Bridges Financial Services has won a resounding victory in its payroll tax dispute with the NSW Government, dodging a multi-million dollar tax bill in a decision that will also come as a major relief for other dealer groups.
In a landmark judgement, the Supreme Court of NSW ruled yesterday that Bridges was not liable for more than $3 million in unpaid payroll tax for the period between 1995 and 2000.
The NSW Office of State Revenue (OSR) had claimed that Bridges planners were either direct employees of the dealer group or ‘relevant contractor’, both of which carry payroll tax implications.
The crux of its argument was that because of the level of supervision dealer groups were required to carry out on their advisers, the relationship was necessarily one between employer and employee.
If Bridges had lost the case, the fear was that it could open the door for other dealer groups to also be hit with millions of dollars worth of payroll tax claims.
But Justice Gzell in the equity division of the Supreme Court of NSW quashed the claims, ruling that while Bridges planners did fit into the definition of ‘relevant contractors’, they qualified for an exemption under payroll tax legislation.
The decision, which the NSW OSR can appeal, was handed down in record time – less than two weeks after the case was heard and more than a month earlier than expected.
Mark Petrucco, a partner with The Argyle Partnership, which defended Bridges in the case, said the win was significant for the financial planning industry.
“It is a significantly positive result for Bridges and the industry, because the judge ruled that the industry is heavily regulated and therefore ordinary tasks of control by dealer groups stemmed from this regulation,” he said.
The win comes on top of a similar victory for Bridges in Western Australia, where a $500,000 payroll tax claim against the dealer group was dropped last month.
Bridges chief executive Alex Hutchison said the latest victory would wipe a $5.2 million liability from the dealer group’s accounts – $3.177 which had been earmarked to pay for the NSW OSR’s claim for the period between 1995 and 2000, and another $2 million to pay for other charges accrued since 2000.
“It is a resounding victory for Bridges because what the court found was that Bridges financial planners can be seen as independent contractors and although the payroll tax legislation applies, the Bridges business model falls within the exemption to the Act,” Hutchison said.
“The decision is also a significant victory for the financial planning industry, because it recognises that financial planning is an independent profession – it is not just a continuation of what financial planners do with a licensee.”
