Commission Income
Variable income earned as a percentage of sales or deals closed, typically paid on top of a base salary in roles like real estate or car sales.
In detail
Commission income is variable by design. Lenders usually require two years of commission history to establish a reliable average, taken from tax returns or year end payment summaries. The commission component is then shaded, commonly at 80 per cent for serviceability, though some lenders accept 100 per cent for specific industries with stable commission patterns.
Some commission roles have a high base and low commission, while others are mostly commission with a small base. Lenders handle the second type more cautiously. A small number of lenders will average commission over the lower of the two most recent years rather than taking a blended average, which affects clients whose commission income has grown significantly year on year.
Why it matters for brokers
Clients in sales roles often have uneven earning histories. Brokers need to match these clients to lenders whose averaging methodology works in their favour and who will accept the length of commission history available.
Example in practice
A real estate sales agent earns $60,000 base plus commission averaging $140,000 a year over the past two tax years. Taking the base at 100 per cent and commission at 80 per cent, assessable income is $60,000 plus $112,000, totalling $172,000.
Related terms
Base Salary
The fixed regular component of a PAYG employee income, excluding overtime, bonuses, commissions, and allowances.
Bonus Income
Discretionary or performance based payments made in addition to base salary, usually paid annually or biannually.
Self Employed Income
Business income earned by borrowers operating under an ABN as sole traders, through a company, or via a trust structure.
Year to Date (YTD) Income
The cumulative gross income an employee has earned since the start of the financial year, shown on each payslip.
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