Nedlands mortgage broker Mortgage Force has won a breakthrough victory against the state tax office by arguing that its sales representatives were consultants and therefore not subject to payroll tax.
Nedlands mortgage broker Mortgage Force has won a breakthrough victory against the state tax office by arguing that its sales representatives were consultants and therefore not subject to payroll tax.
The ruling by the State Administrative Tribunal goes to the heart of a long-running battle between the Office of State Revenue and business groups over the definition of employees.
The OSR has argued that many consultants are effectively employees and should therefore be subject to payroll tax, but in the case of mortgage originators the Tribunal has ruled otherwise.
The Mortgage Force ruling, handed down last month, will give encouragement to many other businesses that believe their ‘consultants’ should not be subject to payroll tax.
It followed a decision by tax authorities in several states, including Western Australia, that financial planners attached to dealer groups are contractors and not employees.
In his ruling, Justice Barker said the Mortgage Force case was keenly contested by the parties, who agreed on certain facts only after much encouragement from the tribunal.
The case concerned 25 mortgage originators who were paid sales commissions by Mortgage Force between July 1999 and April 2003.
Mortgage Force, founded by directors Neil Pinner said Michael Brennan, presented a range of arguments to support its contention that its sales representatives were consultants.
It said they operated independent businesses for their own account.
Mortgage Force said it did not have the ability to control the work performed by its sales representatives, who were remunerated solely in the form of sales commissions.
The sales representatives were free to choose when and where they worked, did not receive any holiday pay or superannuation, provided their own equipment and paid their own business expenses.
The Commissioner of State Revenue countered that the terms of engagement of the sales representatives constituted a contract of service (not for services).
He also argued that Mortgage Force exercised certain controls over its sales representatives who in turn were integral to, and directly assisted in the running of, the business of Mortgage Force.
Justice Barker accepted that Mortgage Force exercised a degree of control over its representatives, and that their work was obviously important to Mortgage Force’s business.
Despite this, he accepted that the sales representatives carried on their own businesses and operated on their own accounts as mortgage originators.
He also concluded that Mortgage Force conducted its own business as a mortgage aggregator and provided support services to its sales representatives.
