The NSW State Government agency, Revenue NSW, is pursuing some aggregators for payment of a payroll tax liability on both upfront and trail commission payments made to sole operator brokers. 

AFG has not been contacted by NSW State Revenue or by any other state revenue office at this stage, but we are keeping a close eye on the issue. AFG is working with our industry bodies and other aggregators to engage the government with the aim of amending the legislation and ensuring the relationship between brokers and aggregators is properly reflected.  

Our position is that brokers are not employees of aggregators, and payroll tax should not apply.  

This isn’t a ‘new issue’. It has been going on for many years. A recent court case between Revenue NSW and Loan Market Group (LMG) found that even though brokers are not employees of LMG, for payroll tax purposes, there is a relationship where payroll tax is payable unless the broker business can establish that they fall within an exemption. 

So, who would it likely impact? 

The circumstances of the LMG finding are specific to the contracts that were the subject of the court case. However, some of the exemptions relevant to the LMG brokers included employing an administrative assistant or processor in the business or engaging another business or contractor as a genuine service provider. 

A broking business is likely to fall under an exemption where the broking business has two or more people performing the work required. This includes arrangements such as offshore loan processing and the engagement of contractors and family members to help with administrative tasks in a broking business.

In addition, under the LMG case, trail commissions were not considered taxable wages once the broker agreement was terminated with LMG. 

What can brokers do about it? 

This has the potential to be a national issue as tax regimes are largely harmonised across the states (apart from WA), meaning if one state introduces or enforces a tax, the others generally follow suit.  

It might be a good idea to review your business structure to ensure you meet some of the exemptions highlighted by the case. If you have any outsourcing or contractor arrangements to assist your broker business in providing credit assistance, make sure these arrangements are properly documented under a written contract. 

We suggest you speak with your accountant or legal adviser about your individual circumstances. 

We will keep you updated as this situation unfolds.