Dealer group Synchron has won its battle with the Victorian State Revenue Office (SRO) over payroll tax being charged on the earnings of its authorised representatives.

The SRO assessment was that Synchron was liable to pay about 5% payroll tax on the gross revenue of its authorised representatives, backdated seven years.

It is understood this would have run into millions of dollars.

The assessment was based on the view that authorised representatives who do not employ two or more people are considered employees or relevant contractors for payroll tax.

“The implications for Synchron and for licensees across the industry were enormous,” Synchron director Don Trapnell said. “It would have meant a huge tax bill for licensees and had the potential to send smaller licensees broke.”

Synchron argued its legal obligation to collect fees and commissions on behalf of authorised representatives is part of its role as an Australian financial services licensee.

“As a substantial licensee we felt we had an obligation not just to ourselves but also to the industry not to blindly accept the assessment given to us,” Mr Trapnell said.

Synchron took the matter to the Supreme Court in February 2014. It was set down for trial in February next year, but the SRO backed down this month, accepting Synchron’s argument.

Synchron Chairman Michael Harrison says the case has spanned five years and cost the group more than $500,000 in legal fees.

“Despite earning the sympathy of some high-profile ministers, politicians were unwilling to take any action that would impede the collection of state payroll tax,” he said.

“We were largely on our own.”

Mr Harrison says the SRO’s assessment also ran counter to the Federal Government’s desire for business modernisation.

“In today’s world, advisers don’t have the same need to employ physical staff,” he said.

“They use software and virtual assistants such as paraplanners who work within other organisations to do many of the tasks required in a financial advice business.”

Mr Harrison says the SRO did not recognise how a financial advice business works.

“It did not recognise these businesses as small businesses in their own right,” he said.