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Speaking at an inquiry held at NSW Parliament House on 21 March, Deputy Secretary, Revenue NSW and Chief Commissioner of State Revenue, NSW, Scott Johnston, and Commissioner of State Revenue, NSW, Cullen Smythe, provided the revenue office’s motives for undertaking action against the mortgage broking community.
When asked about a specific practice note that targeted mortgage broking, Smythe said there had been a lack of clarity about the broking industry, with the office receiving a “number of questions from the financial services industry”.
“There was also the process of commenting on the administration of payroll tax under the former government,” Smythe said.
“There was a focus on trying to ensure that there was sufficient general information available to taxpayers who might be liable to the different taxes we administer.”
According to Revenue NSW, there was a significant change in how mortgage brokers were viewed for payroll tax purposes, with minimal to no assessments before 2016 compared to potential substantial liabilities now.
Hence, Revenue NSW said that the liability always existed, but they weren’t actively pursuing or auditing these businesses previously and there’s an implicit recognition that the mortgage broking industry’s understanding of their payroll tax obligations has changed dramatically.
Revenue NSW said that their approach is about consistent law application, not targeting a specific industry, though the evidence suggests a significant shift in how mortgage brokers are assessed for payroll tax.
The key tension is between Revenue NSW’s claim of consistent law application and the industry’s perception of a sudden, unexpected change in tax liability.
A consistent theme throughout the hearing was around the notion of clarity or lack thereof from Revenue NSW regarding what constitutes payable tax.
Speaking prior to Smythe and Johnston, members of the broking industry said that the Payroll Tax Act 2007 was not fit for purpose.
Particularly, the CEO of the Mortgage & Finance Association of Australia (MFAA) Anja Pannek said that broking businesses are not ones participating in tax avoidance and that there must be an amendment to what constitutes an independent contractor.
“We would be very supportive and would welcome the opportunity to work with NSW Treasury in consultation to have the law amended back to its original intent,” she said.
[RELATED: Aggregators would have ‘no choice’ but to pass on payroll tax to brokers]
