90% of the Psychologist Practices who came to us had the whole relationship between the Clinic and sub-contractor written contracts wrongly worded.

And 95% of the contractors were wrongly claiming GST when they should have been paying GST.

Recent High Court decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 corrected the approach for determining who is an employee and who is a contractor. ATO has introduced a new draft of legislation for these purposes.

Why should you know this? Because most of the Psychologist clinics have a sub-contractor agreement that is not clearly defined whether the arrangement is of a service base or support base. The ambiguity in the written contract means you may be in breach of Superannuation, PAYG, Payroll Tax and Work cover legislation.

Let’s look at this in practical terms. It’s common in a Psychology Practice to hire a psychologist who works under an arrangement where the Psychologist (individual subcontractor) gets paid a percentage of the fee by the practice. The fee percentage can vary but it’s usually around 55% to 70%.

So how you should treat this?

If the supply is made in the psychologist’s name (meaning individual subcontractor) – their name is on the Invoice that is made out to the client – then the psychologist receives facilities and administrative services from the practice operator. And this service will attract GST.

For example, if the psychologist receives $100 for their GST-free health service performed at that practice, then they need to transfer $20 plus GST to the practice operator. That is $22. The rest is GST-free Income.

However, if the supply is made in the name of the Practice (clinic)- and the clinic name is on the Invoice – then the psychologist (individual subcontractor) supplies professional services to the practice operator for 80% of the fee.

Same example as above, the $100 the Practice has collected is GST-free, but they pay the psychologist $88 ($80 plus GST) for their services and keep the rest. The individual Psychologist will need to invoice the clinic for 80% of the income.

Please note that this is where most mistakes occur; neither the supply of facilities and administrative services nor the supply of professional services is another health service that falls under s38-10.

We specialise in Psychologist Taxation, and we understand your industry inside out. We have lawyers who specifically work in these areas to ensure YOUR contracts will hold in the court of law.

Therefore, it is important to choose your industry specialist to help you grow.