An origination fee is a fee for arranging a loan, paid by the borrower or by the financier to the broker or introducer. On commercial and asset finance, that payment can be most or all of your income from the deal. Some facilities also pay ongoing commission, so record each payment separately before quoting the client.
What is an Origination Fee?
An origination fee pays for bringing a loan into existence. The name alone does not tell you who receives it. In broker pay, you will meet two arrangements.
- The borrower pays a fee for arranging the finance. They pay it separately at settlement or borrow the fee as part of the loan.
- The financier pays the broker or introducer when the loan settles, under its remuneration agreement.
A financed borrower fee increases the debt and can attract interest over the loan term. A fee paid separately still increases the borrower’s cost of obtaining finance. Show a financed fee in the loan’s fee schedule and disbursement breakdown, with the recipient identified. Financier-paid commission belongs in the applicable broker disclosure, even when the contract does not show it as a separate borrower charge.
Hypothetical Commercial Loan Example
Assume a business needs $200,000 and agrees to a $2,200 brokerage fee, including $200 GST. The financier permits the whole fee to be financed. Ignore every other charge for this example.
| Item | Amount | What Happens |
|---|---|---|
| Business funding | $200,000 | Paid to the business or its nominated supplier |
| Borrower-paid brokerage | $2,200 including GST | Paid to the brokerage at settlement |
| Total financed | $202,200 | The borrower’s starting debt |
| Brokerage revenue before expenses | $2,000 excluding GST | The brokerage accounts for $200 GST |
The broker receives $2,200, not the full $202,200 advanced. There is no additional financier commission in this example. If an aggregator or referrer takes a share, the brokerage retains less than $2,000 before its other expenses.
Origination Fee vs Establishment Fee
An establishment fee pays the lender for setting up the facility. A broker origination or brokerage fee pays the intermediary for arranging it. Both can appear on the same deal, and each needs its own recipient and payment basis.
| Fee | Recipient | How to Explain It |
|---|---|---|
| Lender establishment fee | Financier | The lender’s charge for establishing the facility |
| Borrower-paid brokerage | Brokerage or authorised intermediary | The client’s charge for the broker’s arranging service |
| Financier-paid commission | Broker, often through an aggregator | Remuneration paid under the financier’s broker agreement |
| Referral fee | Introducer | Payment for referring the client or opportunity |
For regulated consumer credit, the credit quote identifies your client-paid service charge. The credit proposal shows applicable costs and remuneration. The lender’s precontractual documents and loan contract show the borrower’s contractual charges and any amount financed.
Reconcile those documents before settlement. A fee described as the lender’s establishment cost in one document must not become brokerage in another. The National Credit Code’s contract disclosure requirements distinguish the amount of credit from credit fees and charges.
What is a Brokerage Fee on a Commercial Loan?
A brokerage fee is payment to a broker for arranging commercial finance. It can be a percentage of the loan, a flat client fee or an amount paid by the financier. Some agreements combine a client fee with financier commission.
There is no single commercial loan brokerage percentage that applies across lenders or facilities. Loan size and complexity affect the work involved. The financier’s remuneration schedule sets what it pays, while your engagement agreement sets what the client pays. An aggregator split then changes what your brokerage retains.
Agree the service and payment trigger before doing chargeable work. A direct client invoice can fall due at an agreed application milestone or at settlement. When the financier pays, the broker payment follows the financier’s settlement and payment process. A fee financed through settlement needs the client’s authority and the financier’s approval.
GST on Brokerage
For a GST-registered brokerage, arranging finance is generally a taxable service. This applies whether the client or financier pays the brokerage. Specify whether the agreed figure includes GST, and issue the required tax invoice or use an agreed recipient-created tax invoice process.
The loan itself has different treatment. The Australian Taxation Office’s GSTR 2002/2 fee tables classify brokerage, commission and origination services as taxable. They classify a lender’s establishment fee for providing credit as input taxed. Passing a broker fee through settlement does not automatically give it the lender fee’s GST treatment.
For the wider file requirements, see how commercial lending differs from residential lending.
Origination Fees on Car Loans and Asset Finance
A car loan origination fee is a charge for arranging the vehicle finance. A broker can charge a disclosed client fee where the arrangement permits it. The financier sets the maximum fee it will accept within its product, and licensee or aggregator policy can impose a lower limit.
A separate financier commission can sit alongside that borrower fee. Record both amounts and who pays each one. A maximum permitted origination fee is a ceiling, not an instruction to charge every client that amount.
The Australian Securities and Investments Commission (ASIC) banned flex commissions in car finance in 2018 through the ASIC Credit (Flexible Credit Cost Arrangements) Instrument 2017/780. The former arrangement rewarded dealers or brokers for increasing the customer’s interest rate.
Under ASIC’s explanation of the ban, the lender determines the rate. Dealers have limited room to discount it for the consumer’s benefit. Compliant remuneration agreements replace the former rate-setting incentive. The ban does not mean every broker must charge the same fixed fee.
Keep consumer car finance separate from genuine business-purpose vehicle or equipment finance. Their remuneration schedules and disclosure obligations can differ. A business registration number alone does not establish the loan’s purpose. The asset finance guide explains the facility types and licensing boundary. The asset finance aggregator comparison covers access to financier panels.
Introducer and Dealer Origination Fees
An introducer fee, sometimes called an introducer origination fee, pays the party that refers the client or deal. The financier or brokerage pays it under the referral agreement. It can be a flat amount or an agreed share of remuneration.
Identify the referrer and the payment in the client disclosure where required. Keep the referral agreement with the file. Calling someone an introducer does not by itself authorise that person to provide regulated credit assistance.
A dealer origination fee is the charge a car or equipment dealer makes for arranging finance at the point of sale. A broker origination fee pays the broker for the arranging service. The recipient and role distinguish the charges, even where both are financed with the asset purchase.
Is a Dealer Origination Fee a Borrowing Cost?
It can be a borrowing expense where the fee genuinely pays for obtaining a loan used to produce assessable income. A private-use car loan does not create a business deduction merely because its fee has that label.
The ATO’s business borrowing-expense guidance treats costs of obtaining income-producing finance separately from interest. Where deductible borrowing expenses total more than $100, they are generally spread over five years or the loan term, whichever is shorter. Eligible expenses totalling $100 or less can generally be deducted immediately.
The invoice must show what the dealer actually supplied. An asset purchase charge or a separate service can have different treatment. Give the contract and itemised fee invoice to the client’s accountant to classify the cost and apportion any private use.
Commission on Equipment, Invoice and SMSF Loans
Equipment finance commonly pays brokerage when the transaction settles. An agreed client fee can form part of that payment. Some facilities have recurring remuneration, but a settled equipment loan must not automatically enter your expected trail income.
Metro’s vehicle and equipment broker programme provides access through accreditation and its broker portal. The broker agreement and product schedule determine the payment basis for a Metro transaction. Record the settlement payment and any continuing entitlement separately.
Invoice finance can pay an initial introduction payment, ongoing commission linked to the facility or a combination. Unlike a fixed-term equipment loan, an invoice facility can remain in use as the business raises new invoices. The agreement determines whether commission follows usage, revenue or another measure.
ScotPac’s broker partnership page confirms commission for accredited partners. Use the agreed facility schedule to calculate the entitlement. A facility limit alone does not establish the amount of commission earned.
Self-managed super fund (SMSF) property loans can pay upfront and ongoing trail. Thinktank’s SMSF lending material describes adjustable upfront and trail arrangements for commercial SMSF lending. The applicable offer determines the actual split. The SMSF loan guide explains the client borrowing structure.
For each product, keep the commission base beside the rate. A percentage of the amount advanced produces a different result from the same percentage of interest revenue. Keep GST and the aggregator’s share separate from the gross entitlement.
Deals That Pay No Trail
A no-trail deal pays once, with no contractual ongoing commission after settlement. Many asset and commercial transactions use that structure. Your brokerage must cover the arranging work from its initial remuneration and any separately agreed service fees.
Price the work before quoting. Estimate the staff time and external costs, then allow for the aggregator or introducer share. Compare the retained revenue with the work required through settlement. Do not count a future refinance as income already earned.
No-trail income depends on a continuing flow of new settlements. A client relationship can still generate repeat business, but it does not create a contractual trail stream to value. Keep that distinction when forecasting revenue or assessing a loan book. Residential upfront and trail commission follows a different income pattern.
A single payment can still be subject to clawback. Read the financier agreement for early repayment triggers and any sliding refund scale. Keep a possible financier clawback separate from a client refund obligation under your engagement terms. Neither automatically establishes a right to charge the client again.
Record a no-trail deal as having no expected recurring payment. That prevents a deliberate one-off structure from becoming an apparent missing-trail issue during reconciliation.
Disclosing Fees and Commission to the Client
For regulated consumer credit, such as a personal car loan, the National Consumer Credit Protection Act 2009 (NCCP Act) sets the disclosure framework. ASIC’s disclosure guidance explains the documents and applicable exemptions.
| Document | When It Applies | What the Client Needs to See |
|---|---|---|
| Credit guide | Generally before credit activities | Your identity, licence details, complaint process and applicable fee and remuneration information |
| Credit quote | Before credit assistance where you charge the consumer, subject to exemptions | The covered services and maximum client charge, accepted by signature and date |
| Credit proposal | When you provide credit assistance | Applicable costs, reasonable estimates of indirect remuneration and required referral-payment information |
| Loan contract | Before the client commits | Contractual fees and the amount financed, including financed brokerage where applicable |
For a genuine business-purpose loan outside the NCCP framework, use a written engagement and fee disclosure. Identify each recipient and the amount or calculation method. State the GST basis, payment trigger and refund terms. Explain whether the fee is financed and whether financier commission is also payable.
Licensee and aggregator policies can set fee caps, require approval for exceptions and specify the records retained. Apply the stricter relevant product or policy limit before sending the client a quote. Retain the accepted disclosure, settlement disbursement authority and commission statement so another administrator can trace each payment to its recipient.
