Industry Groups Call for Urgent Legislative Update
The NSW Payroll Tax Act is under scrutiny as industry leaders warn that its current classification of mortgage brokers as employees of aggregators could result in significant financial strain on independent brokers and small brokerage firms.
The Mortgage and Finance Association of Australia (MFAA) is leading calls for legislative reform, arguing that the payroll tax obligations imposed on brokers are outdated and unfair. The association has submitted a formal request to the NSW Parliament, urging an immediate update to the law.
Why Are Brokers Facing Additional Payroll Tax?
Under the existing NSW Payroll Tax Act, mortgage brokers—who typically operate as independent contractors—are classified as employees of their aggregators for payroll tax purposes. This classification means that brokers and their firms could be liable for payroll tax payments that were never originally intended for them.
According to the MFAA, this misclassification could cost brokers up to $68,000 in additional tax liabilities, despite their average annual revenue of $182,000 before wages, fees, and expenses.
MFAA Chief Executive Officer Anja Pannek warned that the current interpretation of the law will have devastating consequences for brokers and small business owners alike.
“Mortgage brokers operate independent businesses, serve their own clients, and maintain their own premises, supported by service providers such as aggregators,” Pannek stated. “They take on the risks and responsibilities of running a business, just like other small business owners. It’s difficult to understand why this broader context isn’t being considered fairly in the application of payroll tax.”
She further emphasized that this isn’t just a tax on brokers—it’s a tax on borrowers, as the increased financial burden will ultimately be passed down to consumers in the form of higher mortgage costs.
The Push for Payroll Tax Reform
The call for payroll tax reform follows years of legal uncertainty regarding broker classification. The NSW government launched a parliamentary inquiry in November 2024 to review the contractor and employment agent provisions of the Payroll Tax Act, but no changes have been made yet.
The MFAA is now urging both the NSW and Federal governments to take action, stating that Australia’s small business landscape has evolved and the law must reflect these changes.
“This law is outdated and unfit for purpose. We urge the NSW government to amend the legislation immediately and call on the Federal government to lead a national conversation on harmonising payroll tax laws,” Pannek said.
What’s Next for Brokers?
For now, brokers must assess their potential payroll tax liabilities and explore their options for compliance and tax planning. Some brokerage firms that employ multiple brokers may qualify for limited exemptions, but sole operators remain fully exposed to these tax obligations under the current law.
If no legislative changes are made, brokers may need to adjust their business structures or implement strategic tax planning measures to mitigate their financial burden.
Stay Ahead of Payroll Tax Changes with Boa & Co.
Navigating payroll tax regulations can be complex, especially when changes directly impact your business model and tax liabilities. At Boa & Co. Chartered Accountants, we specialize in tax advisory services for professionals in the mortgage and finance industry, ensuring you remain compliant while minimizing your tax burden.
If you’re a broker or business owner affected by these payroll tax changes, reach out to us for expert advice. Call us at 1300 952 286, email us at [email protected], or visit www.boanco.com.au for tailored solutions that protect your business and financial future.