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Will Aggregators Hit Brokers Up For Their Payroll Tax?

NewsGreg Ashe

Will Aggregators Hit Brokers Up For Their Payroll Tax?

With the recent NSW Supreme Court decision in the case between LMG and Revenue NSW, everyone in the industry is speculating about the future ramifications for the wider industry and everybody is an expert.

At QED, we don't pretend to be "experts" on Payroll Tax but we are always prepared to put our necks out and tell you how we think it is.

Industry spokespeople are saying the Payroll Tax Act is "unclear".  Well, when you read it in the context of the recent judgement, it's pretty clear.  It might be grossly unfair - which the Judge alluded to - but it's not unclear.  If you are paying someone else to perform a task and the agreement under which they perform the task has lots of rules and directions about how the task is to be performed, that agreement is defined as a "relevant contract".  If the performance and payment is under a relevant contract then, for Payroll Tax purposes only, this sets up an employer-employee relationship.  If your business is of a certain size, then the payments you make are subject to Payroll Tax.

It's that simple.  Unfair, as this is not what those sections of the Act were set up to achieve but it is what it is.

Then there is all this talk about brokers having to pay the Tax or being "liable" for the Tax.  This is not true.  Section 36 of the Act is abundantly clear - it is the "employer" and no one else that carries the liability.  Now, of course, if this all unravels in the way that people are assuming it will, sure, aggregators may find other ways to pass on the cost but the broker will never be liable to pay the tax.

Finally, the case explored several "exceptions" - circumstances that knock a broker business out of the calculation for the aggregator.  Essentially - very simplistically - these are:

  • A portion of the tasks are performed overseas - think loans processing in the Philippines; or
  • There is more than one person in the business performing the tasks; and
  • The above is true no less than 180 days in the year.

Even if your business is truly a one-person enterprise, you know QED has been telling you for years to outsource activities that are slowing you down.

So, to minimise the Payroll Tax bill for your aggregator and, hence, the cost that they may roll down to you, outsource!  If you're reading this, there's a high chance that you're already a CompliFast user and that means you've already engaged "someone else" to perform one of those big tasks from your aggregator agreement - compliance!!

Please feel free to contact our amazing Team if you have any questions on 1300 817 662.

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