‘Clarity on legislation is crucial’: What the NSW payroll tax review means for businesses

A new parliamentary inquiry into the NSW Payroll Tax Act will be held, reviewing the operation of the relevant contractor and employment agent provisions and hopefully providing some needed clarity for small businesses.

The NSW government is set to review its Payroll Tax Act. The inquiry will look into and report on the overall application of the contractor and employment provisions in the act. The review of the act will include focusing on the impact on contractors, employment agencies, and gig economy workers.

HR Leader recently spoke to Simon Obee, head of HR advisory at Employment Hero, about the NSW government’s review of payroll tax and the flow-on effect it may have on businesses right throughout Australia.

“The NSW government has launched a parliamentary inquiry into the Payroll Tax Act 2007 (NSW) following recent court cases, including one involving Loan Market, a mortgage aggregator. In the Loan Market case, the court ruled that commissions paid to independent mortgage brokers were subject to payroll tax under the act,” said Obee.

“This decision was based on provisions requiring payroll tax to be paid when one party (the broker) provides ‘work-related services’ to another party (Loan Market) as part of that party’s business. Loan Market’s defence – that the brokers were customers, not service providers – was rejected by the court.

“This outcome has sparked industry backlash, with groups like the Mortgage & Finance Association of Australia and MP John Ruddick, who is also a mortgage broker, urging the NSW government to reconsider how the act applies to contractors.

“In response, the government has agreed to review the act, focusing on its impact on contractors, employment agencies, and gig economy workers. The review may recommend narrowing the circumstances where payroll tax is applied.”

Obee did state, however, that “it’s worth noting that the current law already exempts certain contractor payments from payroll tax, for example, when services are provided for a short time or directly to the public”.

Although it seems quite niche to both the mortgage and broking industries, Obee explained that clarity on legislation is crucial for business confidence throughout Australia, which is why Employment Hero supports the inquiry.

“Clarity on legislation is crucial for businesses to operate with confidence in Australia. Payroll tax was never intended to be payable in a business-to-business relationship, and the majority of mortgage brokers are small businesses,” said Obee.

“We want Australian businesses to be confident in their grip on legislation and their ability to operate compliantly and profitably – that is crucial for long-term job creation.”