Private ruling: Refund of trailing commissions
Published: November 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are the quarterly refunds of trailing commissions you receive from your financial planner assessable income? | A1: Yes.

Relevant facts and circumstances: You have an investment portfolio held with a financial planner. The financial planner is paid an ongoing trailing commission on the balance of your existing investments. You have an arrangement in place with the financial planner to refund the trailing commissions they collect on your investment portfolio less their fee. You receive a quarterly cheque along with a listing of all commission collected during the quarter.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10

Reasons for decision: Summary: Where a financial planner is legally entitled to receive a commission from an investment fund in relation to the capital of an investor but is under an obligation to pay that commission to the investor, the commission is considered assessable income of the investor. In your case you have an arrangement in place with the financial planner to have trailing commissions refunded to you on a quarterly basis. The amounts you receive are taxable to you, and should be put in your income tax return in the year you receive the refunded amounts.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.