If your NSW dental practice engages dentists, hygienists or other practitioners as contractors, payroll tax is a question worth asking now. In September 2026 the ADA NSW called on the NSW Government to urgently clarify how payroll tax applies to dental practices. It warned that retrospective tax bills could push up the cost of treatment, reduce services and add pressure to the public health system.
This article explains the concern in plain English, what we know and don't know, and practical steps practice owners can take.
This article is general information, not tax or legal advice. Payroll tax depends on the exact facts of each arrangement. Speak to a registered tax agent, accountant or lawyer who understands healthcare practices.
Key takeaways
- The ADA NSW (statement dated 29 September 2026) wants the NSW Government to urgently clarify how payroll tax applies to dental practices.
- It warns that retrospective bills could raise treatment costs, reduce services and add pressure on public health.
- It is also seeking a nationally consistent approach to healthcare contractor arrangements, through cooperation between states and territories.
- The issue usually turns on the "relevant contract" rules, which can treat payments to contractors as taxable wages.
- A practice-by-practice review of contracts and how the practice operates is the best protection.
What is the concern?
Many dental practices are set up so that a business or service entity owns the premises, equipment and support staff, while dentists and other practitioners work as independent contractors. Practitioners usually bill patients through the entity and pay a share of their fees back to it, often described as a service or management fee.
Payroll tax law in most Australian states includes "relevant contract" provisions. In simple terms, these can treat certain payments under contractor arrangements as wages for payroll tax purposes, even though the person isn't an employee. Revenue offices across Australia have applied these rules more strictly to health practices in recent years.
The ADA NSW's September 2026 statement says the application of payroll tax to dental practices needs urgent clarification. We haven't seen the full detail behind that statement, which is partly restricted to members, so check the ADA NSW directly for its guidance.
What does "retrospective" mean for a practice?
A retrospective bill means tax is assessed for past periods, not just from now on. The ADA NSW warns this could affect practices that organised their arrangements in good faith. Bills for earlier years could be large relative to a practice's margin, which is why the ADA links the issue to higher fees and reduced services.
How are contractor arrangements usually tested?
Commentary from accounting and legal firms on the "relevant contract" rules points to a few areas that often matter. They aren't a checklist or a guarantee either way, because each case turns on its facts:
- Who owns and controls patient records, including restrictive covenants.
- Who controls the work schedule and how much say the practitioner has.
- Which entity issues invoices to patients.
- Whose bank account receives the patient fees.
What did the earlier NSW relief cover?
When NSW announced a pause on payroll tax audits of general practices in 2023, it did not cover dental practices, according to professional commentary at the time. That is the background to the ADA's current call. The situation may have changed since, so confirm the current position with Revenue NSW or your adviser.
What should practice owners do now?
- List your arrangements. Note every practitioner and every provider engaged as a contractor, and the contract that governs each.
- Map who controls what. Look at records, scheduling, invoicing and fee collection in practice, not just on paper.
- Get advice early. Ask a tax adviser who knows dental or medical practices to review your arrangements against the current rules.
- Document your reasoning. Keep a record of the advice you receive and any changes you make.
- Plan for the risk. If your adviser sees exposure, ask about options, including voluntary disclosure and restructuring.
- Follow updates. Watch for announcements from the NSW Government, Revenue NSW and the ADA NSW. The ADA is also pushing for national consistency, so interstate practices should check each state's rules.
- Build it into budgeting. Include payroll tax in the discussion when setting fees and planning cash flow.
What we don't know
- The ADA NSW's public statement is short. We haven't seen what specific arrangements or timeframes it has in mind.
- We don't know whether, or when, the NSW Government will respond.
- Rates, thresholds and rules change. Always check the current position with Revenue NSW.
Frequently asked questions
Does payroll tax only apply to employees?
No. In most states, "relevant contract" provisions can apply payroll tax to certain payments to contractors. Whether they apply depends on the arrangement.
Is this only a NSW issue?
The ADA NSW's statement is about NSW, but the "relevant contract" rules appear in most state payroll tax laws. The ADA is asking for a nationally consistent approach.
What should I tell my practitioners?
Nothing should change without advice. If you plan to restructure, get professional advice first, because changes can have tax, contract and employment consequences.
Next steps
Read the ADA NSW statement on payroll tax uncertainty and check Revenue NSW's payroll tax guidance. To keep admin costs down while you sort this out, see our guides on the dental receptionist shortage and front desk KPIs every practice manager should track, or book a demo to see how IntelliDent handles routine calls.