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In spite of a recent win from one Aussie dealer group, licensees are being warned they still face the risk of double taxation by state revenue authorities.
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Licensees warned on risk of double taxation
18 July 2016
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In June this year, the non-aligned dealer group Synchron said the State Revenue Office (SRO) Victoria had issued a letter to its lawyers, agreeing with the firm’s argument that authorised representatives are not employees or relevant contractors for payroll tax purposes.
The SRO had previously assessed that Synchron was liable to pay payroll tax in relation to the commission and fees it collects on behalf of some of its advisers.
This meant potentially all licensees would have had to pay around 5 per cent payroll tax on the gross revenue for their authorised representatives for the past seven years.
On 1 June, the SRO forwarded a letter to Synchron’s lawyers.
“The commissioner has determined on the basis of evidence by your client that your client is correct, to contend that the arrangements between your client and its authorised representatives are not relevant contracts for the purposes of section 32 1(B) of the Payroll Tax Act 2007,” the letter stated.
Reflecting on the firm’s eventual win in its five-year battle, director Don Trapnell told delegates to the AIOFP’s offshore conference in Sri Lanka over the weekend that the industry is not yet in the clear.
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“We were delighted that, after having previously decided that payroll tax and financial advisers were a natural target, the SRO eventually agreed with our argument that authorised reps are not employees or relevant contractors for payroll tax purposes,” Mr Trapnell said.
“However, because the SRO settled there is still no test case,” he cautioned. “This means if you are a licensee, they will still be able to knock on your door and claim you are liable for payroll tax for authorised representatives, which could put some small licensees out of business.”
Should licensees find themselves in this unenviable position, they should “skip the accountants and go straight to the lawyers”, Mr Trapnell said.
The win came at a cost of “hundreds of thousands of dollars” to the dealer group, he revealed, and required considerable time and attention from senior management, particularly independent chair Michael Harrison who met with stakeholders, including Prime Minister Malcolm Turnbull, during the course of the lobbying campaign.
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