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The aggregator’s protracted payroll tax case has reached a conclusion, with final orders being handed down.
The long-running court case between Loan Market Group (LMG) and Revenue NSW regarding payroll tax on its brokers’ commissions has now reached a conclusion, with the judge handing down final orders and costs after several delays.
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A judgment on the case, handed down earlier this year, found that the aggregator was liable to pay payroll tax in certain instances.
The case was focused on whether Loan Market brokers were subject to payroll tax under the “relevant contract” provisions of the Payroll Tax Act 2007 over the period from 1 July 2011 to 30 June 2018.
However, LMG has already been paying the tax – as required by Revenue NSW – while the case was ongoing, based on Revenue NSW’s commissioner’s reading of the tax.
In fact, LMG has already paid $2.3 million in tax and penalties as part of the agreed instalment plan.
But with the case now having reached a conclusion and final orders being handed down on Monday (4 November), the judge noted that there had been “a significant overpayment in respect of LML’s liability to primary tax, penalty and interest”.
The final orders reveal that LMG was liable for $1.3 million in payroll tax plus $192,118 in penalties, before the reduction ruled by the court.
As such, the final orders said that the matter be remitted to Revenue NSW to reassess the group’s liability for payroll tax for the 2012 to 2018 financial years.
LMG will, therefore, be entitled to a refund (which the commissioner will calculate).
Indeed, the judge was sympathetic to the aggregator’s submissions and point of view, stating he believed the group had taken “reasonable care to comply with the taxation law in relation to commission payments” in its approach to the payroll tax issue, including by engaging experienced senior counsel in revenue matters.
However, the judge said: “The fact that the application of the relevant contract provisions to the LM Group’s circumstances was complex and difficult is not itself a reason for remitting the penalty. Nor is the fact that the application of the law to the LM Group may appear harsh – that is a matter for Parliament to correct by amending the legislation, and is ameliorated to some degree by the exemption provisions.”
Both LMG and Revenue NSW have until 2 December to consider an appeal.
‘A great outcome’: Sam White
Speaking after the final orders were handed down, LMG executive chairman Sam White said: “The case has been closely watched by many, as it raises broader questions about payroll tax obligations that extend beyond us and impacts the entire industry.
“Since April, we’ve been waiting for clarity on penalties, interest, and costs, which has now been handed down in final orders.
“One of the standout messages from [the final orders] was the court’s recognition that the challenges we’re facing with payroll tax aren’t unique to us.
“In fact, the judge acknowledged that while his initial decision on payroll tax application may appear harsh, this isn’t simply a case of one company needing to adjust – it’s an industry-wide issue.
“Any real change will require action from Parliament to amend the legislation. It’s a sentiment that reinforces just how complex and widespread these payroll tax issues are across the industry.”
White welcomed the “significant reductions" in payroll tax as a result of the application of the exemptions, together with the penalties and interest that were issued by Revenue NSW, as “a great outcome”.
He said: “For the past 30 years, we’ve had the backs of our brokers and have been fighting for what’s fair, even when things get complicated.
“As a result, we have made the decision to cover all historical costs and liabilities from this case with the implication that brokers will only see changes from 1 July 2024.”
The LMG executive chairman said: “This case underscores just how important it is to stand together and push for transparency and fairness across our industry.
“It’s complex, but we’re in it together. A massive thank you to all our business owners and brokers who’ve been alongside us every step of the way.”
Other payroll tax challenges continue to go through the courts, including Finsure’s challenge of the Revenue NSW position.
Several aggregators have also warned their brokers that they may need to start charging for payroll tax, given Revenue NSW’s position, and YBR Aggregation has recently suggested to its brokers that it may ask for reimbursement from them should they become liable to any tax, including historical tax (however, this has not been confirmed).
You can find out more about the payroll tax case and its implications for the broking industry in this news story from July, or watch the full webinar for an in-depth discussion of what it means for broking.
[Related: ‘Payroll tax is payable’, judge finds in Loan Market case]
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