For educational purposes only. Not tax, legal, or financial advice. Tax laws change frequently. Consult a registered tax agent or CPA for your specific situation.
Tax for Australian Real Estate Agents and Property Managers
Australian real estate agents and property managers pay income tax on commission and fee income (sole trader) or company tax at 25% base rate (Pty Ltd). GST at 10% applies to commissions and management fees, but residential rent collected on behalf of landlords is input-taxed. Trust account funds are client money and not assessable income until fees are transferred. State licensing is mandatory, and licence renewals and CPD are deductible. Vehicle costs for property inspections and opens are best claimed via the logbook method.
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Real estate agents sit at the intersection of commission-based income, regulated trust accounts, and state-based licensing. Whether you operate as a licensed principal running your own agency or as a sole trader salesperson splitting commissions, the tax position requires careful handling of income timing, GST on management fees versus input-taxed residential rent, and the distinction between your money and client money sitting in trust. Marketing costs can be substantial and the line between agent-funded marketing (deductible) and vendor-paid pass-through (income offset by expense) must be tracked precisely. Vehicle claims are high given the travel-intensive nature of appraisals, open homes, and property inspections.
What business structure do Real Estate Agents and Property Managers use?
The common patterns for Real Estate Agents and Property Managers are: Sole trader: simplest setup, ABN and personal real estate licence, suits commission-only salespersons or small single-operator agencies under roughly $100k profit, Pty Ltd company: company holds the agency licence (or employs a licensed principal), pays expenses, retains profits at 25% base rate entity tax. Agent draws salary, super, and dividends. Better asset protection for principal operators, Trust with corporate trustee: used by larger practices for profit distribution flexibility and asset protection. Must still comply with state licensing conditions (nominated licensed principal, licence linked to the correct legal entity). The right structure depends on revenue, liability exposure, and personal circumstances, covered below.
How is commission income taxed and when do I declare it?
Commission from property sales and leasing is ordinary assessable income under s 6-5 ITAA 1997. The timing of when you declare it depends on your accounting method.
Cash basis: you declare commission in the financial year you receive payment. If a sale goes unconditional on 25 June but your commission is not paid until 10 July, you declare it in the following year. This is the method most sole trader agents use.
Accruals basis: you declare commission in the year you earn it, regardless of when payment arrives. The same sale going unconditional on 25 June would be declared in the current year even if cash lands in July.
You must apply your chosen method consistently. Switching methods requires careful transitional adjustments to avoid double-counting or missing income. For agents with lumpy commission income (large settlements clustering around June/July), the choice of method has real cash flow and tax timing consequences.
Commission is assessable income declared either when received (cash basis) or when earned (accruals basis). The method must be applied consistently.(ITAA 1997 s 6-5 (assessable income); ATO guidance ATO real estate industry guide)
What are the trust account obligations and how do they affect my tax?
If you hold client money (sales deposits, rent, bonds, advertising floats), you must operate a regulated trust account separate from your business trading account. Every state prescribes the rules: open with an approved ADI, notify the regulator, use prescribed naming conventions, issue trust receipts, perform regular reconciliations, and submit annual trust account audit reports.
Funds in the trust account belong to clients (vendors, landlords, tenants) and are not your assessable income until transferred as authorised fees or commissions. Rent collected into trust on behalf of a landlord is not your income. Only the management fee and reimbursed expenses transferred from trust to your business account are assessable.
Getting this wrong is a common audit issue: agents who treat the entire trust balance as revenue, or who fail to reconcile trust movements against fee transfers, create discrepancies the ATO and state regulators both flag. Your business accounting records should mirror trust ledger movements precisely.
Trust account funds belong to clients and are not the agent's income. Only authorised fee transfers from trust to the business account are assessable income.(State real estate trust account regulations (varies by jurisdiction); ATO guidance ATO real estate industry guide)
How does GST work on commissions versus residential rent?
Sales commissions and property management fees are taxable supplies subject to 10% GST when you are GST-registered. You account for 1/11th of the gross amount (including GST) as GST payable.
Residential rent collected on behalf of a landlord is an input-taxed supply. No GST is charged on residential rent itself. But your property management service to the landlord is a separate taxable supply, so your management fees, letting fees, inspection fees, and admin charges all attract 10% GST.
This distinction must be clear in landlord statements: GST appears on your fees but not on the rent. You claim input tax credits on your own business expenses (software, portal subscriptions, office costs, vehicle running costs) to the extent they relate to your taxable supplies (sales and management activities).
Vendor-paid marketing is a pass-through: you collect the payment (income) and spend it on the vendor's advertising (expense). Both sides must be recorded for GST and income purposes, even though the net profit impact is usually nil.
Agent commissions and management fees are taxable supplies at 10% GST. Residential rent collected on behalf of landlords is input-taxed and not subject to GST.(A New Tax System (Goods and Services Tax) Act 1999 s 40-35 (input-taxed residential rent); ATO guidance ATO GST and real estate guide)
What licensing costs are deductible and which are capital?
Annual licence renewals, certificate of registration renewals, and ongoing CPD required to maintain your licence are fully deductible as business expenses. REIA or state institute membership fees (REINSW, REIV, REIQ) are deductible as professional association memberships.
The initial cost of obtaining your real estate licence (Certificate IV in Real Estate Practice, course fees, application fees for your first licence) is generally not deductible because it is incurred to enter a new income-earning activity rather than to maintain an existing one. However, if you are already working in the industry as an assistant or receptionist and the qualification directly improves your ability to earn income in your current role, a deduction may be available.
Franchise establishment fees (initial franchise buy-in, setup costs) are capital expenditure. Some franchise establishment costs qualify for deduction over five years as business-related capital expenditure under s 40-880 ITAA 1997. Ongoing franchise fees, brand levies, marketing levies, and technology fees are deductible as business operating expenses.
Ongoing licence renewals, CPD, and association fees are deductible. Initial qualifying training and franchise establishment fees are generally capital.(ITAA 1997 s 8-1 (general deduction) and s 40-880 (business-related capital expenditure); ATO guidance ATO real estate industry guide)
Contractor vs employee: the written contract is decisive
The High Court reset the contractor/employee test in 2022. Where there is a comprehensive written contract that is not a sham, classification turns principally on the rights and obligations established by that contract — not on the day-to-day conduct of the parties. Get the engagement contract right at the start; do not rely on post-contract behaviour to recharacterise the relationship later.
This matters because misclassification exposes the engager to PAYG withholding shortfalls, super guarantee charge (with the contractor-deemed-employee extension under SGAA 1992 s 12(3)), and payroll tax. It also affects whether the worker can deduct business expenses and whether PSI rules engage.
Contractor vs employee classification is determined principally by the rights and obligations in the written contract, not by post-contract conduct.(CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1; ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (companion case); ATO guidance TR 2023/4 (employee vs independent contractor))
Home running costs: PCG 2023/1 fixed-rate vs actual cost
Most workers in this trade do some admin from home — quoting, invoicing, scheduling, BAS prep. From 1 July 2024 the ATO fixed-rate method is 70c per hour worked from home and covers electricity, gas, internet, mobile, stationery and computer consumables. You cannot also claim those bills separately under the fixed rate. You can still separately depreciate office furniture and equipment used at home.
FY 2024-25 and FY 2025-26 rate: 70c/hr. FY 2022-23 and FY 2023-24 rate: 67c/hr. The fixed rate requires a contemporaneous record of actual hours worked from home — a timesheet, calendar or app log. Estimates and four-week samples are no longer accepted for the fixed rate method (they remain valid for the actual cost method).
The fixed-rate method for home office running costs is 70c per hour from 1 July 2024 and requires a record of actual hours worked from home.(PCG 2023/1 (as amended); ITAA 1997 s 8-1; ATO guidance TR 93/30; TR 2024/3)
Allowable expenses
Category
Examples
Tax treatment
Vehicle
Fuel, servicing, registration, insurance, tyres, finance interest, decline in value for car used for appraisals, opens, inspections, and client meetings
Logbook method (actual costs x business-use %) or cents-per-km (88c/km, max 5,000 km). Car limit $69,674 applies to passenger vehicles
Marketing and advertising
Portal listings (realestate.com.au, Domain), photography, videography, copywriting, signboards, brochures, staging costs, social media advertising
Deductible as business expense where agent is contractually liable. Vendor-paid pass-through must be recorded as income (receipt) and expense (spend) with net nil profit impact
Licences and memberships
State licence/registration renewal, CPD courses, REIA/state institute membership (REINSW, REIV, REIQ)
Deductible as ongoing professional expenses. Initial qualifying course fees are generally capital
Insurance
Professional indemnity, public liability, income protection, office contents
Deductible as business operating expense. PI insurance is mandatory for licensed agents in most states
Salesperson wages, admin staff wages, super contributions, workers compensation premiums
Deductible as employee expense. SG at 12% (2025-26) on ordinary time earnings
Vehicle and travel costs
Most agents should use the logbook method: property inspections, appraisals, open homes, client meetings, signage runs, and key handovers generate substantial business kilometres. A 12-week logbook typically shows 60-80% business use for active sales agents. Apply that percentage to all running costs (fuel, servicing, registration, insurance, interest, depreciation) for the year. The logbook is valid for five years unless your work pattern changes significantly. Cents-per-km (88c/km, max 5,000 km, capped at $4,250) is simpler but rarely covers actual costs for a full-time agent. The car depreciation limit of $69,674 (2025-26) applies to passenger vehicles.
Capital allowances and equipment
The instant asset write-off threshold for small business entities (turnover under $10 million) is $20,000 per asset for 2025-26. A $4,500 professional camera and drone package, a $2,800 laptop, or a $1,500 tablet for on-site inspections can each be written off in full in the year of purchase. For assets above $20,000, the simplified depreciation pool applies: 15% in the first year, 30% in subsequent years. A vehicle costing $55,000 (below the car limit) would be depreciated through the pool at the business-use percentage established by logbook.
Common ATO audit triggers for Real Estate Agents and Property Managers
Commission income timing mismatch: declaring commission in the wrong financial year based on chosen accounting method (cash vs accruals)
Trust account discrepancies: total commission claimed does not reconcile with trust account transfers and fee journals
Vendor-paid marketing not recorded as both income and expense, understating turnover and potentially triggering GST registration issues
Vehicle claims without a logbook to substantiate business-use percentage
Claiming initial licence or franchise establishment costs as immediate deductions instead of capital
Home office occupancy costs claimed without understanding the CGT implications on eventual home sale
Frequently asked questions
Is the rent I collect into my trust account my income?+
No. Rent collected into your trust account belongs to the landlord, not you. It is not your assessable income. Only the management fee, letting fee, inspection fees, and other authorised charges you transfer from trust to your business account are your income. Your accounting records must clearly separate trust movements from business income. Treating the entire trust balance as revenue is a common error that triggers both ATO and state regulator scrutiny.
Should I use cash or accruals basis for reporting commission?+
Most sole trader agents use cash basis because it is simpler and aligns income recognition with when money actually arrives. Accruals basis declares income when earned (for example, when a sale goes unconditional) even if the commission is not paid until weeks later. For agents with large commissions settling around financial year-end, the choice affects which year the income falls in. Pick one method and apply it consistently. Switching requires careful transitional adjustments.
Can I deduct the cost of vendor-paid marketing that I arrange?+
Vendor-paid marketing is a pass-through, not a deduction in the conventional sense. You collect the vendor's marketing payment (income) and spend it on the agreed advertising (expense). Both sides must be recorded in your books for income tax and GST purposes. The net profit impact is usually nil, but failing to record both sides understates your turnover, which can trigger GST registration issues if you appear to be below the threshold when you are actually above it. If you charge a flat marketing package fee above underlying costs, the margin is assessable income.
Is my initial Certificate IV in Real Estate Practice deductible?+
Generally no. The cost of initial qualifying training to enter a new profession is not deductible because it is incurred before you start earning income in that trade. However, if you are already employed in real estate (as an assistant, receptionist, or in an administrative role) and the Certificate IV directly improves your ability to earn income in your current role, a deduction may be available. Once qualified, ongoing CPD courses, specialist training, and licence renewal fees are fully deductible.