Financial planners and mortgage brokers occupy a heavily regulated space in which the compliance obligations extend well beyond tax. The Future of Financial Advice (FoFA) reforms and the Hayne Royal Commission reshaped the revenue model for financial planning practices, and the bookkeeping must reflect those changes accurately. For mortgage brokers, lender commission structures require careful reconciliation. Both professions carry ASIC licensing obligations, professional indemnity insurance requirements, and strict record-keeping rules. This guide covers the bookkeeping disciplines that matter most.
Revenue Recognition: Distinguishing Advice Fees from Commissions
The FoFA reforms introduced the Best Interests Duty and a ban on conflicted remuneration for financial planners. In practice, this means the revenue structure of a modern advice practice must be carefully disaggregated in the chart of accounts. The minimum revenue categories to maintain separately are:
- Initial advice fees — charged for the Statement of Advice (SOA), typically fixed or hourly
- Ongoing service fees (OSFs) — annual or monthly fees for ongoing advice services, charged directly to clients under a signed Fee Disclosure Statement (FDS)
- Implementation fees — charged for executing transactions (portfolio establishment, insurance placement)
- Grandfathered trailing commissions — where still permitted under transitional arrangements; these must be separately identified as they are subject to different disclosure rules
- Insurance commissions — permitted within the FoFA framework (unlike investment product commissions). Upfront and ongoing components should be tracked separately
Conflated revenue categories make compliance reporting difficult and obscure whether the practice's revenue mix remains within the FoFA framework. A chart of accounts that collapses all income into a single "advisory income" line is inadequate.
GST on Financial Planning Advice: A Common Misconception
Many financial planners believe their services are "financial services" and therefore input-taxed under Division 40 of the GST Act. This is incorrect.
Division 40 applies to financial supplies — dealing in financial products such as interests in managed funds, shares, derivatives, or credit facilities. Providing financial planning advice is not a financial supply. It is a taxable supply of professional services, and 10% GST must be charged on advice fees.
This distinction is not academic. An adviser who has incorrectly treated their fees as input-taxed has:
- Failed to collect GST from clients on advice fees
- Failed to remit that GST on BAS
- Potentially overclaimed ITCs (since input-taxed suppliers have reduced ITC entitlements, an incorrectly classified adviser may have underclaimed — but needs to review this carefully)
The ATO's GSTR 2002/2 confirms that advice services are taxable. The GST-free and input-taxed treatments apply to the financial product itself (e.g., a margin loan, a managed fund unit), not to the adviser's fee for providing advice about those products.
If you are onboarding a financial planning practice, review their existing BAS history for this misclassification before lodging any further activity statements.
Mortgage Broker Commission: Upfront, Trail, and Clawback
Mortgage brokers receive two types of commission from lenders:
Upfront commission: paid on settlement of the loan, typically 0.5–0.7% of the loan amount. This is recognised as income in the period of settlement. GST applies.
Trail commission: paid monthly based on the outstanding loan balance, typically 0.15–0.25% per annum. Trail is recognised as income in the month it accrues, as it is earned progressively over the life of the loan. GST applies to each monthly trail payment.
The bookkeeper must reconcile the broker's commission statement from each lender against the expected income each month. Lenders settle commissions on different cycles and with varying lag times. An aggregator (e.g., Connective, AFG, PLAN Australia) may collect commissions from multiple lenders and pass them through net of aggregator fees — the gross commission, aggregator fee, and net receipt should each be tracked separately.
Clawback: most lender agreements require the broker to repay some or all of the upfront commission if the loan is repaid or refinanced within 12–24 months of settlement. A clawback is a reversal of previously recognised income, not an expense. The GST component is also reversed. Maintain a clawback provision for loans settled in the past 12 months that are at risk of early repayment.
ASIC Industry Funding Levy: Timing and Tax Treatment
ASIC charges an annual industry funding levy to all AFSL holders and authorised representatives. The levy is calculated based on the type of financial services activity and the scale of that activity (number of retail clients, funds under management, number of loans written). ASIC issues levy invoices typically in the October–December quarter each year, in respect of the prior financial year's activity.
The ASIC levy is an ordinary operating expense — deductible in the year it is incurred. It is not deductible against superannuation guarantee contributions, does not attract GST (it is a government levy, not a supply), and cannot be passed through to clients as a reimbursement under the FoFA framework.
For AFSL holders, the levy can be a material amount — a medium-sized advice practice can face levies of $10,000–$50,000 per year. Accrue the expected levy at 30 June each year (based on the prior year's activity) and reverse the accrual when the ASIC invoice arrives and is processed.
Professional Indemnity Insurance: Prepayment and Coverage Periods
ASIC requires all AFS licensees and authorised representatives to hold professional indemnity (PI) insurance that meets its requirements under Regulatory Guide 210. PI insurance for financial planners and brokers is typically a significant premium — larger practices pay $30,000–$100,000+ annually.
PI policies are on a "claims-made" basis and cover the policy period, not the period in which the advice was given. A policy running 1 July 2026 to 30 June 2027 covers claims made in that period regardless of when the underlying advice was provided. The premium paid for the 2026–27 year is an expense of that year.
Where the policy is paid in advance (e.g., a 12-month premium paid on 1 July), it is a prepayment at balance date only if the policy period extends beyond 30 June of the current year. A premium paid on 1 July for a 12-month policy ending 30 June the following year is entirely expensed in the year of payment under the 12-month rule in ITAA 1997 section 82KZM — there is no apportionment required.
Dealer Group Fees and AR Arrangements
Many financial planners are not direct AFSL holders — they operate as authorised representatives (ARs) of a dealer group. The dealer group provides the licence, compliance infrastructure, professional indemnity cover, and PI insurance in exchange for a fee or revenue share.
The fee to the dealer group may be:
- A flat monthly or annual licensee fee
- A percentage of advice fees or funds under management
- A split of upfront and trail commissions (the dealer group takes a percentage off the top)
Where commissions flow through the dealer group before reaching the AR, the bookkeeper must track the gross commission, the dealer group's cut, and the net amount payable to the practice. The AR's income is the net amount — but the GST obligation may apply to the gross, depending on the contractual structure. Confirm the arrangement with the dealer group's compliance team.
Record-Keeping: Seven Years, Stored Securely
ASIC's advice record-keeping requirements under the Corporations Act 2001 require financial planners to retain client documents, SOAs, Records of Advice (ROAs), Fee Disclosure Statements, and client consent forms for seven years. Mortgage brokers have similar obligations under ASIC's responsible lending record-keeping rules.
The bookkeeper does not manage compliance files, but should be aware that the cost of secure offsite document storage (physical or digital), document management software subscriptions, and periodic file audits are legitimate deductible business expenses. These costs should be coded as "professional compliance costs" rather than lumped into general office expenses.
End-of-Period Checklist
- Confirm revenue chart of accounts separates advice fees, OSFs, implementation fees, insurance commissions, and grandfathered trail
- Verify GST is being charged on all advice fees — review BAS for any periods where fees appear to have been treated as input-taxed
- Reconcile commission statements from each lender (or aggregator) to income recorded — confirm upfront and trail components are separately posted
- Review clawback risk register — identify settlements in the past 12 months and confirm clawback provision is adequate
- Accrue ASIC industry funding levy at 30 June based on prior year's activity metrics
- Confirm PI insurance premium is correctly coded: assess whether prepayment treatment applies or 12-month rule applies
- Reconcile dealer group fee statements to expense ledger — confirm gross commission, licensee fee, and net income are correctly separated
- Verify FDS have been issued to all ongoing service clients — flag any client relationships where the FDS is overdue (triggers automatic termination of OSF entitlement under the Corporations Act)
- Confirm seven-year document retention policy is in place and storage costs are being claimed as a deduction