McGrath float possibly closer after $6 million NSW OSR payroll issue settlement

McGrath float possibly closer after $6 million NSW OSR payroll issue settlement
McGrath float possibly closer after $6 million NSW OSR payroll issue settlement

McGrath Real Estate Agents, who were issued with an assessment of $6 million by NSW Office of State Revenue, has settled the claim for payroll tax, interest and penalty tax.

The OSR alleged the McGrath group were liable for payroll tax on commission payments received by “independent” agents who were contracted to them from July 2007 to June 2012.

The Tobin Partners payroll industry advisory spoke earlier this month to McGraths CFO Paul Hauenschild who advised that their had been settlement terms were confidential.

Geoff Lucas, chief operating officer for McGrath Estate Agents subsequently confirmed to Property Observer that the dispute with the OSR was actually resolved in September 2014, shortly after the issue garnered public attention.

"We are happy with the outcome and that there will be no impact upon McGrath's operating model," he advised this week.

"As part of a confidential resolution, no further comments will be made."

Tobin Partners noted it is common practice in the industry for better performing agents to enter into contract arrangements with agents who work under the company’s banner.

These arrangements often include the agent operating under a company set up but there are cases where the Courts will look behind the documentation to work out the true nature of the relationship. In this case the NSW OSR alleged that the agents came within the definition of “employees” under the Payroll Tax Act (NSW).

Under the Payroll Tax legislation which has been harmonised throughout all Australian States and Territories “wages” can include commission payments.

The McGrath Estate Agents group maintained its payroll dispute with the New South Wales Office of State Revenue had industry-wide repecussions.

Property Observer revealed that the prominent estate agency has been issued OSR payroll tax assessment notices.

The total amount being disputed is $6,072,810, inclusive of payroll tax, interest and penalty tax.

The directors had believed McGrath Sales Proprietary Limited has no payroll tax obligations and intends to further challenge the assessments, or any other future assessments, if their objection is dismissed.

The group's chief operating officer Geoff Lucas had previously advised Property Observer that in the real estate industry there had been a trend of licensed co-agents operating their own independent business within a business.

The McGrath estate agency was expected to generate earnings before interest and tax of about $20 million in fiscal 2016 and net profit of about $15 million, according to The Australian Financial Review which recently updated details on the prospect that John McGrath intends floating his estate agency around November.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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