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After several state governments made new payroll tax exemptions for GPs, hopes are rising that more reprieves may be brought in for brokers.
With several revenue offices across Australia targeting both the medical and broking industries to introduce a new payroll tax obligation, changes announced for GPs have provided hope to the broking industry that similar exemptions may be applied to this industry.
Currently, the broking industry is facing widespread uncertainty regarding how payroll tax may apply to brokers and whether the industry may be liable for retrospective back taxes and penalties.
While the Loan Market case against Revenue NSW resulted in a finding that payroll tax would be applicable to brokers in certain instances, the final orders and appeals process continues to stretch out.
It is now expected that final orders from the Judge (including final rulings on costs and penalties) will be handed down on 6 September (after which Revenue NSW and LMG will have 28 days to appeal).
But new stances on how retrospective payroll tax applies to medical practices have reignited hopes that the industry may not have to pay retrospective penalties, which could amount to tens of millions of dollars.
What has happened in SA and Victoria?
On 22 May 2024, the Victorian and South Australian governments made new announcements on their payroll tax exemptions for general practitioners (GPs).
Previously, the states had taken the position that rates of up to 4.85 per cent should be applied to payments made from medical centres to GPs, which had caused widespread alarm among the medical community, which was concerned with how these payments would be met, particularly given pressures to boost bulk-billing nationally.
However, after extensive consultation between the state government and primary care sector, the Victorian Treasurer Tim Pallas revealed that retrospective taxation had been taken off the table up to 1 July 2025.
Instead, all Victorian general practice businesses would receive an exemption from any outstanding or future assessment issued for payroll tax on payments to contractor GPs for the period up to 30 June 2024.
A further 12-month exemption from payroll tax for payments to contractor GPs, through to 30 June 2025, would be available for any general practice business that had not already received advice and begun paying payroll tax on payments to their contractor GPs on this basis (provided through the Treasurer’s existing ‘ex gratia’ powers).
Moreover, the Victorian Labor government said it would not only provide an exemption from payroll tax for payments to contractor GPs but also to employee GPs for providing bulk-billed consultations from 1 July 2025.
Pallas said: “We’ve worked closely with the primary care sector on how we can best support them – and we’re making these long-term changes to provide certainty to general practice businesses and support more bulk-billing for Victorians.”
Similarly, the South Australian government had previously provided an amnesty to GP practices for five years of retrospective payroll taxes and an additional 12 months to ensure GPs had time to understand their obligations and to come into compliance with them.
However, the Malinauskas government also announced on 22 May that the payroll tax exemption would apply from 1 July 2024 to all GP practices liable for payroll tax, whether their GPs are engaged as employees or as contractors.
South Australian Treasurer Stephen Mullighan said the move had been made after it “became clear that many GP practices did not understand their longstanding tax obligations” and many GPs were concerned about the ongoing viability of their businesses.
How does this tie to brokers?
Speaking to The Adviser about the changes, lawyer and taxation specialist George Samaras from Samaras Lawyers explained that the changes provide a precedent that could benefit the broking industry, which has been repeatedly compared to the medical practitioner case.
He said: “Some of the businesses in the medical practitioner cases resemble, in some way, something similar to what Loan Market is … there are extreme scenarios; not your run-of-the-mill case where everything’s fairly balanced.”
Samaras flagged the Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 259 and Commissioner of State Revenue (Vic) v The Optical Superstore Pty Ltd [2019] VSCA 197 cases as good examples of this.
“These were health professionals working in a large business where they didn’t actually own the clients and they didn’t have their own relationships with clients,” he said.
“It’s similar in the Loan Market case; you have a whole lot of brokers who are effectively working in a really large business and they don’t own the relationships with the people they are writing the loans for … the brokers in question in the Loan market case received all their work, or at least a large chunk of it, from the Ray White Group.
“This is unlike most brokers that have their own clients and, while they come under some sort of banner or brand, they have their own relationships and referrals and are answerable back to their own clients. They’re not dictated to by a bigger brand as to who they do work for, when they do the work and what they do/how they respond to all leads.
“Most brokers don’t fall under the Loan Market scenario but the Loan Market case, the Optical Superstore case and the Thomas and Naaz case are all similar in that way … And these are close enough that it is precedent-setting for how payroll tax should apply to the broking industry, in that in most cases payroll tax should not be payable. But even in the extreme cases, the brokers and the medical practitioners are still personally liable for professional mistakes and are answerable to the end client first by their professional standards and indemnity obligations.”
Samaras noted that the changes the South Australian and Victorian governments have announced recently expanded the payroll tax exemptions to both contractor and employee GPs – beyond the original remit.
“In my opinion, the approach that SA and Vic have taken for GPs is a good starting point, and something similar and relevant to the broking industry should be put in place, giving clarity to the broking industry across all the jurisdictions,” he told The Adviser.
Samaras noted that while the Loan Market case involves NSW (and not Victoria or South Australia revenue offices), both NSW and Victoria revenue offices have “previously worked hand in hand across other payroll tax issues” (such as grouping and the general exemptions for contractors) and the expectation would be that similar and relevant announcements could be made in NSW for the medical and broking industries.
“Most brokers, like GPs in the medical industry, simply use the services of an aggregator as a way of being able to run their own broking business, they do not behave and operate as employees or contractors of an aggregator,” he said.
Related: ‘Payroll tax is payable’, judge finds in Loan Market case]
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