Institute of Certified Bookkeepers
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June 2016 Question of the Month - Commission Payment

  • 127 posts
  • # 113244

A real estate salesperson left before her sales commission came through and the employer did not pay it. She pursued the employer for the commission payment after leaving. The court ruled that the business pay $25,000. The solicitor has instructed the payment should not have any PAYG withheld. Do I classify the payment as OTE for SGC purposes? And how should I classify the payment, is it an ETP or a bonus or something else?

Edited at 21 Jun 2016 02:48 AM GMT

  • 127 posts
  • # 113457

Ideally you should have some documentation from the court to direct the nature of the payment and how it is treated. It should be the court instructing on tax matters, rather than the solicitor. It does sometimes happen that the court instructs a payment to be untaxed.

The documentation should also show the breakdown of the payment; in this example, it could be that part of the payment is the actual commission, and part is compensation, and they would be treated differently, and there would be tax and super involved.

However, if this is all the information you have, you have to follow that instruction.

Treat the payment as an excluded ETP for compensation, (code R), without tax or super.

We would recommend that you provide a copy of the relevant solicitor’s instruction regarding the payment and taxation to the employee. Also let them know they will need to consult with their personal tax agent regarding the tax implications of receiving this payment.

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