The Core Challenge with Commission-Based Income
Professionals on commission-based income, including real estate agents, mortgage brokers, financial planners, insurance agents, car sales managers, and corporate sales executives, typically earn a modest base salary with significant upside in commissions and bonuses. A senior real estate agent might earn $70,000 base but $250,000 or more in a strong year. Standard lenders approach this income sceptically: they require 2 years of commission history, average the two years, and sometimes apply a further 20% shade to account for income variability. The combined effect can dramatically understate actual earning capacity and reduce borrowing power well below what the underlying income warrants.
This is not a marginal problem. A real estate agent with 2 years of commission income at $200,000 per year assessed at 80% of the 2-year average would have an assessed income of $160,000. The same agent at a specialist lender using 100% of the 2-year average would have $200,000 in the serviceability model. At typical debt-to-income ratios, that $40,000 difference in assessed income produces $200,000 or more of additional borrowing capacity.
The 2-Year Averaging Rule Explained
Most lenders calculate commission income as the average of the last 2 full financial years, using individual tax returns or ATO income statements as the primary evidence. The logic is that averaging smooths out an unusually strong year or a particularly weak year to produce a more reliable measure of expected ongoing income.
The problem is that averaging can misrepresent income for workers on an upward trajectory. A mortgage broker who spent their first year building a client base and their second year converting that pipeline will show a lower Year 1 and a much higher Year 2. A simple average of those two years significantly understates what the broker is earning now and what they are likely to earn in Year 3. Standard lenders apply the average regardless. Specialist lenders may use the most recent year where it is the higher figure and the upward trend is supported by current payslips and year-to-date income evidence.
The 80% Shade: What It Is and Which Lenders Apply It
Above and beyond the 2-year averaging, some lenders apply a further 20% shade to commission income after the average is calculated. Their reasoning is that variable income carries more risk than base salary and should be assessed more conservatively. This takes a $180,000 2-year average down to $144,000 in the serviceability model.
Not all lenders apply the 80% shade. Many specialist lenders assess commission income at 100% of the 2-year average without any further reduction. A small number of lenders apply the shade only to bonus income and not to recurring commission, on the basis that recurring commission in professional sales roles is more analogous to salary than to a discretionary bonus. Identifying which category a lender falls into requires policy-level knowledge, not a rate comparison website. This is a core part of what a specialist mortgage broker provides.
Lenders That Use the Most Recent Year
A small number of lenders use the most recent financial year only, where that year is the higher of the two and can be properly evidenced. This is the most favourable assessment approach for a borrower whose income is trending upward. The requirement is typically a completed tax return for the most recent financial year plus current payslips for the current year to date showing a trajectory consistent with or above the prior year's total.
Access to these lenders is almost exclusively through brokers who have panel access to specialty credit providers. They are not retail-facing lenders whose rates appear on comparison sites. For a commission earner on an upward income trajectory, identifying and accessing these lenders is the single most valuable thing a broker can do.
Real Estate Agents: Specific Documentation Requirements
Real estate agents receive commission under the Real Estate Industry Award or an agency-specific enterprise agreement. The commission split between the agent and the agency typically ranges from 30% to 50% of gross commission earned, depending on the agent's performance tier and the agency's remuneration structure. This means tax returns show the agent's net commission received rather than gross sales commission, which is the correct figure for assessment.
Key documentation for a real estate agent application: 2 years of individual tax returns showing total income including commission, a current employment letter from the agency confirming the commission structure and that the employment is ongoing, and year-to-date payslips covering the current financial year. Agents who have recently changed agencies, such as moving from one franchise office to a competing agency, may have a break in their commission history with the new employer. Most lenders require 2 years at the same employer for full commission recognition. At 18 months, some specialist lenders will accept the commission history with supporting documentation from the prior agency.
Mortgage Brokers: Upfront and Trail Commissions
Mortgage brokers, including Mankin Finance itself, receive upfront commissions typically ranging from 0.55% to 0.65% of the loan amount at settlement, and trail commissions typically ranging from 0.15% to 0.25% of the outstanding loan book balance, paid annually. Both are assessable income, but lenders treat them differently.
Trail commissions are more like passive recurring income than variable sales commission. They continue to be paid on an established loan book regardless of whether new loans are settled in that period. Some lenders recognise this distinction and treat trail income more favourably than upfront commission, assessing it as stable ongoing income rather than variable sales income. For a broker with an established loan book generating $80,000 or more in annual trail, this distinction can materially improve the assessed income figure. Evidence required: 2 years of tax returns, accountant's letter describing the income structure, and current commission statements from the aggregator.
Financial Advisers: Ongoing Advice Fees
AFSL-licensed financial advisers earn a combination of ongoing advice fees, planning fees, and in some cases insurance commissions (where these have not been banned under the FOFA reforms). Ongoing advice fees, which are recurring fees paid by clients under a Financial Services Agreement, are assessed similarly to trail commissions: they are stable, recurring, and documented on tax returns. Planning fees are more variable, tied to the volume of new plans completed each year.
For advisers whose income is primarily ongoing advice fees, the 2-year averaging methodology is less punitive because the income does not fluctuate as dramatically as sales commission. For advisers who rely heavily on new planning fees, the variable income assessment applies in full. Structuring the application with the right lender, using the correct income category for each fee type, is the key to maximising assessed income for this borrower profile.
Who Else Faces This Assessment
Real estate agents are the most visible commission-income borrowers, but they are far from the only ones. Mortgage brokers, financial advisers, recruitment consultants and business development managers all carry a commission or bonus component that lenders treat under the same averaging and shading rules, wherever in Australia they live and work.
Automotive sales professionals represent another significant segment. Car sales remuneration is typically 100% commission above a minimum draw, and the assessment challenges are identical to those faced by real estate agents. Insurance brokers add further breadth to this borrower group, and the same principle applies to all of them: the lender you choose matters as much as the income you earn.
Frequently Asked Questions
I had a great year last year but a slower year the year before. Can the strong year count more?
At most standard lenders, no. The default methodology is a straight average of the two most recent financial years, regardless of the trend. A strong Year 2 averaged with a weaker Year 1 produces an average that understates your current earning capacity. However, a small number of specialist lenders assess commission income using the most recent year only, provided it is the higher of the two years and can be fully evidenced with a tax return and year-to-date payslips. These lenders exist and are identifiable through a broker who works regularly with commission-income borrowers. Where the Year 2 income is materially higher than Year 1, the difference in assessed income between an averaging lender and a most-recent-year lender can be $30,000 to $60,000, which is significant at the serviceability level.
I changed agencies 18 months ago. Does my commission history still count?
Most lenders require 2 years of commission income history with the same employer before they will count commission income at full value. If you changed agencies 18 months ago, you have 18 months with the current agency and a prior history with a different employer. Some lenders will assess commission income from the current agency at 18 months, particularly if you have a tax return covering part of your time there. Others require the full 2 years at the current agency. The strongest approach is to use your most recent individual tax return, which should include at least one full financial year or part year with the new agency, combined with current payslips. A broker can identify lenders that weight continuous industry experience rather than individual employer tenure, which often produces a better outcome for agents who move between agencies within the same discipline.
Can I include bonuses as well as commissions?
Yes, bonuses are assessable income under the same framework as commissions. The key distinction lenders make is between recurring bonuses that are a regular feature of the role and discretionary bonuses that vary significantly or may not be paid at all. A sales manager whose bonus is structurally tied to team performance and has been paid every year for 3 years is assessed differently from a corporate executive who received a one-off retention bonus. The assessment methodology is the same as for commissions: most lenders average 2 years of bonus history. Where bonuses have been consistently paid and are evidenced on 2 years of tax returns, they are generally treated as assessable income. Where a bonus was a one-off or was not paid in one of the 2 years, the average will be reduced accordingly.
Find out what your commission income can support
If your commission has been averaged down or shaded by a standard lender, your actual borrowing capacity is likely higher than you have been quoted. A 30-minute call will clarify where you stand.
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