'Significant ambiguities' still exist for Australian brokers
Three heavyweights of the mortgage and finance broking industry made the case for significant changes to the NSW Payroll Tax system this Friday.
Speaking before the NSW Parliamentary Inquiry into NSW Payroll Tax, chief executive of the Mortgage and Finance Association of Australia (MFAA) Anja Pannek (pictured, left), chief executive of the Commercial and Asset Finance Brokers of Australia (CAFBA) David Bushy (pictured middle) and chairman of Loan Market Group Sam White (pictured, right) reiterated their concerns of the devastating consequences payroll tax changes could bring to Australian brokers.
Despite partial wins in the Supreme Court, brokers and aggregators could find themselves subject to NSW’s payroll tax legislation, backdated for five years, which risks increasing their annual tax bills by thousands of dollars.
An inquiry into the issue was launched in November 2024.
“The MFAA has been advocating for change for a number of years – this inquiry is a welcome step for our over 15,000 broker members nationally and close to 6,000 in NSW,” Pannek told the inquiry today.
She added: “Significant ambiguities still exist with payroll tax, presenting a real threat to the viability of small broking businesses and the ability of NSW borrowers to access a competitive home loan.
“We know this is a key issue for brokers, not only just in New South Wales, but across the country, given laws are harmonised across most other states.”
White spoke of the serious consequences the mortgage broking industry has had to deal with in the wake of LMG’s less-than-desirable outcome in litigation against Revenue NSW.
Although the court agreed to slash LMG’s tax liability by 65% compared to the initial assessment, the ruling failed to resolve the inherent uncertainty surrounding payroll tax for mortgage brokers across Australia.
“While we lost our case, the judge called the outcome ‘harsh’ and highlighted that the law’s complexity makes it difficult to apply fairly,” White told the inquiry today. This complexity has been compounded by limited regulatory guidance and “a burdensome, inconsistent approach to audits”, he added.
Speaking on behalf of commercial brokers, Bushy told the inquiry: “Assessment of payroll tax on the activities of commercial and asset finance brokers, would directly undermine the ability for those brokers to assist small businesses get the finance they need to grow.”
“The potential for a detrimental impact on the economy is real,” Bushby added.
CAFBA has previously said “a critical evaluation of the payroll tax system was essential due to the lack of alignment with modern business practices”.
Pannek added in today’s hearing: “The industry is looking for clarity and change – we have seen this through the many submissions put forward to this inquiry from the mortgage broking industry, including Loan Market Group, CAFBA and other small industry bodies.
“The inquiry was an opportunity for the NSW government to show leadership, to step in and enact sensible change. The MFAA is committed to working constructively with the NSW Government and Revenue NSW to seek certainty and clarity for the industry.”
In a joint press statement, LMG, MFAA and CAFBA have laid down four recommendations for the inquiry:
- changing the Payroll Tax Act’s contractor provisions to reflect the original intent as anti-avoidance provisions, rather than capture bona fide contractors
- following this, requiring Revenue NSW to review CPN 016 in comprehensive consultation with the mortgage broking industry
- in the interim, providing immediate relief to the broking industry through an amnesty on audit and enforcement actions and ensuring no retrospective application of the current law
- a national dialogue is commenced to seek true harmonisation of payroll tax laws, with a focus on reducing red tape and administrative burden on national businesses
