Backdated Payroll Tax Hikes Business Costs

Small and medium businesses in industries like mortgage broking and building services are struggling with payroll tax bills reaching millions. New South Wales' aggressive enforcement could lead to higher consumer costs, including increased interest rates and medical fees, as companies pass on expenses.

The payroll tax provisions aim to prevent tax avoidance in employment-like relationships, but businesses argue the rules are being unfairly expanded. Legal decisions have extended payroll tax requirements to medical centres and mortgage brokers, raising concerns that other sectors like cleaning and agriculture could also be affected.

One mortgage aggregator now faces a $15 million tax bill nationwide after losing a case in NSW. Industry groups warn these costs will reduce competition in lending, leading to more expensive mortgages. One analysis estimates the average borrower in NSW could pay an additional $98,000 over the life of a loan if penalties apply.

Medical groups are pushing for a full payroll tax exemption for independent GPs, following Queensland’s lead. Without it, general practices may increase fees, counteracting federal efforts to lower healthcare costs. Surveys show only a small percentage of clinics can absorb these new costs without raising prices.

Revenue NSW denies retrospectively applying tax liabilities, arguing that reassessments simply correct past underpayments. However, businesses claim they have received massive backdated bills despite previous tax audits showing compliance. Some firms warn these changes could force them to close, calling it an "extinction-level event" for small operators.

A further hearing will examine how the taxes could impact the gig economy as a pending court decision may extend these obligations to ride-share and food delivery services.

Source: Australian Financial Review, MFAA, Amplify