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The major aggregator has confirmed that the final orders of its payroll tax court case against Revenue NSW will not go to appeal.
Loan Market Group (LMG) has revealed that neither it – nor Revenue NSW – will be pursuing a challenge of the final orders in their major payroll tax court case.
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In April 2024, the Supreme Court found that the aggregator is liable to pay payroll tax in certain instances, setting a new precedent for the mortgage broking industry.
Final orders for the payroll tax decision were handed down on 6 November, finding that LMG had actually overpaid its liability of the tax, penalty, and interest (reported as $1.3 million in payroll tax plus $192,118 in penalties).
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 2012–18 financial years.
LMG is therefore entitled to a refund (which the commissioner will calculate), a move executive chairman Sam White welcomed at the time as “a great outcome”.
While both LMG and Revenue NSW had until 2 December to appeal the final orders, the aggregator has confirmed that neither party has taken up that option.
Speaking of the decision not to appeal, LMG executive chairman White said: “Yesterday, the appeal period for the recent Supreme Court of New South Wales decisions on payroll tax ended. Neither we nor Revenue NSW lodged an appeal.
“Final orders were an important step forward for us and the industry, offering much-needed clarity around payroll tax exemptions and how these laws are applied in most states and territories.”
However, White said that the group still believes that payroll tax shouldn’t apply to brokers or aggregators “and this issue has left the industry in a tougher position than before”.
“While the outcome comes at a cost, it also provides a manageable path forward,” he said.
“We’ll continue working alongside our brokers to navigate these challenges together.”
NSW Legislative Council to review payroll tax application
The decision comes as the NSW government conducts a review of the application of the contractor and employment agent provisions in the Payroll Tax Act 2007, following industry concerns.
Specifically, it will look at:
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The provisions in Division 7 of Part 3 of the Payroll Tax Act 2007 on contractors.
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The provisions in Division 8 of Part 3 of the Payroll Tax Act 2007 on employment agents.
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Revenue rulings and commissioner’s practice notes issued by Revenue NSW addressing the contractor and employment agencies’ provisions in the Payroll Tax Act 2007.
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Decisions of courts in cases involving the application of the contractor and employment agencies provisions in the Payroll Tax Act 2007.
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The applicability of the contractor and employment agent provisions in the Payroll Tax Act 2007 on particular industries including the on-demand and gig economy.
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Any other related matter.
It comes after the Supreme Court judge said in his original judgment that the application of the law was “harsh” given the relevant contractor provisions were originally introduced as an anti-avoidance measure that was not intended to catch “bona fide independent contractors”.
While handing final orders last month, Justice Richmond said: “[T]he 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.”
Following engagement with industry, John Ruddick, mortgage broker and libertarian member of the Legislative Council of NSW Parliament, brought the matter to NSW Parliament last month.
Speaking to The Adviser about the launch of the inquiry, Ruddick said: “I am delighted the NSW parliament will hold an inquiry into the matter of the application of payroll tax in NSW.
“As someone who had worked in mortgage broking for more than two decades before my election, I am particularly keen for public scrutiny in how an expansion of payroll tax could cripple that great industry.
“The relationship between aggregators and mortgage brokers does not come anywhere near the type of relationship which would trigger payroll tax. I am confident this NSW inquiry will help the Minns Government come to the right policy setting.
“If NSW gets this wrong it will become a precedent for other states and badly damage the mortgage broking industry. It would result in there being less mortgage brokers and a concentration of the market in the largest banks.
“The alternative would be a hike in commissions being paid to brokers which will obviously flow through to consumers in the form of higher interest rates. All bad outcomes. All unnecessary outcomes.”
Speaking of the inquiry, White said: “We’re hopeful about the recent NSW parliamentary inquiry announced to review these payroll tax provisions. This inquiry is a promising step toward addressing some of the challenges created by the current laws.
“Throughout this process, we’ve worked with the Chief Commissioner of State Revenue, an effort acknowledged by the Court. We’ll continue that approach as we work toward a resolution that supports brokers and simplifies the system for everyone.”
Submissions to the inquiry will close on 7 February 2025.
[Related: Final orders handed down in Loan Market payroll tax case]
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