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Loan Market Loses Landmark Payroll Tax Case in NSW: What Brokers Need to Know

A recent court case in New South Wales has sent shockwaves through the mortgage broking industry. The Supreme Court ruled in favour of Revenue NSW, the state’s tax authority, in a case against Loan Market, a major mortgage broker aggregator. The decision hinges on whether Loan Market needs to pay payroll tax on commissions paid to brokers who use their services.

The Case: Payroll Tax on Broker Commissions?

The crux of the case centred on the legal relationship between Loan Market and the brokers who operate under their brand. Loan Market argued that brokers are independent contractors, not employees, and therefore not subject to payroll tax on their commissions. Revenue NSW, however, contended that a “relevant contract” existed between Loan Market and the brokers, making them liable for payroll tax.

Court’s Ruling and Potential Impact

The Supreme Court sided with Revenue NSW. This means Loan Market will likely owe millions of dollars in backdated payroll tax on commissions paid to brokers between 2012 and 2018. The judge based his decision on the presence of a “relevant contract” under the NSW Payroll Tax Act.

This ruling sets a significant precedent for the broking industry in NSW. It potentially opens the door for Revenue NSW to pursue similar claims against other mortgage broker aggregators. Additionally, other states with similar payroll tax legislation might follow suit, creating a nationwide impact.

Unanswered Questions and Broker Concerns

The court’s decision raises several critical questions that remain unanswered. Here are some key points of concern for brokers:

  • Impact on Non-Branded Brokers: The judgement focuses on Loan Market branded brokers. How will this tax apply to aggregators with business models where brokers operate under their own brands and commissions are not shared?
  • Exemptions and Mitigating Factors: The judge did acknowledge exemptions that may apply to certain situations, such as brokers who utilise offshore loan processing services or employ family members. Understanding these exemptions and how they might apply is crucial for brokers.
  • Retroactive Tax Demands: The potential for Revenue NSW to seek backdated payroll tax from other aggregators is a major concern for the industry.
  • Industry-Wide Implications: This case could potentially increase the overall tax burden for brokers across the nation.

Staying Informed and Seeking Guidance

The Loan Market case is a complex legal matter with far-reaching consequences for the broking industry. Brokers are advised to stay informed about further developments and seek professional guidance from qualified accountants or lawyers specialising in payroll tax matters.

Understanding your specific circumstances and exploring potential exemptions can help you navigate this new landscape. By staying informed and seeking professional advice, brokers can take proactive steps to manage their tax obligations and minimise any potential financial impact.

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