
At least annually—and whenever the operating model changes—practice owners should review: (1) every practitioner engagement and whether the written agreement reflects reality; (2) payment pathways, collection authorities and service-fee calculations; (3) NSW payroll tax registration, grouping, exemptions and rebate eligibility; (4) superannuation, workers compensation, GST and employment status; (5) award compliance and employee entitlements; (6) privacy, cybersecurity and records management; and (7) expiry, termination and renewal provisions for external suppliers. Material changes should be reviewed by legal and tax advisers before implementation.
Conclusion
Well-drafted legal agreements are a practical risk-management tool, not merely an administrative formality. For healthcare practices, payroll tax has made the structure and operation of practitioner arrangements especially important. A periodic legal and financial review can help identify exposure early, support defensible arrangements and protect the continuity and value of the practice.
Karen Crouch is Managing Director of Health Practice Creations Group Pty Ltd, an incorporated legal practice assisting medical, dental and allied health businesses with legal, operational and practice management matters.
General information only, with a NSW focus. Legislative and revenue guidance should be checked at the time of advice; individual arrangements require legal and tax review.
