Q. Why should the NSW government rethink applying payroll tax to broker commissions?

It threatens viability

Applying payroll tax to Finsure’s wholesale aggregation model fundamentally mischaracterises its role as a service provider and threatens the viability of independent mortgage brokers. The inappropriate extension of the relevant contractor provisions risks:

Reducing competition in the mortgage market: by forcing independent brokers into franchise or lender-controlled models, which would adversely affect the NSW residents who use brokers to negotiate the best deal for them to finance the acquisition of their homes.

Increasing costs for brokers: as the payroll tax imposed on aggregators will be passed on to brokers through higher fees and compliance costs.

Distorting the financial services industry in NSW: by discouraging investment in technology-driven service platforms.

It undermines brokers

Our submission highlights key concerns arising out of our legal proceedings with the chief commissioner of State Revenue of Revenue NSW (RNSW), which underscore the unintended consequences of the current legislation. Specifically:

Independent mortgage brokers are being unfairly impacted: the court affirmed that brokers run independent businesses, yet the tax provisions fail to adequately exclude them from payroll tax obligations.

The current provisions cast too wide a net: payroll tax was never historically enforced on broker commissions, yet recent interpretations have created uncertainty, which particularly impacts smaller brokers.

The compliance burden is unreasonable: mortgage aggregators like LMG face significant administrative challenges in proving exemptions, often relying on information not in their control.

It could impact affordability

Without brokers, consumers will have fewer choices and in turn face higher mortgage costs and more difficulty accessing credit, further exacerbating the housing affordability crisis in NSW. This isn’t just a tax on brokers – it’s a tax on borrowers and families trying to secure a home.

If the NSW government fails to act on this issue in line with their current commitments, our data shows the average NSW borrower – who already carries a larger mortgage than those in other states – could end up paying up to $100,000 more over the life of their loan.

We’re calling on the Minns government to demonstrate leadership by supporting home loan borrowers and small businesses.

It impedes effectiveness

A critical evaluation of the payroll tax system is essential due to the lack of alignment with modern business practices. The discrepancies, particularly in contractor rules, result in unintended consequences that impede investment and operational effectiveness.

The current system is overly intricate, financially cumbersome, and disproportionately affects sectors and contractual arrangements not originally addressed by the tax regulations. CAFBA is committed to contributing its insights on this critical issue and respectfully requests the opportunity to further engage directly as a stakeholder to the committee.