Use this article to understand the recent NSW payroll tax judgment, why it matters to brokers, and how Connective is responding. It explains the potential risks, what factors may increase exposure, and what support is available as the situation evolves.
What is the recent payroll tax judgment?
The NSW Office of State Revenue (OSR) has been reviewing relationships between aggregators and brokers to determine whether payroll tax applies.
In April 2024, the NSW Supreme Court handed down a judgment relating to Loan Market’s franchise model for the period 2012–2018. The court found that, due to the broad drafting of payroll tax legislation, payments between an aggregator and brokers may be subject to payroll tax unless specific exemptions apply.
This decision sets a precedent that could influence how payroll tax is assessed across the mortgage and finance broking industry.
Key findings from the Loan Market case
How broker relationships were assessed
The court determined that payroll tax could apply to commissions or payments made to brokers where the relationship meets the definition of a “relevant contract” under payroll tax legislation.
This assessment focused on the substance of the working relationship, not just how it was labelled contractually.
Available exemptions
The judgment highlighted that exemptions may apply in certain circumstances, including where brokers:
Employ offshore loan processors
Engage family members who perform genuine, substantive work
Operate with other businesses that provide services as true independent providers
Whether an exemption applies depends on how the business operates in practice.
How payroll tax may be calculated
The court noted that payroll tax would generally apply to the net commission or salary paid to brokers, rather than gross amounts.
A reduction may be applied to reflect non-labour components of the business, though this depends on individual business structures and evidence provided.
Who could be affected
The judgment is relevant to both:
Australian Credit Licence (ACL) holders
Credit representatives
It also signals a possible trend of similar enforcement activity in other states and territories, except Western Australia.
What this means for you as a broker
Potential appeals
Parties involved in the case had until mid-May to appeal the decision. Outcomes of any appeal may influence how the ruling is applied more broadly.
Business structure matters
Your risk exposure may depend on how your business operates day to day. Brokers who are sole operators and personally perform all work, without staff or external service providers, may face higher risk.
Possible retrospective assessments
While Connective has not been assessed at this stage, payroll tax reviews could potentially look back up to five financial years, based on recent enforcement activity.
Important: This information is general in nature and does not replace independent tax or legal advice.
How Connective is responding
Reviewing legal and commercial arrangements
Connective is actively assessing potential payroll tax risks and reviewing member agreements to reduce exposure where possible.
Supporting brokers
We are identifying brokers who may be more vulnerable and will provide guidance on operational changes that could help support exemption eligibility.
Industry advocacy
Connective is working with industry bodies to advocate for changes that recognise the impact of payroll tax enforcement on small businesses and broker sustainability.
What happens next
The industry environment is evolving, and further guidance may emerge as regulators and courts respond to this decision.
We recommend staying informed and reviewing your business structure with professional advisers as required.
Need help?
If you need help understanding how this issue may affect your business, contact your Partnership Manager or email [email protected].