South Australian doctors in general practices would be permanently exempted from paying payroll tax on earnings from bulk-billed services.

The South Australian government announced the tax cut after many clinics reported they would pass on the cost to patients from July 1 if they were forced to fork out more payroll tax.

The Royal Australian College of GPs (RACGP) has been campaigning against the tax since a New South Wales tribunal ruling sparked a nationwide change in the interpretation of payroll tax, viewing doctors as employees of GP clinics instead of contractors.

From July 1, some SA doctors were going to be liable for payroll tax for the first time on services but Wednesday's announcement meant only time spent on privately billed consultations would be applicable.

RACGP SA chair Sian Goodson said the exemption for doctors providing bulk-billing services was "a reasonable middle ground".

“Although it’s targeting bulk-billing, all practices will benefit from this because all practices actually do bulk-bill a significant proportion of the services they provide,"  Dr Goodson said.

Dr Goodson said the estimated patient fee increase under this tax cut would drop from $12 per consult to single digits.

"The increased fees for private patients won't need to compensate for bulk-bill so the increased fees would be a lot less but there would still be some increase for private patients," Dr Goodson said.

Dr Goodson urged the federal government to provide better Medicare rebate to protect bulk-billing.

“I think this [exemption] will protect the bulk-billing that’s there, I think the federal government needs to increase rebates if they want to see more bulk-billing because it’s very difficult on the current rebate structure to sustain the bulk-billing model," she said.

Australian Medical Association SA president John Williams said the tax exemption is only "a reprieve" and would not solve ramping and ease pressure on hospitals.

"Payroll tax will still impact private consults and we're particularly concerned about the cost of living and the working poor who can't have their consultations bulk-billed so it does leave a large section of the population out," Dr Williams said.

"It's just going to kick the can down the road as far as a long term solution."

Dr Williams said doctors are still confused whether they would be liable for payroll tax and asked for a longer amnesty to clarify the finer details.

SA Treasurer Stephen Mullighan denied Wednesday's decision was a backflip, saying the new exemption is "fairer".

"Everyone around the country has been put in a difficult position once this court case was handed down because for the first time I think thousands of GPs across the country realised that they are likely to have had a payroll tax obligation going back many years," Mr Mullighan said.

When asked how much revenue would be lost from the upcoming state budget as part of this tax cut, Mr Mullighan said no modelling was done.

"There’s never been a change in payroll tax in South Australia that’s led to this issue being a concern for GPs.”

SA Health Minister Chris Picton said the tax relief would hopefully give GPs more incentive to bulk-bill patients.

"We know that good primary care means people can stay out of hospital, stay well in the community and that's ultimately what we need to see is improvement in primary care," Mr Picton said.

SA Opposition Leader David Speirs welcomed the tax cut but said it was a "backflip that doesn't flip far enough".

"It's only for bulk-billing patients and while that's a reasonable number of patients seen by doctors, there's still going to be a significant number of patients that they see who won't be exempted," Mr Speirs said.

"If communities can't absorb this cost they will look for alternative ways to get healthcare, that will mean calling an ambulance or rocking up in an ED and we need to avoid that at all costs."