The mortgage broking industry has told the NSW government’s payroll tax inquiry that a “nebulous pool of uncertainty” surrounding payroll tax is threatening the viability of the industry.
At the second hearing of the NSW Legislative Council’s inquiry into Revenue NSW’s current interpretation of the contractor and employment agent provisions in the Payroll Tax Act 2007, industry members and legal experts said that Revenue NSW’s current interpretation of the Payroll Tax Act 2007 has strayed far beyond its original intent.
Currently, court cases have determined that brokers working under aggregators may be working under a ‘relevant contract’ where payroll tax applies (as per section 32 of the Payroll Tax Act 2007 NSW).
The second hearing for the inquiry, which took place on 15 December following a similar hearing in March, sought to understand how different industries, including brokers, ride-sharing platform Uber, care services, and security services, interpret the payroll tax regulation and gather insights on industry-specific concerns and opportunities for innovation.
The committee repeatedly referenced the precedent-setting Loan Market court case from 2024 and the current Finsure case, which was heard by the Supreme Court in October 2025 and is still under consideration.
Fronting the NSW Legislative Council hearing last month was Peter White AM, managing director of the Finance Brokers Association of Australia (FBAA), and Jack Aquilina, tax expert and managing associate at Dentons Australia.
Aggregators as ‘utilities’, not employers
Speaking on behalf of the broking sector, White told the committee that the relationship between aggregators and brokers is being fundamentally mis-characterised by Revenue NSW.
Currently, Revenue NSW believes that aggregators are liable to pay payroll tax on broker commissions, unless there are specific exemptions. However, aggregators are having to challenge the reading of the application of the law individually, given the variation in models and agreements.
In his opening statement, White reflected on the Loan Market payroll tax case – which found that the brokerage brand was liable to pay millions in payroll tax – and told the members that the “characterisation of a broker providing services to an aggregator... runs completely counter to how the arrangements work,” White supplied.
He said that aggregators function as a means of enabling brokers – many of whom are self-employed – to access a panel of lenders, rather than acting as employers or traditional principals.
“To be clear, the relationship between an aggregator and broker is not structured to avoid tax or obligations of either party. The arrangement is not a sham to circumvent employment laws. Aggregators provide services to brokers. Aggregators exist to help self-employed brokers, of which there is currently just over 22,000. Aggregators have access to a wider range of panel of lenders so that brokers can provide services to their clients. Brokers find the client and have a direct relationship with each one,” he said.
“Aggregators have no relationship with the individual clients of the brokers. They merely provide mechanisms for which brokers can lodge applications to a wider range of lenders solely for the benefit of a client.”
By saying that brokers are submitting loans on behalf of their clients, not on behalf of the aggregator’s client, the “aggregator doesn’t come into it”, White continued.
“The brokers are not providing the service to the aggregator,” he said.
The FBAA MD highlighted that the average broker earns roughly $85,000 per year and that many operate “mum-and-dad” businesses from home.
He warned that if aggregators are hit with large tax bills – as Loan Market has – the costs will inevitably be “pushed down the line”, effectively penalising the 22,002 brokers nationwide.
The FBAA MD therefore suggested that retrospective penalties for not paying payroll tax should be waived. White noted that for decades, top-tier auditors (such as PwC) had advised the industry that they were meeting all tax obligations.
“If we were out of lockstep... why wasn’t this addressed many years ago?” he asked and called for a “line in the sand” that would prevent retrospective assessments dating back over a decade.
What could fix the legislation?
Later in the hearing, Aquilina, payroll tax specialist and managing associate at Dentons Australia, proposed a legislative solution to the committee.
He said that the current “services” test in section 32(1) of the act is too broad, allowing Revenue NSW to “deem” a service exists simply because a financial benefit flows through a supply chain.
“Remember, payroll tax is a tax on employment. It’s not a tax on transactions. It’s not a tax on supply chains. It’s a tax on employment relationships or things that mirror, or are similar to, employment relationships,” he said.
He said that what makes an employment relationship is something where there is a degree of integration and control between the principal and contractor.
“It is the absolute reliance by section 32 (1) on that concept of services that is creating vast difficulties with how the provisions are being tackled by the courts, how they’re being interpreted and how they’re being administered by Revenue,” he said.
“The problem with the concept of services being the basis for determining an employment-like relationship is that it is an incomplete way to describe what an employment-like relationship would look like.
“The mere fact that a person derives financial benefit from the related activities of another person, in and of itself, is not a service. I think that’s to take the concept of service beyond its natural meaning and in a way that the employment law, at the very least, has never contemplated employment-like relationships to be characterised.
“If there’s no integration and control between the principal and the contractor, even to some extent – even if there is the presence of a very nebulous, broad, deeming idea of services – then there is no employment-like relationship.”
The lawyer said that the consequence of this is that “the most vulnerable people in the supply chain are suffering the economic issues that are associated with this tax being passed through the supply chain”.
“Parliament might decide to lower that threshold. That is something that could be perfectly amended,” he said.
As such, Aquilina suggested the act be reformed to focus on:
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Integration: Is the worker truly part of the principal’s business?
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Control: Does the principal direct the work?
“Only Parliament can lead the way in terms of drawing the line, making it clear and giving certainty to business. New South Wales can lead the nation on this,” Aquilina told the inquiry and said the current situation was hurting bona fide independent contractor relationships.
“Every single contractor that is impacted, largely by these decisions, is a sole trader contractor who themselves are starting their own small businesses and who is operating those businesses in good faith under the idea that it is their businesses.
“The costs, although not imposed on them directly – imposed on, say, an intermediary – are being directly imposed on them. That is hurting them. These are people who operate on low margins and who are operating in circumstances where they have very little control or imbalance in these relationships.
“I think that the unfair impost of this tax is that it is inevitably going to hurt those people – it is hurting those people. Whether they are the single operator mortgage broker, driver, cleaner, telehealth provider or whoever it may be, these people are bearing the cost. That is an obscurity of the system. I don't think Parliament ever intended for that to happen. We’ve got an opportunity to correct it.”
The hearing also heard from other sectors, including Uber and Mable, which echoed concerns about inconsistent application.
The committee is expected to continue its investigation into whether the Payroll Tax Act requires urgent amendment later this year. No further hearings have so far been scheduled for this inquiry.
You can learn more about the NSW parliamentary inquiry into payroll tax and its potential impact on the mortgage broking industry in this podcast 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.
[Related: Unpacking payroll tax: essential broker insights from industry experts]
