Leaders lobby government as court cases continue
The leaders of the MFAA, FBAA and CAFBA have shown their unity when it comes to fighting one of the biggest battles affecting the mortgage and finance industry – payroll tax.
In what’s believed to be an industry first, MFAA CEO Anja Pannek, FBAA managing director Peter White and CAFBA CEO David Bushby took part in a panel discussion at the 2024 National Finance Brokers Day event in Sydney last month focusing on the future of broking.
Hosting the panel of industry heavyweights was Nectar Mortgages head of distribution and growth Andrew Stevens.
While the forum discussed a range of topics, including interest rates, refinancing and artificial intelligence, the hot topic was the Revenue NSW’s decision to impose backdated payroll tax on aggregators LMG and Finsure and their legal challenges against it.
The NFBD event was held before a decision in the NSW Supreme Court ruled in favour of Uber’s appeal against backdated payroll tax and revoked the $81 million Revenue NSW was seeking.
NSW payroll tax
Stevens said he was privileged to lead a conversation involving all three industry bodies on the stage together for the first time – it demonstrated collaboration and was a great sign for the future.
He said a number of the questions had been generated by members of the broking industry.
MFAA’s views
The first question was directed to Pannek (pictured above centre) and was about the potential implications of the LMG payroll tax court case ruling and what steps should be taken in response.
Pannek said the payroll tax issue had been “rumbling around” our industry for a number of years but came to the forefront when LMG proceeded with its court case against Revenue NSW.
“Our position at the MFAA has been and continues to be that we see Revenue NSW’s application of payroll to aggregator mortgage broking arrangements as just farcical,” said Pannek.
“It’s completely ridiculous and it is an overstretch of application of law and we’ve said as much to the NSW government and NSW Treasury.”
The MFAA respected the fact that a legal process was underway with the LMG case and the judge had made a determination about what he viewed as the application of payroll tax when it came to mortgage brokers and their aggregators.
Pannek said because it was subject to appeal, the matter would unfortunately be a drawn-out one.
“What does it mean? It means Revenue NSW would end up applying payroll tax to the smallest of small businesses in our industry because that’s where the liability arises and unfortunately those businesses would not be able to avail themselves of any of the exemptions.
“We consider this incredibly harsh – there’s an element of a complete lack of fairness about this as which is why we’ve looked to champion the cause. It’s not done yet – believe you me.”
The MFAA’s position on where it wants the government to step in is very clear, Pannek said. “You cannot retrospectively apply the findings of this case and the industry needs a moratorium effectively, should there be no appeal, what it means.”
When GST was implemented there was a period of time allowing businesses to adjust and it was not unreasonable for that to happen with payroll tax.
Pannek said the MFAA had crunched the numbers and payroll tax was not just an attack on small business, it was an attack on competition.
She said it was a poor move for any government to seek to diminish competition and homeowners’ access to critical support regarding their largest household expense during a cost-of-living crisis.
FBAA’s views
Stevens put the same question about payroll tax to White and also asked if there was anything that individuals could do to help the cause.
White (pictured above left) said he completely agreed with Pannek’s comments. While there were some other considerations that the FBAA had been dealing with and discussing, which changed its position slightly “it doesn’t change the principle”.
He said when the judge made his determinations he said the law was wrong, but he had to enforce the law.
“We’ve written to Premier Chris Minns and petitioned him to get the attorney general to change the law but that’s a future play not a today play. But the law needs to be accurately placed,” White said.
The ruling was not saying that brokers were PAYG people but it was focused on how payroll tax was applied.
White said it was a small cohort of people who would be affected by the tax. “When we first heard about this we thought the world was coming to an end but it’s not and it won’t.”
He said the LMG case showed that the number of people affected had shrunk due to the limited time period involved and the exemptions available.
“if you’re a one plus nothing broker, you’ve got no support and nobody else in your business, you’ve got a problem. That needs to change and aggregators across the country are working through that.
“If you’re a one plus broker it’s not going to apply to you – so if you have PA support or support through your aggregator (as long as it’s close to you) or you have other people working directly in your business, this won’t apply to you.”
White said the industry needed to make sure the payroll tax wasn’t extended across the nation.
If that did happen, laws needed to be changed to ensure “this sits right in the marketplace.”
In recent times, the governments of South Australia and Western Australia had tried to apply payroll tax to other industries but those attempts had been overturned by the courts.
White said the industry shouldn't just assume the payroll tax threat wasn’t going to happen. “Prepare for the worst, hope for the best.”
“What do we need to do here? Chill, don’t stress. Let the lawyers, the heads of aggregators and the KCs deal with it.”
CAFBA’s views
Bushby (pictured above right), a lawyer and former federal senator, said as White had mentioned the judge said it “wasn’t what the law intended to do but he felt bound to interpret it that way”.
“He did also throw in as many exemptions as he could because of that – to try and soften the impact of the decision he felt bound to make,” said Bushby.
“It [payroll tax] does apply to a very specific set of circumstances at the moment but as Peter also said we don't want this to go across the country.”
Bushby said while the payroll cases only applied to the residential lending sector there was a risk that it could expand, through further court cases, and be applied to commercial and asset finance.
“It's a risk that will actually expand and impact more broadly and in ways that are bad for brokers, bad for their clients, bad for the economy.”
Bushby agreed with Pannek and White that the industry needed to work with the NSW government and point out to them “that this isn't what this law was intended to catch.”
“There’s a mischief out there you are trying to catch, which is people trying to hide employees as contractors, but that's not what this is – so change the law, fix the policy.”
Bushby said CAFBA, the MFAA and the Council of Small Business Organisations of Australia (COSBOA) had written to the relevant ministers and was hoping to talk to them soon about this “on a deeper basis”.
