Real estate tax: employee or contractor on an ABN?

Every other page in this cluster tells you what an agent can claim. This one comes first, because a single fact about how you are engaged decides whether those pages even apply to you. Sort it before you go near a receipt, and the rest of the cluster lands where it should.

Why this is the first question

There is one thing to settle before you claim anything, and it quietly decides every other answer in this cluster. Are you a PAYG employee, or a contractor or principal working under your own ABN? That single fact changes what the word deductible means for you, which return you lodge in July, and whether GST is part of your working life at all. It also feeds straight into the commission gate covered in the marketing chapter, since whether you can claim self-funded advertising and client gifts turns on your status and your pay structure together. Real estate carries a large cohort of contractors and principals alongside its salaried and commission staff, and plenty of agents are genuinely unsure which side of the line they sit on. Get this right and the car, marketing and licence pages that follow apply cleanly. Get it wrong and you spend the year answering questions that were never yours to answer.

How to tell which you are

You do not need to read your contract to work this out. The shape of your pay tells you most of it.

• Is tax taken out before the commission reaches you? If tax is withheld from each pay, your commission and retainer land as wages, an income statement turns up in myGov after the year ends, and the agency pays super in for you, you are an employee. Someone else is carrying the tax on your behalf.
• Do you hold an ABN and invoice the agency for your gross commission? If you bill under your own ABN and collect the full amount with nothing withheld, sorting your own tax afterwards, you are a contractor.

One caution that trips a lot of agents up. Having an ABN, or being called a "conjunction agent", does not settle the question on its own. The ATO looks at the whole relationship, not the label: a fixed desk in the office, an agency email address, set hours, and work directed by the agency all point back towards employment. Many agents who believe they are contractors are, in substance, employees, and should be claiming as employees. If the arrangement looks and works like a job, that is usually what it is.

What the employed agent claims

If tax comes out before you are paid, you are on the right page, because this whole cluster is written for you. Your task at tax time is claiming back the work costs you funded yourself and were not paid back for. For an employed agent that is the car and the work-related travel between the office and open homes, inspections and auctions; self-funded marketing and client gifts, provided you are entitled to commission; your licence renewal and institute fees; the work share of your phone; self-education that keeps your current role sharp; and the running costs of a home office. All of it sits against your income on the individual return, and each of those pages works through the detail and the catches.

What changes if you are a contractor or principal

If you invoice under your own ABN, you are not lodging a wages return. You are running a business, and the rules widen in both directions.

• All of it is business income. Every dollar of commission you invoice is declared as business income, however it arrives.
• Your deductions run wider. Beyond the usual work costs, a business reaches things an employee never can: desk fees, franchise fees, the commission-split and marketing levies you pay the agency, professional-indemnity and public-liability insurance, and home-office occupancy where the room is a genuine place of business.
• GST arrives at $75,000. Once your turnover reaches $75,000 in a rolling twelve months you must register for GST, charge it on your invoices, and lodge a business activity statement, the BAS, through the year.
• Personal services income rules can bite. Because your commission is mainly a reward for your own personal effort, the PSI rules can apply and restrict some of the deductions a broader business would take for granted.
• The instant asset write-off opens up. A business can immediately deduct an eligible asset up to a cap the ATO sets, a concession employees cannot use at all.

That is the shape of it, not the manual. If this is you, the rules are broader and heavier than a single chapter can cover properly, and a registered tax agent who works with agency principals is worth the fee, most of all in the first year GST and BAS come into play.

If you are both, or you cannot tell

Some agents hold a wage role and pick up ABN work on the side. When that is you, split the two lives. On the employee side sit your commission-as-wages and the work deductions this cluster covers. On the business side sit the income you invoiced and the wider business deductions that belong to it, kept as separate records so neither blurs the other. And if you genuinely cannot tell which you are, resolve that before anything else, because your status silently changes every other answer on these pages. Anyone truly unsure should get advice on their classification first, rather than pick a side and hope.

The records differ too

Whichever side you land on, the habit that saves you is logging each cost as it happens instead of rebuilding the year from memory in July. What you keep is not the same, though. An employee keeps receipts for the work costs, a note of the work share on anything used for both work and life, and a logbook or kilometre record for the work travel. A contractor keeps full business records, income and expenses both, and the BAS lodgements once GST is in play. The ATO's free myDeductions app holds the basics on either side.

The bottom line

Work out which one you are first, because everything else follows from it. Check how you are paid: tax withheld and super going in means you are an employee, and this cluster claims your work costs against your income. An ABN and a gross-commission invoice means you are running a business, with broader deductions and, past $75,000, GST and a BAS to run. Do not let a label decide it for you, since the ATO weighs the whole relationship. Settle that one question and every hour you spend on your tax lands in the right place, instead of solving a problem that was never yours.

General information only, not tax advice. Check the ATO or a registered tax agent for your situation.