Brokers say proposed tax could put them out of business
NSW mortgage brokers say they’re prepared to go to war with the Perrottet government at election time over a plan to hit the industry with a payroll tax.
The government could be looking at a potentially damaging campaign from the state’s mortgage brokers thanks to a plan by Revenue NSW to force mortgage aggregators to pay tax on commissions they pay to brokers, according to a report by The Australian Financial Review. Brokers say such a move could put them out of business.
Under the plan, aggregators’ relationship with brokers would be defined as an employer-employee relationship, forcing aggregators to pay payroll tax on commissions and payments to brokers.
The Mortgage and Finance Association of Australia has already expressed its opposition to the move in a letter to NSW Treasurer Matt Kean and the Opposition, calling the plan “unwarranted, unfair and unreasonable”.
Brokers told AFR that they could be forced to close if the plan is enacted, arguing that aggregators will pressure them to pay the tax obligation, which could be backdated by as much as eight years.
“That would put me out of business”
“From the aggregators’ point of view, it’ll be a cost to their business and they’re likely to just pass it on,” Berowra-based mortgage broker Wayne Dickerson told AFR. “And so if they bring it in and backdate it, there’s a likelihood that a small broker like myself will potentially get a bill based on past commissions, and that would put me out of business.”
Read next: NSW payroll tax threatens to derail aggregators
In its letter to Kean, the MFAA agreed that the tax could destroy many brokers’ businesses.
“The erroneous and haphazard application of this tax, including retrospective fines and penalties by Revenue NSW, threatens the financial stability of the industry,” MFAA chief executive Anja Pannek wrote. “This places at risk the ability for home borrowers and business owners in NSW to access the services of a broker for critical credit assistance … at a time when access to credit for economic recovery … is critical for the state.”
The industry argues that aggregators do not function as brokers’ employers, AFR reported – rather, they act as an intermediary between banks and brokers. Brokers aren’t subject to minimum performance requirements from aggregators, and aggregators don’t have a financial interest in a broker’s business.
Preparing for war
Brokers told AFR that they are prepared to campaign vigorously against the Coalition over the issue, at a time when brokers handle more than 70% of mortgages and 40% of small business loans in Australia.
The pledge is similar to a move the mortgage industry made in 2019 against then federal opposition leader Bill Shorten after he pledged to end trail commissions, AFR reported.
The MFAA is scheduled to meet with the treasurer today to discuss the issue.
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