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Revenue NSW has defended its actions after brokers and industry experts slated the application of payroll tax and called for reforms.
The NSW government division responsible for taxation has addressed broker industry concerns over payroll tax, saying it does not write policy and administers laws “fairly and impartially”.
Representatives from Revenue NSW spoke at a NSW parliamentary hearing on Friday (21 March), saying that the application of the law had not changed, despite several industry experts arguing the opposite earlier in the day.
Members of the broking industry had pushed for reform at the same hearing, saying that arrangements between aggregators and brokers should not come under payroll tax obligations.
While speaking at the hearing on the application of the contractor and employment agent provisions in the Payroll Tax Act 2007, Scott Johnston, Deputy Secretary of Revenue NSW and Chief Commissioner of State Revenue NSW, said: “Revenue New South Wales is responsible for administering the state’s taxation laws.
“We administer those laws as written, fairly and impartially. While we assist the Government in reviewing those laws and developing any changes we’re ultimately not responsible for tax policy. Tax Policy is led by the treasurer.”
After industry experts described payroll tax’s application as a “reckless mission creep”, Johnston said: “Contrary to the assertions made in some submissions to this inquiry, there has been no major change to the contractor employment agent provisions, nor the introduction of any new tax.”
Johnston later defended Revenue NSW’s approach to administering payroll tax provisions.
“Payroll Tax is a self assessed tax and our focus is very much on voluntary compliance. From the outset, we encourage and assist taxpayers to comply with the law by providing a significant amount of information, education and tools to help them understand their obligations,” Johnston said.
Addressing earlier grievances made by the broking industry, Johnston said: “I must respectfully reject the assertion made in some of the submissions to this inquiry that Revenue New South Wales has retrospectively imposed liabilities on taxpayers.
“This is simply incorrect.”
Earlier in the hearing, Mortgage and Finance Association of Australia (MFAA) CEO Anja Pannek had said that the industry body had witnessed an “escalation of audit activity, and I speak on behalf of our aggregator members, where audits started being conducted across a number of aggregators in industry.
“We saw this very much as a targeted industry approach which we did not feel was appropriate, because we do not feel that the tax should apply,” she said.
‘Reckless’ tax application
The Council of Small Business Organisations Australia CEO Luke Achterstraat described payroll tax’s application as “reckless”.
“The New South Wales Government will bring in almost $55 billion in payroll tax over the next four years. Remarkably, this state will raise more in payroll tax than gambling tax,” he said.
“This inquiry is timely. An alarming symptom of the New South Wales payroll tax addiction has been the reckless mission creep of its application beyond the employment relationship.”
Addressing LMG’s precedent-setting case arising out of its legal proceedings with the Chief Commissioner of State Revenue of Revenue NSW (RNSW), Achterstraat said: “Payroll tax was never intended to be payable in a business-to-business relationship, yet small businesses have been highly anxious since a court ruling harshly found a business providing services to mortgage brokers somehow owe[s] payroll tax.
“Even the judge in that decision acknowledged the harshness of that case.”
Achterstraat later argued for new legislation: “It’s not fit for purpose. It needs a rewrite.”
Industry calls for reform
In a joint statement, LMG, CAFBA, and the MFAA outlined four recommendations made to the inquiry. These are:
1. Changing the Payroll Tax Act’s contractor provisions to reflect the original intent as anti-avoidance provisions, rather than capture bona fide contractors.
2. Following this, requiring Revenue NSW to review payroll tax Commissioner’s Practice Note CPN 016 in comprehensive consultation with the mortgage broking industry.
3. In the interim, providing immediate relief to the broking industry through an amnesty on audit and enforcement actions and ensuring no retrospective application of the current law.
4. A national dialogue is commenced to seek true harmonisation of payroll tax laws, with a focus on reducing red tape and administrative burden on national businesses.
Members of the industry provided submissions to the NSW Parliament’s inquiry into the application of payroll tax provisions.
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 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 submissions collectively urged the NSW government to exclude mortgage brokers from payroll tax obligations, saying that current interpretations unfairly classify independent brokers as employees, creating financial strain and industry uncertainty.
[Related: Broking industry tells NSW Parliament why payroll tax should be reviewed]
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