News Wrap

‘Payroll tax is payable’

The long-running court case between Loan Market Group Pty Ltd/Loan Market Pty Ltd and Revenue NSW regarding the application of payroll tax to certain brokers came to a head on 12 April, when the judge – Justice Richmond – ruled in favour of the government office.

The case primarily centred on whether brokers operating under the Loan Market brand were deemed to be working under a “relevant contract” where payroll tax applies.

Loan Market had argued that payroll should not be payable at all, with the belief that brokers were customers of aggregators and not employees.

However, Justice Richmond found there was indeed a “relevant contract” that existed between Loan Market and active brokers using its aggregation services.

The judge found that payroll tax would be payable on the payments passed through Loan Market to all individual operators operating under the brand, unless they could establish an exemption.

The managing director of the Finance Brokers Association of Australasia (FBAA), Peter White AM, accused Revenue NSW of a “blatant money grab” and that it was unfair the tax was being applied retrospectively.

“[M]y concern is the impact this may have on new entrants to the broking sector and the precedent for other states to attempt a similar money grab,” he said, adding it was time for the government to “fix the problem”.

The chief executive of Mortgage & Finance Association of Australia, Anja Pannek, added that the decision was based on legislation that was “flawed, poorly written and needs to be changed”.

“We fundamentally disagree that mortgage brokers, as small-business owners, should be subject to payroll tax – this is an unfair tax on the smallest of small businesses,” she said.

“This legislation is unclear, and over many years and across the industry, legal advice has been sought with even experts struggling to understand it.

“It is clear that the law must be overhauled.

“Having an ambiguous law applied retrospectively is incredibly unfair. The NSW Government needs to step in and address this.”

Broker market share breaks records

A record volume of residential mortgages are coming through the broker channel, according to new data from the Mortgage & Finance Association of Australia (MFAA).

According to the association, 71.8 per cent of all new residential home loans were written by mortgage brokers between October and December 2023.

This broke the previous record of 71.7 per cent in the September 2022 quarter and was 0.3 percentage points up on the previous quarter (ended September 2023).

The value of loans written by mortgage brokers also rose during the December 2023 quarter, with the nation’s brokers settling $94.06 billion in home loans, a 5 per cent increase year on year.

According to the MFAA, this was the third consecutive period of growth since settlement values dropped to $78.59 billion in the March 2023 quarter.

MFAA chief executive Anja Pannek said this was a clear reflection of brokers’ commitment, professional approach, and the trust clients have in their brokers.

“Mortgage brokers play a pivotal role in the home loan market, providing their clients with a broad spectrum of choices and expert guidance,” she said.

Industry calls for accreditation transfer improvements

Members of the broking industry have urged for improvements to be made to the accreditation transfer process when brokers move aggregators.

While brokers are required to pass accreditation tests to be able to lodge loans with different lenders, concerns have been raised that the long delays in the re-accreditation process are not only costing brokers time and money but having a wider impact on borrowers.

The MFAA’s Accreditation Working Group has found that brokers hold between 16 and 29 lender accreditations, on average, and that the accreditation transfer process can take between six and eight weeks.

The group also found that approximately 80 brokers move aggregators every month, meaning that the issue was significant.

Tanya Sale, chief executive of aggregation group outsource Financial, suggested that lenders should issue brokers with a standardised broker code that can be ported between lenders.

Sale explained: “A discussion needs to happen, and should be around how the lenders can issue brokers with their own unique broker code, which is aligned to them individually.

“That way, if the broker transfers, it would be as simple as internally amending the aggregator.”

According to Sale, this would avoid going through the process of issuing a new broker code, further removing disruptions and delays.

Lenders reaching unconditional approval in record time

ASX-listed aggregator Australian Finance Group (AFG) has revealed that lender turnaround times have shrunk to their fastest time since the group started tracking this data.

AFG’s most recent Mortgage Index found the average number of days it took for loans to go from submission to unconditional formal approval in the March quarter were 17.2 days.

This is the joint fastest time on record, tied with the same turnaround time achieved in the September 2022 quarter.

On average, turnarounds have taken less than 18 days for more than a year, AFG added.

Speaking with The Adviser, AFG’s chief executive David Bailey said that the record-fast turnaround times were a result of lenders “investing in their process, both people and technology”.