Effective tax strategies for mortgage brokers

As a mortgage broker I often asked clients what their two top expenses were, most were taken by surprise, unaware that their largest expense most often was tax followed by their mortgage or rent payments. While google provides us answers to just about every question, asking the right questions is a challenge, for you don’t know what you don’t know.

As a mortgage broker, you are lucky, you not only get to earn from your clients, but learn from them too. So have you considered your tax position?

I speak with successful mortgage brokers who have established a good business and loan book. From one perspective this is great – easy income! But it comes at a cost, which is that as the trail commission grows, so does your taxable income!!

When success equals more tax

Successful mortgage brokers can earn significant amounts each year from upfronts and trails. But as your tax bracket increases you get to keep less of the money you work harder for. This results in a form of ‘bracket creep’ whereby the more income you earn, the higher the percentage of tax you are required to pay.

Currently in Australia there are five tax brackets, ranging from the tax-free threshold allowing people to earn $18,200 without having to pay any tax, through to a base rate of $54,097 plus 45 cents for each $1 over $180,000 earned. Around $15,000 in monthly trail and you are paying more than they keep of the upfronts for new deals. 

Independent experienced brokers in particular have a dilemma. As you grow wiser and time becomes more valuable, you end up earning less per hour.

Options to address bracket creep

Brilliant Brokers offers a unique opportunity to reset your tax bracket. For those aged 60 or over, there couldn’t be a better time to consider this option. By offloading trail commissions to Brilliant Brokers, you maybe in a better position to work less and earn more.

Other ways to benefit from selling trail commissions

Offloading some or all a loan book is an ideal way for independent mortgage brokers to secure a quick injection of cash. The proceeds can be used for a range of investment opportunities or asset accumulation.

If you’re looking to exit the broking industry due to retirement, the desire to launch a new career, or looking at your long-term financial strategy, it makes sense to negotiate with industry specialists like Brilliant Brokers. We’ll work with you to ensure you get the best price for your portfolio and that your trail commission is in safe hands for the benefit of your ongoing reputation and the satisfaction of your clients.

Tips to resetting your capital gains tax bracket

Residents in Australia are expected to pay capital gains tax when you sell a capital asset – like your loan book. However, a trail book if often exempt from capital gains tax, because it is generally expected that the value will decline over time. The role of capital gains tax is for tax to be collected if the asset will increase in value over time. So often there will be a 50 per cent discount applied to the tax.

The size of your business is also taken into consideration, because if your turnover is less than $2 million each year, you could be eligible for the 50 per cent active asset exemption.

This could mean two sets of a 50 per cent reduction in your capital gains tax – a HUGE savings!

Plus, if you have been in the industry for over a decade and a half you could also be eligible for another 15 per cent discount.

Do you see why I have these conversations each day? There are some amazing tax savings to be made, if you approach your loan book in the right way!

Talk to us

Brilliant Brokers are highly experienced in recommending effective tax strategies for mortgage brokers to make the most of their trail book.

Discover more about how to leverage your trail book commission with me today. With a quick conversation, we can discuss your options and provide a tailored solution to provide ongoing financial gain.

Don’t hesitate to contact me directly on 0434 626 237, or learn more via our website.

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