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Submissions for the NSW Parliament review of payroll tax close tomorrow, with clarity on the matter expected by the end of the year, according to council member John Ruddick.
Members of the industry have one day left to provide a submission to the NSW Parliament’s inquiry into the application of the contractor and employment agent provisions in the Payroll Tax Act 2007.
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First announced in November 2024 the review was introduced following concerns raised by several industries subject to a new tax impost, including the mortgage broking industry (as well as the transport industry).
The review, introduced by Ruddick, a member of the Legislative Council and former mortgage broker, aims to address the controversial application of payroll tax to commissions paid to mortgage brokers. Recent court rulings have fuelled uncertainty and anxiety within the industry, prompting calls for legislative clarity.
The Legislative Council will accept submissions until tomorrow (7 February), after which submissions will be reviewed.
It is expected that the council will then invite relevant members who have submitted to the inquiry to attend public hearings later this month (which the public can attend or view online).
Following hearings, the committee will deliberate for a period of weeks before releasing a final report with recommendations.
The findings and recommendations of the inquiry are expected to be released in a report by April 2025.
Should the committee provide a unified report to Parliament, it is likely that the recommendations would be taken up by the Minister for Finance (with any relevant legislation put to Parliament).
Speaking to The Adviser for the Mortgage & Finance Leader podcast, Ruddick said he expected that – should everything “go to plan” (i.e. no dissenting report is issued) – there would be clarity on the application of the relevant clauses by the end of this year.
However, he said that there was “a reasonably good chance here that there will be a split decision”, which would see a majority report and a dissenting report released.
What are the issues with the payroll tax application?
The crux of the industry issue lies in the classification of mortgage brokers as independent contractors or employees. While brokers operate under the umbrella of aggregators, they maintain control over their businesses and clientele.
The imposition of payroll tax, as highlighted by industry stakeholders, could have detrimental effects on the industry, including:
- Reduced commissions for brokers.
- Increased fees passed on to borrowers.
- Consolidation within the industry and the potential exit of single-operator brokers.
Speaking to The Adviser about the review, NSW Legislative Council member Ruddick, said he believed that the current ambiguity surrounding the issue necessitates a parliamentary intervention to provide a clear and pro-business framework.
He told The Adviser: “Something important like this should not be decided by judges, it should be decided by the Parliament. And this is why the inquiry is a good thing. So clarity; that’s the number one thing that we want. And hopefully it’ll be clarity with a pro-business outlook.”
The Libertarian said that the outcome of the review holds significant implications for the mortgage broking industry nationwide, as other Revenue Offices may seek to also charge payroll tax onto aggregators.
However, he said that should NSW decide that payroll tax does not apply to brokers, the state could become “the powerhouse” state for the mortgage broking industry.
Brokers urged to take action
Ruddick encouraged brokers to actively engage in the review process by:
- Contacting their local state member of Parliament to express their concerns and highlight the potential impact of payroll tax on their businesses.
- Sharing real-life examples of how the tax could affect their operations and the broader industry.
- Raising awareness among their clients and networks about the issue and its potential consequences.
You can listen to the full episode of the Mortgage & Finance Leader podcast with John Ruddick here:
Click here to listen on your device
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[Related: NSW payroll tax law to be reviewed]
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