State revenue offices around Australia are targeting financial planning dealer groups for payroll tax on advisers.

The offices are arguing that advisers belonging to a dealer group are employees and not contractors.

Most advisers outside of the big institutions who belong to a dealer group are running their own businesses and are independently owned. The dealer group provides some services to the adviser such as training, compliance and commission payments.

One of the national dealer groups being targeted is Synchron, with the Victorian State Revenue Office claiming 14 of its advisers are employees.

Revenue offices in NSW and Queensland have targeted another 20-30 advisers, Synchron Director Paul Riegelhuth told insuranceNEWS.com.au.

“These moves are a great concern to us as there is a lot of money at stake,” he said.

“We are challenging these assessments and we have employed a solicitor, barrister and QC as it could end up in the Supreme Court.”

Mr Riegelhuth says the payroll assessments are from June 2008 for the affected advisers. Payroll tax in Victoria is set at 4.9%.

“The Australian Tax Office has definitions of what an employee and contractor is and everyone of our 236 advisers ticks the contractor box,” he said.

“The state revenue offices now have a different view of what an adviser is.”

The Victorian State Revenue Office does exempt “insurance agents” from payroll tax as well as door-to-door salesmen and owner-drivers.

A spokesman for Victorian Treasurer Kim Wells told insuranceNEWS.com.au the provisions of payroll tax do not apply to companies which engage “genuine, independent contractors”.

“The fees paid to these contractors by large financial services firms qualify for a general contractor exemption and would not be recognised as wages for the purpose of assessing the payroll tax liability,” the spokesman said.

“Some financial planners engaged by large financial services firms operate as a single-person operation and do not satisfy any of the general contractor exemption criteria.”

Mr Riegelhuth says most of Synchron’s advisers are predominately life insurance advisers, but a number also provide wider financial services advice.

“Our connection with the advisers is they are authorised representatives of our financial services licence,” he said. “They do have to put our number on their documentation and declare the relationship as part of the disclosure rules required by law.”

He says the advisers source their own clients and disclose the Synchron relationship as part of meeting licence compliance standards.

“The offices have only targeted the smaller dealer groups and not the institution-owned ones,” he said. “We are going to fight these moves because otherwise it will have a domino effect through the whole financial services industry.”

Mr Riegelhuth says the industry needs to get behind Synchron in this challenge, because it will affect the existing relationship between dealers and advisers in the future.