Last Updated: December 2025 | Last Verified: December 2025
Key 2025-26 Updates
Disclaimer: This guide provides general information only and does not constitute financial, legal, tax, or compliance advice. Scale Suite is a registered BAS agent, not a registered tax agent. For tax advice specific to your circumstances, consult a registered tax agent. AFSL requirements, trust account obligations, and GST treatment for insurance services are subject to change. Always verify current requirements with ASIC and the ATO.
Insurance brokers operate under one of the most heavily regulated financial services frameworks in Australia. Unlike general businesses, brokers must maintain strict separation between client funds and operating funds, track multiple commission streams from different insurers, meet Australian Financial Services Licence (AFSL) compliance requirements, and navigate complex GST treatment that differs between insurance premiums and broker fees.
According to ASIC data, administrative failures including inadequate financial record-keeping remain a leading cause of AFSL suspensions and cancellations. The Royal Commission into Financial Services placed additional scrutiny on intermediary fee structures and disclosure requirements, making accurate bookkeeping not just good practice but essential for regulatory survival.
This comprehensive guide explains how to manage bookkeeping for insurance brokers in Australia, covering trust account requirements, commission tracking, AFSL compliance documentation, and the specific GST treatment that applies to insurance transactions.
Insurance brokers require a specialised chart of accounts that separates commission income by insurer and product type, distinguishes between trust funds and operating funds, and tracks the various fee arrangements that exist in modern broking.
Broker income should be categorised by source and type:
Commission Income:
Fee Income:
Other Income:
This separation allows analysis of revenue concentration by insurer, identification of the most profitable product lines, and compliance with AFSL disclosure requirements regarding remuneration.
Insurance brokers have specific expense categories:
Insurance brokers holding client premiums must maintain trust accounts separate from operating funds. This is a fundamental AFSL requirement.
Premium Received from Client↓Deposit to Trust Account (within 1 business day)↓Record Trust Liability (Premiums Held)↓Monthly Trust Reconciliation↓Remit Premium to Insurer (per insurer terms)↓Transfer Earned Commission to Operating Account
Client premiums received must be deposited into a designated trust account within one business day. These funds belong to clients until remitted to insurers and cannot be used for business operations under any circumstances.
Example: A broker collects $45,000 in premiums during October. The accounting treatment is:
When premiums received:
When premiums remitted to insurers:
The broker's commission is then transferred from trust to operating account as a separate transaction.
Trust accounts must be reconciled at least monthly, though weekly reconciliation is recommended. The reconciliation must show that trust bank balance equals total trust liabilities (premiums held for clients plus any other trust amounts). Any discrepancy must be investigated and resolved immediately.
ASIC requires trust account records to be maintained for seven years. Failure to maintain accurate trust account records can result in AFSL conditions, suspension, or cancellation.
Interest earned on trust accounts typically belongs to the broker unless client agreements specify otherwise. However, this varies by state and must be disclosed in Financial Services Guides. Record interest income separately as Trust Account Interest Income.
Commission structures vary significantly between insurers and product types. Accurate tracking is essential for both financial reporting and AFSL disclosure compliance.
Upfront commission is typically paid when the policy incepts. Recognition timing depends on payment terms from insurers.
Example: A commercial property policy with $50,000 annual premium at 15% commission generates $7,500 commission. If the insurer pays commission 30 days after policy inception, record the commission as income when earned (policy inception date) with corresponding accounts receivable from the insurer.
Trail commission is ongoing commission paid on policy renewals, typically at a lower rate than upfront commission.
Example: A life insurance policy pays 2% trail commission annually on a $3,000 premium, generating $60 per year. This is recognised each year when the policy renews and the commission is earned.
For a broker with 500 life insurance policies averaging $2,500 premium and 2% trail, annual trail income is $25,000. This recurring revenue stream requires tracking by policy to ensure all trail payments are received.
Many insurance products include clawback provisions where commission must be repaid if the policy cancels within a specified period (commonly 12 to 24 months).
Example: Life insurance upfront commission of $4,000 with a 24-month clawback. If the policy cancels in month 8, the broker may need to repay a pro-rata amount (16/24 x $4,000 = $2,667).
Brokers should maintain a provision for potential clawbacks based on historical cancellation rates. A broker with 8% annual cancellation rate on life insurance products should hold approximately 8% of recent commission as a clawback provision.
GST treatment for insurance transactions is complex and differs from standard business GST.
Example: A broker earns $5,000 commission from general insurance (GST applies, $454.55 GST component on the 1/11th calculation) and $3,000 commission from life insurance (input-taxed, no GST). The broker also charges a $550 advice fee to a life insurance client. The fee includes $50 GST because it is a separate supply from the broker to the client.
Brokers can claim full input tax credits on expenses related to general insurance activities. Expenses related to life insurance activities (input-taxed supplies) do not generate input tax credits. Mixed expenses must be apportioned based on the proportion of taxable versus input-taxed revenue.
Example: A broker with 70% general insurance revenue and 30% life insurance revenue can claim 70% of input tax credits on mixed expenses such as rent, utilities, and general administration.
Insurance brokers operating under an AFSL must maintain specific financial records and meet ongoing compliance obligations.
AFSL holders must meet base level financial requirements. A common minimum for general insurance brokers is $50,000 net tangible assets, though requirements vary based on your specific AFSL authorisations. Always confirm your specific requirements with ASIC or your compliance adviser.
Other requirements include:
AFSL holders must lodge annual compliance reports with ASIC, including audited financial statements if above certain thresholds. Records must demonstrate:
Brokers must disclose remuneration arrangements in Financial Services Guides and Statements of Advice. This requires accurate tracking of:
Insurance brokers benefit from integrated software solutions:
Broking Software: Sunrise Exchange, Broker Buff, or WinBEAT for policy management and insurer integration.
Accounting Integration: Most broking platforms integrate with Xero or MYOB for financial reporting. Key integrations include:
Recommended Stack: Broking software connected to Xero with trust account bank feeds and automated commission reconciliation.
Mixing Trust and Operating Funds
Incorrect GST Treatment
Not Tracking Clawbacks
Poor Commission Reconciliation
Inadequate Record Keeping
What are the trust account requirements for insurance brokers?
Insurance brokers holding client premiums must maintain trust accounts separate from operating funds. Premiums must be deposited within one business day of receipt. Trust accounts must be reconciled at least monthly, with records kept for seven years. Trust funds cannot be used for business operations under any circumstances. Failure to comply can result in AFSL suspension or cancellation.
How is GST treated on insurance broker commissions?
GST treatment depends on the insurance type. Commissions from general insurance (property, motor, liability) include GST at 10%. Commissions from life insurance are input-taxed, meaning no GST is charged. Broker fees charged directly to clients are subject to GST regardless of the underlying insurance product. Mixed expenses must be apportioned for input tax credit purposes. Consult a registered tax agent for advice specific to your situation.
What is commission clawback and how should it be accounted for?
Commission clawback occurs when a policy cancels within a specified period (typically 12 to 24 months) and the broker must repay some or all of the upfront commission. Brokers should maintain a provision for potential clawbacks based on historical cancellation rates. This provision reduces reported income and creates a liability on the balance sheet until the clawback risk period passes.
What financial requirements must AFSL holders meet?
AFSL holders must maintain minimum net tangible assets (commonly $50,000 for general insurance brokers, though this varies by authorisation - confirm with ASIC), demonstrate adequate resources to provide services, and maintain cash flow projections showing ability to meet obligations for at least 12 months. Annual compliance reporting to ASIC is required, including audited financial statements if above certain thresholds.
How should insurance brokers track commission from multiple insurers?
Create separate revenue accounts or tracking codes for each insurer and product type. Reconcile monthly against insurer statements to ensure all commission is received. Track commission rates by insurer to identify discrepancies and analyse which insurers and products deliver the best returns.
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