The recent cost determination in the long-dated payroll tax matter between Loan Market and Revenue NSW has clearly highlighted the need for payroll tax legislation in New South Wales to be changed says the Mortgage & Finance Association of Australia (MFAA).
In fact, in both the April and in the most recent decisions, the court has clearly highlighted the application of the law can be seen as ‘harsh’ and is a matter for Parliament to correct through amending legislation.
“Our industry has not been avoiding paying relevant taxes, the legislation is ambiguous and over many years and across the industry, legal advice has been sought, and even experts have struggled to understand it making it difficult for our industry to comply."
In the April judgement the court ruled that, based on the agreements between Loan Market Group and its brokers, mortgage broker commissions are captured under relevant contractor provisions of payroll tax legislation.
The ruling also provided some clarity on the legislation, in particular the exemptions that can be applied allowing common arrangements used in broking businesses such as offshore loan processing to reduce the payroll tax liability.
“We respect the court’s decision in this matter, the fact a lengthy and expensive legal case was required shows that the legislation is too complex.
The NSW Government now needs to confirm this ruling by changing the law and make the law clear so our members can be confident of the path forward,” said MFAA CEO Anja Pannek.
“This situation has been caused by ambiguous legislation and anti-avoidance provisions being applied in a way that was never intended. Even the judge in the Loan Market case noted the application of these provisions is harsh, and the exemptions are too narrow.”
The MFAA has been actively advocating on behalf of the industry and Ms Pannek said they will continue to meet with NSW Government and advocate for legislative changes that make the law clear and appropriate.
In addition to legislative changes, the MFAA holds firm that the mortgage and finance broking industry must be given time to adjust with a with a moratorium, and a guarantee no retrospective penalties will be applied.
“To apply penalties would be harsh and unfair. In fact in this November judgement, the court has reversed Revenue NSW assessments including the application of penalty tax and interest” said Ms Pannek.
The MFAA also continues to encourage Revenue NSW to urgently revise the commissioner’s practice note in consultation with industry. The practise note currently issued by Revenue NSW does not provide appropriate guidance to make it easier for businesses to comply with legislative requirements.
“While our position remains that broker commissions are not a salary – they are business income used to pay expenses before a broker pays themselves – our industry wants to comply with taxation requirements and our members must be given the right guidance to do so. It is vital that the commissioner’s practice note reflects how our industry operates, and we want to work with Revenue NSW to get it right,” said Ms Pannek.
The MFAA led a successful campaign in March 2023 that resulted in a stop action on any new audits of aggregators by Revenue NSW while this case was before the courts.
“The stop action spared the industry from unnecessary audits, along with the significant time, money and focus they would have consumed,” Ms Pannek explained.
“The stop action must also continue as there are still legal processes underway from the Finsure case – this must be respected.”
Ms Pannek advised that the MFAA will continue to keep its members informed, noting that it will mount a campaign if it is required to secure the future of our industry and ensure Australians retain access to the crucial guidance and support its members provide.
“With payroll tax legislation harmonised across most jurisdictions, this is not just an issue in New South Wales, it is a national issue,” she added.
