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The outcome of the Loan Market payroll tax case sets a “dangerous precedent” and is based on “flawed” legislation, the broking associations have said.
Following on from the news that the Supreme Court of NSW has found that payroll tax should be paid on commissions and payments to brokers in certain instances, the two mortgage broking associations have come out strongly against the decision.
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Responding to the outcome of the Loan Market Group Pty Ltd v Chief Commissioner of State Revenue NSW payroll tax Supreme Court matter, the managing director of the Finance Brokers Association of Australia (FBAA), Peter White AM, accused Revenue NSW of a “blatant money grab”, adding it was unfair that it was being applied retrospectively.
“We must be clear that this decision applies only to the case at hand involving Loan Market, however my concern is the impact this may have on new entrants to the broking sector and the precedent for other states to attempt a similar money grab,” he said.
White said “the most reasonable approach” by Revenue NSW would have been to help aggregators prepare for any change of interpretation of payroll tax eligibility and set the course for the future.
“But, in this case, they took a big stick approach and it’s difficult to see this as anything but an opportunity to use Loan Market to raise extra revenue,” he said.
The FBAA head is now calling on the NSW government to intervene.
“To this point, the government has taken a ‘wait and see approach’ while the legal action was underway,” the FBAA MD said.
“However now that the court has basically stated that the law was wrong but that they have to uphold it, it’s time for the government to fix the problem.
“I will be talking to the NSW Premier and asking his government to draft whatever legislation is necessary to change law that led to this decision and protect small business.
“Both sides of politics must now come together and fix this mess.”
Calls for laws to be overhauled
The Mortgage & Finance Association of Australia (MFAA) has also said it was disappointed by the ruling, arguing the decision was based on legislation that was “flawed, poorly written and needs to be changed”.
“We fundamentally disagree that mortgage brokers, as small-business owners, should be subject to payroll tax – this is an unfair tax on the smallest of small businesses,” MFAA chief executive Anja Pannek.
“The court has ruled that in this matter based on the agreements between Loan Market and its brokers, mortgage broker commissions are captured under relevant contractor provisions of payroll tax legislation.
“We are disappointed with this outcome.”
While she welcomed that the decision had provided clarity on some elements of the legislation – particularly the exemptions that can be applied allowing common arrangements used in broking businesses, such as offshore loan processing – she warned: “This is a complex case and with payroll tax laws harmonised across most Australian states and territories, this is not a NSW issue, it is a national issue.
“Our industry has not been avoiding paying relevant taxes. This legislation is unclear, and over many years and across the industry, legal advice has been sought with even experts struggling to understand it.
“It is clear that the law must be overhauled.
“Having an ambiguous law applied retrospectively is incredibly unfair. The NSW Government needs to step in and address this.
“Earlier this month, the NSW Premier said that where there are poorly designed taxes weighing down on small businesses, that they want to change that. This is a perfect example of such a tax.”
She said the MFAA would look to “mount a campaign if it is required to secure the future of our industry and ensure Australians retain access to the crucial guidance and support our members provide”.
Loan Market Group has 28 days from the day of judgment (12 April) to consider whether they will appeal the decision (as does Revenue NSW).
The case is one of several cases relating to payroll tax in the broking industry, with Finsure also taking court action against the tax collection office.
Revenue NSW last year paused any new payroll tax audits connected to mortgage aggregators until the Loan Market court case process had been resolved.
What do you think about the payroll tax decision? Let us know in the comments below:
[Related: ‘Payroll tax is payable’, judge finds in Loan Market case]
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