Imposing payroll tax on brokers would be ‘unjustifiable’

The long-running court cases between aggregators Loan Market and Finsure with Revenue NSW have drawn grim speculation about what the future holds for the broking industry should the courts ultimately rule in favour of the Tax Office.

Specifically in relation to Loan Market, the cornerstone of the case is to determine whether brokers operating under the aggregator’s brand (between June 2012 and 2018) were subject to a “relevant contract” under the Payroll Tax Act 2007 (NSW), which would necessitate payroll tax payment.

Speaking to Broker Daily, managing director of MC Finance Group, Matthew Chik, said that while his business operates primarily in Victoria, it’s highly likely that other state revenue offices would follow suit should Revenue NSW win its case.

“This would directly affect our profit margins, potentially forcing us to reconsider certain aspects of our operations,” Chik said.

“Unfortunately, this could mean reducing staff or prioritising higher-value transactions, which goes against the very purpose of brokers – helping a wide range of consumers, especially first-time home buyers who need the most assistance.

“This shift might also cause more mortgage brokers to exit the industry, leading to fewer options for consumers and potentially lower service quality.”

Chik said that while it may be “business as usual” for more established brokerages with adequate support structures (barring any further changes to the court’s decision), it’s the smaller brokers who’ll be hit the hardest.

“From what I understand, this case may primarily affect smaller brokers or those without support staff, as it’s becoming increasingly challenging to operate a brokerage without a solid team, given the heavy compliance demands,” Chik further told Broker Daily.

“In my opinion, this ruling appears to be fundamentally unfair. Even the judge, as far as I know, expressed concerns about its application to mortgage brokers.

“As small business owners, we manage our own profit and loss, hire, and pay staff, cover operational expenses, and only earn an income if we write loans. We don’t have access to statutory leave arrangements like PAYG employees, which makes the idea of imposing payroll tax on brokers through this ruling unjustifiable.”

However, glimmers of hope for the mortgage broking industry may have arisen as a result of the Supreme Court of NSW’s ruling in Uber’s appeal against Revenue NSW.

The court determined that payments to Uber drivers did not qualify as “for or in relation to the performance of work” under the Payroll Tax Act 2007, meaning that payments are not to be considered wages and therefore extended payroll tax provisions are inapplicable.

Simon Bednar, Finsure’s CEO, said that the outcome was “optimistic” as aggregators are a “service platform that distributes revenue from lender partners to the brokers” in its network, who all operate as independent entities.

“We have no doubt that other State Revenue offices are watching the outcome of the current cases with keen interest so a successful outcome for Finsure will no doubt dissuade further action and help prevent unfair financial charges that could cripple our industry,” Bednar said.

[RELATED: Uber’s appeal against Revenue NSW holds positive implications for brokers]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.