Payroll tax risk ‘greater than first imagined’: Finsure CEO

It is the second major aggregator to challenge the application of the tax to brokers. Major aggregator Loan Market Group (LMG) had been at the centre of the precedent-setting case arising out of its legal proceedings with the Chief Commissioner of State Revenue of Revenue NSW (RNSW), where it was found that payroll tax is payable under certain models.

The Finsure case, however, will challenge the reading from a wholesale aggregator perspective - rather than from a brokerage model perspective.

The aggregator has previously said that it believes Revenue NSW is taking “a misguided position that brokers operating under Finsure’s aggregation model are performing work for Finsure, rather than operating independent businesses servicing their own clients”.

In his open letter, published on Wednesday (10 September), Bednar said: “As we continue to prepare for our case in the NSW Supreme Court against the application of the payroll tax system by Revenue NSW, I’m concerned that the mortgage broking industry may be at greater risk than I first imagined,” Bednar wrote.

“While I believe our position is strong, our investigation has led us to review broker contracts across the industry, where we discovered clauses which stipulate that brokers must adhere to the aggregator’s explicit instructions. Terms that limit broker autonomy or substitute their independent judgement with an aggregator’s operating rules places them at risk and creates an impression that brokers cannot run their business with genuine independence.

"The lack of flexible fee options for brokers to pay for the services they receive from aggregators, especially imposing high commission split plans and not offering flat fee subscription, takes away a broker’s independence.

“I worry when I see clauses which restrict options for brokers and force them to abide by an aggregator's operational framework. That's not how brokers should be treated,” he said.

“I am also concerned about what will happen to competition within our industry. As mortgage brokers know, competition is at the heart of what we do. In fact, it's how mortgage broking started in the first place - helping Australians to find a better deal on their loan by comparing options between lenders. To this day, I believe it is why Australia's banking and lending industry is one of the strongest in the world and has proven to be incredibly resilient through some challenging times," Bednar continued.

“However, with this case looming, we face a situation that may narrow the choice and reduce competition across our industry.”

Lessons from Uber

Drawing parallels with the recent Uber Australia case, Bednar noted that Revenue NSW had previously deemed Uber liable for payroll tax on payments to drivers, despite their classification as independent contractors.

“The crux of the case was what constituted a service fee. Because Uber were wholly dependent on clipping the payments they remitted to drivers from riders, this was interpreted to be a ‘service’ by the drivers to Uber.

“As a result, Uber was found to be ultimately liable to payroll tax on those payments,” he said. (However, Uber is seeking an appeal to the High Court on this finding, so there remains uncertainty for what this case might mean for the broking industry.)

Bednar emphasised that Finsure’s business model differs. “The ‘flat fee’ model we offer mortgage brokers means that our business is not dependent on brokers in the same way Uber is wholly dependent on clipping driver’s payments.

“However, given the various models offered by aggregators across Australia, it may mean other aggregators who predominantly offer percentage models to their brokers, and rely on clipping (like Uber), end up being collateral damage,” he said.

Issue has industry-wide implications

Finsure said while it was well-resourced to pursue legal clarity, the group warned that smaller aggregators may struggle to challenge these readings, thereby putting their models under threat.

“There may be a handful of other aggregators who could also rally the necessary resources to fight. But smaller aggregation and sub-aggregation groups may not be so fortuitous. To them, this is a looming threat that has the power to put them out of business and, in turn, hurt our industry by removing options for brokers wanting another choice,” Bednar said.

The Finsure CEO concluded by underscoring the broader consequences for brokers and consumers.

“Should this eventuate, the 22,000+ Australian mortgage brokers and their millions of customers will ultimately pay the price,” he wrote.

Bednar cautioned that differing aggregator models could expose the sector to further payroll challenges, with wide-reaching consequences for brokers and their clients.

“Finsure still remains confident about its position in relation to payroll tax and a court ruling in our favour could be a landmark moment in the industry’s history,” he said.

NSW Parliamentary Inquiry ticks on

Bednar’s concerns echo the wider industry push for reform.

At a NSW parliamentary hearing in March, representatives from the Mortgage and Finance Association of Australia (MFAA), Commercial and Asset Finance Brokers Association of Australia (CAFBA), and aggregators such as Loan Market Group (LMG) warned that the Payroll Tax Act’s contractor provisions unfairly capture independent brokers.

Industry leaders have described the tax’s application as “reckless,” calling for legislative reforms to clarify contractor provisions, provide temporary audit relief, and harmonise payroll tax rules nationally.

However, Revenue NSW has defended its approach, with Deputy Secretary Scott Johnston stating that the laws are administered “fairly and impartially” and that there has been no retrospective imposition of liabilities.

In its submission to the NSW parliamentary hearing, Finsure said it wants the NSW Parliament to intervene to:

• Amend the provisions to exclude complying aggregators (and introduce a clear legislative carve-out for business-to-business (B2B) platforms that sell services to independent contractors).

• Exclude from the carve-out arrangements where the business directs, controls, and is integrated with and financially depends on contracted labour. This would align the law with its original intent to capture disguised employment while excluding independent business models.

• Clarify that intermediary oversight required by law should not be mischaracterised as employer-like control.

• Have the chief commissioner issue clear public guidance confirming that qualifying aggregators and other technology-driven platforms are not employers for payroll tax purposes.

At the time, Bednar said: “We urge the NSW Government to correct the potential misapplication of payroll tax to businesses like Finsure’s and other intermediary businesses, which will ensure that: independent mortgage brokers can continue to operate freely; that competition remains strong and NSW resident borrowers benefit from the better financial deals they can secure in a more competitive environment; and the mortgage industry is not unfairly burdened by tax consequences not intended by the Payroll Tax Act,” he said.

The next hearing for the NSW Parliamentary inquiry into the application of the contractor and employment agent provisions in the Payroll Tax Act 2007 will take place on 16 December 2025.

You can watch the full webcast on payroll tax and why brokers need to be preparing for it in The Adviser Live video from July 2024 here or learn more about the NSW parliamentary inquiry into payroll tax and its potential impact on the mortgage broking industry in a special Mortgage and Finance Leader episode with John Ruddick, Libertarian member of the NSW Legislative Council and former broker, here.

Information included in this article and webinar does not constitute legal advice and should not be used as such. Formal legal advice should be sought for specific legal matters.