Artboard 1Icon/UI/CalendarIcons/Ionic/Social/social-pinterestIcon/UI/Video-outline

Mortgage aggregators: Are you ready to defend your broker relationships from payroll-tax and superannuation reviews?

19 January 2023

8 min read

#Taxation, #Superannuation, Funds Management & Financial Services

Mortgage aggregators: Are you ready to defend your broker relationships from payroll-tax and superannuation reviews?

Revenue authorities are increasing their scrutiny of industries with independent contractors being engaged – from University lecturers to delivery drivers. This article looks at the relationships between mortgage aggregators and their independent contractor arrangements with mortgage brokers. Direct parallels can probably be drawn with the insurance industry and share trading brokers.

What we are seeing is a number of state revenue payroll tax investigations which seek to test the extent to which ‘aggregators’1 should be liable to payroll tax for commissions paid to mortgage brokers, by aggregators, on behalf of lenders. 

Should payroll tax apply, can the same analysis be deployed by the ATO to justify the imposition of superannuation guarantee charge obligations on aggregators concerning their relationships with independent brokers?

This article explores the key risk factors for aggregators, the (aggressive) positions being taken by revenue authorities and suggests high-level strategies that Holding Redlich has experience with in defending and advising on aggregator/mortgage broker relationships in this space.

Key takeaways:

  • aggregators should prepare for state revenue investigations of their relationships with mortgage brokers from the payroll tax perspective;
  • the Chief Commissioner of NSW’s position (in Commissioners Practice Note 016 ‘Payroll Tax- Relevant Contracts – Australian Financial Services Licences and Australian Credit Licences’ (CPN 016), issued in June 2022, that payroll tax applies to the payment of commissions by entities that hold an Australian Financial Services Licence (AFSL) or Australian Credit Licence (ACL) to mortgage or other brokers (described as ‘Agents’) presents significant tax risk and challenges to the aggregation sector;
  • the Chief Commissioner’s position in CPN016, relying on the decision of the NSW Supreme Court in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788, may be distinguishable from modern day aggregation models where the relationship between aggregators and mortgage brokers are not that of an agency relationship;
  • aggregators should be wary of the potential risk of superannuation guarantee charge (SGC) being imposed on their relationships with mortgage brokers under the extended definition of employee in the Superannuation Guarantee (Administration) Act 1992 (Cth);
  • aggregators and other intermediaries, should seek advice early on – reviewing existing arrangements, creating defence files (to later support arrangements) or prepare to make necessary disclosures.
  • members of our team have experience acting for aggregators in the payroll tax and ‘relevant contractor’ disputes context. We also act for taxpayers, operating in highly regulated sectors of the economy, regarding superannuation guarantee obligations (and have recently run a case in the Federal Court of Australia). Our team can assist you to navigate State and Commonwealth revenue investigation and assist you to reduce tax risk.

The ‘relevant contractor’ provisions, contained in the uniform payroll tax acts, 2 were enacted to:

‘'catch those relationships where the sub-contractor works exclusively or primarily for the one person and where the object of the contract between the parties is to obtain the labour of the sub-contractor".

(see: Nationwide Towing & Transport Pty Ltd v Commissioner of State Revenue (No 2) [2018] VSC 609, [31] (Croft J), citing Victoria, Parliamentary Debates, Legislative Assembly, 27 October 1983, pages 1579 to 1580).

The types of relationships that were meant to be captured by the relevant contractor provisions were those that 'for all intents and purposes' were identical to the typical employer and employee relationship, but for an arrangement between (former) employees and employers to engage on another as 'independent contractors'. 

However, recent experience has demonstrated that the scope and ambit of the ‘relevant contractor’ provisions are ambiguously broad. Revenue authorities, seizing upon these ambiguities, are applying the payroll tax provisions to contracts and relationships in heavily regulated sectors that (previously) would not typically be considered employment relationships.

With the increasing importance of the role of financial aggregators, as intermediaries facilitating relationships between independent mortgage brokers (and the broker’s clients) and lenders, revenue authorities (particularly in NSW) are actively investigating and assessing aggregators under the relevant contractor provisions. The significant volume of commissions paid by lenders to mortgage brokers (via the aggregator), which annually falls within the billions, represents a substantial potential revenue pool for authorities to tax.

The Chief Commissioner of NSW, in CPN 016,3 sets out the basis upon which the NSW Revenue believes that the relevant contractor provisions apply to businesses:

  • providing financial services under an ASFL issued under the Corporations Act 2001 (Cth) (Corporations Act)
  • credit services under the ACL issued under the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act).

The Commissioner contends that payments of commission by entities that hold an ASFL or ACL, under which mortgage or other brokers operate (described as ‘Agents’), are subject to payroll tax. In CPN 016, the Commissioner relies heavily on the authority in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788 (Bridges). Bridges concerned the relationship between stock brokers and a principal broker under an agency agreement and the effect of long repealed provisions of the former Corporations Act 1989 (Cth).

In drawing an analogy with Bridges, the Commissioner now contends that the statutory language of the Corporations Act and/or NCCP Act gives rise to an agency relationship between aggregators and mortgage brokers, justifying the imposition of payroll tax under the relevant contractor provisions. This is despite the NCCP Act provisions expressly denying any agency relationship between an aggregator and mortgage broker but rather confirming that:

  • a broker is always only the agent for the consumer (i.e the borrower)
  • a person cannot be an agent for more than one party involved in a transaction (for example, a mortgage broker is always an agent for the borrower and is not able to be an agent for the aggregator or a lender in the same transaction).

This position taken by Revenue NSW (and likely to be adopted across other state revenue authorities) presents serious tax risk and challenges to the aggregation sector that operate in a commercial environment where the role of mortgage brokers, aggregators and lenders are commercially distinct.

It is also foreseeable, that if relationships between aggregators and mortgage brokers are treated as being ‘services provided by the brokers to the aggregator for the mortgage brokers performance of work’ that such arrangements may be treated by the Commonwealth Commissioner of Taxation as being ‘contracts that are wholly or principally for the labour of the Mortgage broker’ and potentially, an employment relationship giving rise to SGC.

If this position was ever to be taken by the commissioner in the vast majority of cases there is effectively no limitation – and assessments can be issued for the relevant SGC back to the commencement of the claimed employment. What we are seeing currently is that the ATO is acutely aware of the unfettered ability to raise unlimited assessments. 

Aggregators take on many different forms and structure their arrangements/ relationships with mortgage brokers according to different wholesale or franchise models, as best suits their business needs. It is possible that the scope and structures relied on by the Commissioner in CPN 06 are not applicable to your aggregating arrangements. What is important and has now been confirmed by a unanimous High Court is that the contract evidencing the arrangements is of critical importance in determining the nature of the relationship (see: ZG Operations Australia Pty Ltd v Jamsek and ors (2022) 96 ALJR 144 and Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 96 ALJR 89).

Given the tax risk and uncertainty, it is important that aggregators obtain expert tax law advice and guidance to review their existing arrangements. If the revenue does come to the door it will be equally important to retain experts in the field when strategically responding to or preparing for an investigation.

Members of our team have experience acting for aggregators in the payroll tax and ‘relevant contractor’ disputes context and taxpayers, operating in highly regulated sectors of the economy, regarding SGC. Our team can help with navigating state and commonwealth revenue investigation and assist in reducing tax risk.

If you have any questions about this article or if you require any assistance, please get in touch with us below or send us in your enquiry here.

Authors: Sue Williamson, Damien Bourke & Jack Aquilina

1 Aggregators act as an intermediary between mortgage brokers and lenders. Aggregators provide value add services to support and enable growth of a mortgage broker’s independent business. Aggregators provide services to brokers such as access to administrative support and customer relationship management systems. They also act as a single point of contact between large numbers of brokers and lenders. Lenders also benefit when aggregators provide access to brokers (and the broker’s clients) to lenders via the aggregator’s lending panel. For more information see: Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report, Volume 1 (Commonwealth of Australia, 2019) page 60-64, section 6 & 8; ASIC Regulatory Guide 203- RG203.75(c); Mortgage and Financial Association of Australia,

2 Payroll Tax Act 2007 (Vic), section 32; Payroll Tax Act 2007 (NSW), section 32; Payroll Tax Act 1971 (QLD), section 13B; Payroll Tax Act 2009 (SA), section 32 and Payroll Tax Act 2008 (TAS), section 32.

3 Accessible via

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Share this