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Trailing commission rebate from broker - taxable income?

Discussion in 'Accounting & Tax' started by martino, 25th Aug, 2016.

  1. martino

    martino Member

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    Interested to hear from the brains trust here on whether being paid an ongoing regular rebate from your mortgage broker would be considered taxable income by the ATO.

    I assume yes but am not sure.

    Scenario:
    • I refinance through a broker
    • Broker receives their ongoing % trailing commission from the bank via their aggregator
    • Broker agrees to pay me back a % of their ongoing trailing commission as a monthly rebate payment for the remainder of the life of the loan (aggregator/referrer arrangement), with this money paid into my loan account or loan offset account
    Not so interested in whether this is a great loan structure/agreement or not (I understand the risks and am also broadly aware of ASICs current review of lender/aggregator/broker/referrer remuneration arrangements in the aus market).

    cheers
    martino
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Investment loan?
     
  3. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Is this a once off or ongoing agreement. That is do you get % of trail for referrals?

    I would say that this is income and needs to be declared and taxed.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not necessarily. It is like the upfront rebates the bank offers as an incentive to move out. It could be a reimbursement or defraying of expenses incurred by the borrower.
     
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  5. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    If it is a commercial agreement for referrals for example does this still apply?

    A once of I could understand but ongoing would constitute income surely?
     
  6. martino

    martino Member

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    Thanks both, this scenario (in my case) is for a PPoR refinance. Would be interested generally speaking in how it would impact in an IP loan scenario too.

    And yes, this would be for ongoing monthly rebate payments from the mortgage broker's aggregator where the broker has set me (the borrower) up as a "referrer" to be able to take a cut of the broker's trailing commission as part of the agreement
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It is probably not assessable income.

    But as you are down as a referrer there is a business aspect to it and therefore it could be. Also since it has an ongoing nature adds to the argument that it could be income.

    Seek specific tax advice.
     
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  8. martino

    martino Member

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    Thanks Terry
     
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  9. Greyghost

    Greyghost Well-Known Member

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    id cut up front but never trail.