Responding to the outcome of the Loan Market Group Pty Ltd vs. Chief Commissioner of State Revenue NSW payroll tax Supreme Court matter, the Mortgage & Finance Association of Australia (MFAA) said while it is disappointed by the ruling, the Court’s finding highlights that payroll tax legislation is 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,” said MFAA CEO Anja Pannek.
“The court has ruled that in this matter based on the agreements between Loan Market and its brokers, mortgage broker commissions are captured under relevant contractor provisions of payroll tax legislation. We are disappointed with this outcome.
“However, the court has also provided 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.”
This is a complex case and with payroll tax laws harmonised across most Australian states and territories, this is not a NSW issue, it is a national issue,” Ms Pannek continued.
LMG are analysing the impact of the ruling and have 28 days to consider if they will appeal the decision, as does Revenue NSW. The MFAA will be working very closely with LMG to understand their go-forward position.
Revenue NSW have been pursuing aggregators with payroll tax audits for a number of years, including retrospective application of fines and penalties.
The MFAA successfully secured a stop action from Revenue NSW in March 2023 on new payroll tax audits while this case was before the court.
The relevant contract aspects of the payroll tax legislation were originally introduced as anti-avoidance provisions.
“Our industry has not been avoiding paying relevant taxes. 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,“ she said.
“Earlier this month, the NSW Premier said that where there are poorly designed taxes weighing down on small businesses, that they want to change that. This is a perfect example of such a tax,” said Ms Pannek.
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.
“We will continue to keep our members informed on any movement that occurs on payroll tax, and 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 our members provide.”
