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Several representatives from the mortgage broking industry have been meeting with NSW politicians over concerns that a new tax being placed on the industry could decimate the industry.
As first reported on our sister brand, The Adviser, Revenue NSW — the division of the NSW government that collects taxes — has been in contact with several aggregators and sub-aggregators seeking payment for backdated payroll tax for their broker members.
The backdated payroll tax, affecting several mortgage broking aggregators, is believed to cover a period of up to eight years ago and amounts to tens of millions of dollars.
The issue does not seem limited to any particular model or pass-through model. Instead, it centres upon the tax office’s belief that payments of commission or other forms of remuneration by entities that hold an AFS licence or an ACL — such as payments by aggregators to their “agents” (i.e. brokers) — may be liable for payroll tax if they are deemed to form part of a “relevant contract”.
However, there are exemptions as to which type of broker it applies to. For example, brokers with two or more brokers may be exempt in some circumstances.
While the issue has been a source of debate for several years, it has come to a head in the past few months given that a growing number of aggregators have been receiving notices to pay the tax (and face a penalty if they do not pay it on time). The total tax for each group is believed to be several millions of dollars (depending on size).
Groups are now mounting a fight. Major aggregation and brokerage group Loan Market Group was one of the first aggregators to be contacted by Revenue NSW for backdated payroll tax and is now taking legal action against the office to challenge its reading of the Payroll Tax Act 2007 (the Act).
Both the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) have also been working to engage with Revenue NSW and the state government on the matter.
Indeed, Mortgage Business understands that several groups, including the FBAA, met with NSW Treasurer Matt Kean MP and shadow finance minister Anoulack Chanthivong last week to outline the industry’s belief that aggregators should not be subject to payroll tax for brokers and flag the devastating impact that the financial burden would have on the industry.
The MFAA has also recently written to Revenue NSW and several key members of the NSW Parliament to flag its belief that there is “no legal basis” to apply payroll tax to the mortgage broking industry.
Given that Revenue NSW is just one of several state tax revenue offices, there are broader concerns that other states will seek to impose this same tax if NSW Revenue continues down this path.
Yellow Brick Road (YBR) executive chairman Mark Bouris recently said the move is a “tax grab’” that would “send the industry broke”.
The MFAA has now launched a campaign using DoGooder, to provide a letter template for brokers to email to their local MPs, expressing concern about the issue.
You can find out more about the payroll tax issue impacting the mortgage broking industry in the latest episode of the Mortgage Business Uncut podcast, here:
[Related: LATEST PODCAST: The big payroll tax issue]
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