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Real estate agents and commissions only remuneration

Hopefully all of you know about the changes that happened last year, in April 2018. It is now though, 12 months later that you need to look back and ensure that you comply with the Fair Work and Real Estate Industry Awards and that your staff that have been on commission only, can continue to do so.

 

What were the changes introduced?

  1. New broad-band classification structure

The old job titles are gone, replaced by four-tiered classification based on skills, duties and responsibilities:

  • Real estate employee Level 1 – Associate with a minimum rate of pay, with different rates for employees employed for less or more than 12 months
  • Real estate employee Level 2 – Representative covering salespeople, property managers and strata managers
  • Real estate employee Level 3 – Supervisory covering sales, property and strata management supervisors
  • Real estate employee Level 4 – In charge level, for employees responsible for all operations

 

  1. New minimum rates of pay, which you need to review every year to ensure you don’t breach the awards rules

 

  1. New commission only arrangements

From 2 April 2018, employees with commission only remuneration have to be:

    • need to be a Real Estate Employee Level 2 or above
    • need to have worked in property sales or commercial, industrial or retail leasing as a Real Estate Employee Level 2 or as a licensed real estate agent for at least 12 consecutive months over the previous 3 years
    • who are engaged on this basis after 2 April 2018, need to meet the new minimum income threshold amount rules.
    • who are already engaged on this basis before 2 April 2018, can continue their commission only arrangement as long as their arrangement is reviewed each year and meets the new minimum income threshold amount rules.

The award changes also introduce a new minimum commission only rate of 31.5% of an employer’s gross commission. This replaces the previous rate of 35% of an employer’s net commission.

Commission only arrangements need to be reviewed every 12 months and need to meet the new minimum income threshold amount rules. In particular, employees engaged on a commission only basis:

    • before 2 April 2018 – need to have their arrangement reviewed by 2 April 2019
    • on or after 2 April 2018 – need to have their arrangement reviewed no later than 12 months after the arrangement started.

Arrangements that don’t meet the minimum income threshold amount rules have no legal effect and can’t be enforced.

What does this mean for you as an employer?

  1. You need to check if your commission only employees passed the minimum income rules

 

The award now says that employees engaged on a commission only basis must, in any single 12 month period over the past 3 years, have been paid an annual amount (including commission or bonus payments) that is at least equal to:

    • the minimum annual rate for their classification under the award
    • an extra 25%.

In reality, that means that they must have earned at least roughly $53,000 plus super.

  1. What if they didn’t?

If they earned less, then they cannot continue as commission only employees. They need to be paid part time/ full time wage according to their award.

This will put a big dent in the real estate agencies budgets.

As hard as it is (and we expect some tough conversations), remember that not complying with the industry awards imposes heavy fines and can put your business in jeopardy.

 

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