21/02/2025
The mortgage broking industry has taken a strong stance against the application of payroll tax on broker commissions, urging the NSW Parliament to clarify and amend the law to exclude brokers from this financial burden.
The NSW Parliament recently conducted a review of payroll tax provisions, following concerns from various industries, including mortgage broking. A key issue is the misclassification of independent mortgage brokers as employees, leading to significant tax liabilities. This ambiguity threatens the viability of many small businesses and could ultimately impact borrowers by increasing loan costs and reducing market competition.
Industry-Wide Opposition
Submissions from major aggregators—including Loan Market Group, Finsure, Connective, and Mortgage Choice—as well as legal experts and broker associations, have strongly opposed the tax’s application. Their primary concerns include:
The mischaracterization of independent brokers as employees, which contradicts their self-employed status.
The financial strain this tax imposes on brokers, particularly sole traders, many of whom may not survive the additional expense.
The potential for increased mortgage costs for consumers if brokers are forced to pass on the additional costs.
The administrative burden on aggregators, who are being required to prove exemptions based on complex and unclear guidelines.
Recommended Reforms
To address these concerns, industry stakeholders have called for the following reforms:
Legislative Clarity: Amend the Payroll Tax Act to ensure independent contractors, including mortgage brokers, are not unfairly classified as employees.
Exemptions for Aggregators and Brokers: Introduce specific exclusions to protect bona fide independent contractor arrangements.
Modernization of Tax Laws: Update provisions to reflect contemporary business structures and intermediary models, preventing unintended tax burdens.
Amnesty for Brokers and Aggregators: Provide a fair transition period for businesses that may have unknowingly fallen under the new tax interpretation.
Clear Public Guidance: Ensure Revenue NSW provides transparent and fair guidelines to prevent future misapplications of the law.
The Bigger Picture
The broking industry plays a crucial role in helping Australians secure home loans, fostering competition, and ensuring consumers have access to a broad range of lending options. The unintended consequences of applying payroll tax to broker commissions could lead to reduced competition, fewer options for borrowers, and increased costs at a time when housing affordability is already a major issue.
Broker associations, including the MFAA, FBAA, and CAFBA, have emphasized that this issue extends beyond mortgage broking. If sole traders in the broking industry can be classified as employees for payroll tax purposes, other self-employed professionals—such as hairdressers, dentists, and tradespeople—could face similar tax burdens, setting a concerning precedent across multiple sectors.
A Call for Fairness
We stand with the industry in calling on the NSW Government to amend this outdated and ambiguous tax provision. Clearer guidelines and fair exemptions will ensure that mortgage brokers can continue to operate independently, supporting both small businesses and consumers alike.
The mortgage broking industry has made its position clear—this tax must be reviewed, and brokers should be exempted to protect competition, fairness, and accessibility in the home loan market.
