NSW brokers urged to write to MPs over payroll tax

Revenue NSW is seeking to introduce payroll tax on commissions paid to mortgage and finance brokers.

As of 1 July 2022, the rate of payroll tax is 5.45 per cent for total wages exceeding the threshold of $1.2 million.

According to the MFAA, while this is mostly targeting aggregators and brokerages, it is likely the cost of the tax will be passed down to brokers (and cannot be passed through to borrowers).

The tax will most likely hit single operator brokers the hardest.

The MFAA has already written to Revenue NSW – the division of the NSW government that collects taxes – and several key members of NSW Parliament to flag its “serious concerns” with the application of payroll tax to the mortgage broking industry.

It has suggested that “this is just the tip of the iceberg and this precedent has a range of implications, including that other states will seek to impose this same tax if NSW Revenue continues down this path”.

It could also extend to diverting broker commissions to superannuation instead of revenue to their businesses, the MFAA has warned.

The association has now launched a campaign using DoGooder to provide a letter template for brokers to email to their local MPs expressing concern about the issue.

The letter outlines that the broker believes NSW Revenue's application of the tax to be “wrong” because they have a view that single operator brokers are an “employee” or contractor employed by an aggregator, rather than a small independent business in their own right.  

The letter reads: “The way that I get paid for the work that I do is through commissions paid by lenders. When I help my customer get a loan with a lender or help them to refinance to a new loan, I am paid by that lender. I contract the services of an aggregator to administer these commission payments to me. This is normal practice for my industry.

“The law is very unclear, and I am concerned Revenue NSW is taking advantage of this lack of clarity to apply this extra tax.  

“This tax would represent an added cost to our industry that cannot be passed on to customers. This means the smallest of small businesses in our industry will bear the brunt of this – at a time when we are working hard to support our customers who are facing cost of living pressures and increases in their mortgage interest rates.”

The letter continues: “Revenue NSW is also seeking to retrospectively apply this tax, as well as, applying penalties – on a tax that should not apply to our industry. This is applying penalties on a tax that we should not be obligated to pay.

“If Revenue NSW continues with its actions, I worry that many small broking businesses in NSW will close. That means that customers who need help with their home loans and business financing needs will not get the support that they need to navigate this very challenging economic environment, especially in regional areas where bank branches are few and far between.

“Until the law is clear, I call on the NSW Government to impose a moratorium on any action by Revenue NSW against the mortgage and finance broking industry in NSW.”

MFAA CEO Anja Pannek explained the body is “urgently seeking” a commitment from both the government and the opposition to suspend all activities against the broking sector in NSW by Revenue NSW, by way of a moratorium, until there is clarity on the rules and “certainty for industry”.

Once a moratorium has been agreed, the industry can then work with Revenue NSW “on a constructive outcome,” she said.

“The best way for brokers to add their voice to our call for a moratorium is by contacting their local Member of Parliament in the lead-up to the upcoming NSW state election,” Ms Pannek continued.  

The MFAA has prepared a letter brokers can send to their local member via email through a secure campaign delivery service called DoGooder.  

“The DoGooder platform makes it quick and easy for brokers to take action on this important issue that threatens the viability of broking businesses and the financial stability of our industry,” said Ms Pannek.  

“I also encourage brokers to raise this issue with candidates in their local areas as they campaign for the upcoming New South Wales election.”  

Ms Pannek commented that Revenue NSW is “incorrectly” considering mortgage and finance brokers as employees, representatives or agents of aggregators and views the commissions that aggregators pass on to brokers as wages or a salary.  

“This tax would represent an added cost to our industry that cannot be passed on to customers. This means the smallest of small businesses in our industry will bear the brunt of this – at a time when we are working hard to support our customers who are facing cost of living pressures and increases in their mortgage interest rates,” she said.  

The associations and several heads of aggregation and brokerage groups have been meeting with NSW politicians in recent weeks to discuss the payroll tax issue, which is costing aggregator groups tens of millions of dollars.

While the government is currently in caretaker mode ahead of the state election on 25 March, it is hoped that both sides of the political spectrum will agree to a moratorium on the tax being paid until industry has had the opportunity to discuss the issue with Revenue NSW and whomever is in power. 

[Related: ‘Disaster’: Bouris says payroll tax will kill broking]