Mortgage Commission Clawbacks in Australia: The Complete Broker Guide

A clawback is a lender’s right to reclaim some or all of the upfront commission it paid you if the loan discharges early. Australian law caps the clawback period at two years from the start of the credit contract, and brokers are prohibited from passing the cost on to the borrower. Within that two-year ceiling, every lender sets its own structure — and they now differ enough that two identical loans with different lenders can produce clawback bills that differ by thousands of dollars.

That’s the shape of it. The rest of this guide covers what actually triggers a clawback, how the tiered structures work, how to provision for the liability properly, and where the rules look to be heading.

What is a clawback, exactly?

When a loan settles, the lender pays your aggregator an upfront commission, which flows through to you. If the borrower discharges that loan within a defined window afterwards, the lender reverses some or all of that payment — recovering it from the aggregator, who recovers it from you, usually by netting it off your next commission run.

Clawback was introduced to discourage churn: brokers refinancing clients repeatedly to harvest fresh upfronts. That was the original policy logic, and it’s the reason ASIC has historically supported clawback arrangements as a check on the practice.

The mechanism is contractual, not statutory. It sits in the agreement between the lender and your aggregator, and flows to you through your aggregator agreement. What is statutory is the outer limit on how long it can run.

How long can a clawback period be?

Two years, maximum. Following the post–Royal Commission reforms to broker remuneration, clawback arrangements are prohibited where they extend beyond two years from the start of the credit contract.

The clock starts at a specific point:

That distinction matters more than it looks. On a construction or staged-drawdown facility, “initially drawn down” is not the same date as formal settlement, and if you’re diarising clawback expiry from the wrong date you’ll misjudge exposure by weeks at exactly the moment it matters most.

The cap is a ceiling, not a standard. Nothing requires a lender to use the full two years, and competitive pressure has pushed several of them well inside it. Westpac, for instance, moved its active clawback period from two years down to 18 months. Others have gone further.

How much gets clawed back?

The traditional shorthand — 100% in year one, 50% in year two — is still roughly right at the start of the window and increasingly wrong at the end of it.

Three structures are now in circulation:

1. Flat tiers (the traditional model). 100% of the upfront if the loan discharges in the first 12 months, then a flat percentage across the second year. Simple, and harsh at the boundary: a discharge at day 363 attracts the same 100% clawback as one at day 30. Brokers have reported exactly that scenario — a full clawback two days short of the twelve-month mark.

2. Monthly tapering scales. Several major lenders have replaced the flat second-year rate with a straight-line monthly reduction, so the amount recovered falls each month the loan survives. NAB introduced a sliding scale effective 1 September 2024 that begins reducing at month 14 — from 50% down to around 6% by month 24 — replacing a flat 50% across months 13 to 24. CBA moved to a comparable approach, retaining a first-year clawback and paying out the second-year portion on a monthly straight-line basis to month 24.

3. Reduced or zero clawback. A number of non-bank lenders have used clawback as a competitive lever. ORDE Financial has run a zero-clawback policy across its product range. Bluestone has applied a 24-month clawback on prime full-doc and SMSF products but only six months on some residential lending. Better Mortgage Management has carried zero clawback on certain flagship products and stepped structures on others. La Trobe has bypassed the mechanism differently again, charging an upfront fee rather than operating a clawback.

Every figure above is a point-in-time example of a structure, not a current rate. Lender clawback policies change, sometimes with a few weeks’ notice, and they vary by product within the same lender. Your actual exposure is whatever your aggregator’s current schedule says for that lender, that product and that settlement date. Treat this section as a map of the possible shapes, then check your own schedules.

What actually triggers a clawback?

The common trigger is a full discharge inside the window. But the edges are where brokers get caught:

• Refinance to another lender. The standard case.
• Property sale and loan payout. The client’s circumstances, not your conduct — and the clawback applies regardless.
• Full repayment from savings, inheritance or a windfall. Same result.
• Refinance within the same lender. Treatment varies. Some lenders treat an internal refinance as a new loan and claw back the original; others don’t. This is one of the most commonly misunderstood cases.
• Product switch or restructure. Sometimes triggers, sometimes doesn’t, depending on whether the lender treats it as a discharge and re-origination.
• Substantial partial repayment. Some structures reduce commission proportionally where a large portion of the balance is repaid early.
• Default or serious arrears. Some agreements permit recovery where the loan doesn’t perform.

The practical consequence is that you cannot determine clawback exposure from the fact of a discharge alone. You need the lender, the product, the settlement date, the discharge date, and the specific schedule that applied when the loan settled — because the terms in force at settlement are the terms that govern, not whatever the lender publishes today.

What does a clawback actually cost?

More than the reversed upfront, because the trail stops at the same moment.

Take a $700,000 loan at 0.65% upfront and 0.15% p.a. trail, discharged at month 10:

The reversed upfront is the number that shows up on the statement. The forgone trail is the larger number, and it never appears anywhere — it’s simply an income stream that stops.

There’s a cash-flow dimension too. The clawback is typically netted off your next commission run, which means it lands as a reduction in a month you’ve already spent against. A cluster of clawbacks in one cycle can turn a normal month negative.

Trail figures above are illustrative, assuming P&I over a 30-year term with indicative amortisation.

Can I recover a clawback from the client?

A broker should not make the consumer liable for the broker’s lender clawback repayment obligation. Regulation 28VG imposes this as a condition of a permitted clawback arrangement.

This doesn’t mean every historical fee agreement or differently drafted service-fee clause is automatically unenforceable — that depends on its wording and circumstances. If your client documentation contains a clawback reimbursement, early-discharge or related fee clause, have it reviewed by an Australian credit lawyer or qualified compliance adviser before relying on it.

The practical alternative is disclosure, not recovery: explaining to a client at the outset that refinancing within the first two years costs you the commission you were paid for the work. Most clients don’t know this. It won’t stop a genuinely better offer, but it’s often enough to prompt a conversation before a discharge rather than after. A broker may explain remuneration and clawback factually, but the explanation must remain client-first — it should never pressure a borrower to retain an unsuitable or uncompetitive loan merely to protect the broker’s income.

Can I choose lenders to reduce my clawback risk?

Not on that basis. Best Interests Duty requires you to act in the borrower’s best interests, and where a conflict arises, to give priority to the client’s interests over your own. Your clawback exposure is your commercial risk, not a permissible input into which product you recommend.

This is worth being precise about, because it’s where well-intentioned “how to avoid clawback” advice goes wrong. What you can legitimately do:

• Recommend the product that genuinely suits the client’s actual timeframe. If a client tells you they intend to sell in eighteen months, a product suited to a short hold is the right recommendation on its own merits — and it happens to reduce your exposure. The reasoning has to run in that direction, and your file notes need to show it.
• Ask better questions up front. Planned relocation, expected sale, an inheritance or bonus that might clear the loan, a relationship in difficulty. These change the recommendation legitimately and let you forecast exposure honestly.
• Understand each lender’s clawback terms so you can price your own business risk and provision accurately — which is a different activity from letting those terms steer a recommendation.

What you cannot do is steer a client toward a zero-clawback lender when a different lender better serves them. Document the reasoning either way.

How should I plan for clawback risk?

Clawback creates a real cash-flow risk because a lender or aggregator may deduct a reversal from a later commission run. Many brokerages therefore maintain an internal clawback reserve or cash buffer based on their own historical discharge experience and the settlements still within applicable clawback windows.

A practical internal process:

1. Measure your own experience. Review what proportion of settled loans discharged during each lender’s applicable clawback period.
2. Identify current exposure. Track settlements that remain within their applicable windows and the amount that may be reversed under the relevant schedule.
3. Set an internal reserve or cash buffer. Use a method appropriate to the size and volatility of your business, and review it regularly.
4. Obtain accounting and tax advice. Ask your accountant whether and how the estimate should be recognised or disclosed in your financial statements and tax records.

This turns clawback from an unexpected cash deduction into a managed business risk. It doesn’t mean every brokerage should use the same reserve method or percentage — the appropriate treatment depends on your entity, agreements and accounting framework.

The risk of not doing this isn’t theoretical. Clawback costs rose sharply through the recent refinancing cycle — the FBAA has put the increase between 2018 and 2021 at 47.4% — and survey work conducted for the association found around eight in ten brokers affected by clawbacks in a single year, with close to half losing more than $10,000.

Where are the clawback rules heading?

There is active reform pressure, but no change to mortgage-broker clawback rules has commenced.

The FBAA has raised lender clawback practices through Treasury’s consultation on extending unfair-trading-practices protections to small businesses and franchisees, which closed on 10 July 2026. The association’s central argument is that clawback provisions were originally designed to address broker misconduct or non-compliance, but have shifted to being triggered by borrower conduct instead — a borrower’s decision to refinance or sell isn’t broker misconduct, yet the broker carries the cost. FBAA CEO Leo Gagic framed the submission as seeking to rebalance a lender–broker–consumer relationship that brokers say has tilted against them.

Separately, and on a different track, consumer-focused unfair-trading-practices laws passed in mid-2026 are scheduled to commence on 1 July 2027. That commencement date applies to the consumer-focused reforms — it is not the start date for small-business protections or for any broker clawback reform, which remains at the consultation stage with no legislated timeline.

Within the industry there’s also a live argument for a regulatory standard rather than lender-by-lender discretion — with proposals for a six-to-twelve-month cap floated as a fairer balance than the current two-year ceiling.

What this means for you now: nothing has changed yet, and you should plan against current schedules. Any future change to broker clawback rules should be treated as confirmed only once legislation, regulation or an official lender policy change actually lands — not on the strength of a closed consultation.

How do you actually track clawback exposure?

A spreadsheet can hold this for a small book. It stops working at scale for a specific reason: exposure is a function of four moving variables — settlement date, lender schedule at that date, current loan age, and discharge status — and three of those change every month across every loan simultaneously.

What you need visibility of, continuously:

• Which loans are still inside a clawback window, and how many months remain on each.
• Total dollar exposure right now — the sum you’d repay if every at-risk loan discharged today, and a weighted figure based on your actual discharge rates.
• Loans approaching the cliff edges, particularly under flat-tier lenders where month 12 is the difference between 100% and 50%.
• Discharges as they happen, rather than when the clawback appears on a statement six weeks later.
• Whether the clawback you were charged looks consistent with the right schedule, settlement date and taper point. Clawbacks are commission calculations, and they can contain the same kinds of errors as commission payments.

That last point gets almost no attention. Brokers scrutinise underpayments and accept clawbacks as unarguable. They aren’t — a clawback applied against the wrong schedule, or at the wrong point on a taper, is an error like any other, and it’s recoverable if you can show it.

Clawback risk monitoring is one of the core reasons CommissionsIQ exists: tracking which settlements are still exposed, what they’d cost, and keeping clawback-related statement entries visible so you can check them against the applicable schedule.

Frequently asked questions

The bottom line

Clawback is the most misunderstood part of Australian broker remuneration, largely because the shorthand everyone repeats — 100% year one, 50% year two — stopped being accurate several years ago and nobody updated it.

Three things worth doing regardless of your systems:

1. Know each lender’s current structure, including where the taper starts and whether internal refinances trigger. The variation between lenders is now material enough to matter to your business planning.
2. Provision for clawback on every settlement for the applicable window, rather than treating upfront as clean profit. Estimate the rate from your own book’s discharge history.
3. Check the clawbacks you’re charged. They’re calculations like any other, and they contain errors like any other.

Related reading

• How Mortgage Broker Commissions Work in Australia: Upfront vs Trail — the full picture of upfront, trail, net-of-offset and aggregator splits
• Commission calculator — model upfront, trail and clawback exposure on a specific loan
• Clawback prevention and monitoring — how CommissionsIQ tracks exposure across a book

Sources and further reading

• National Consumer Credit Protection Amendment (Mortgage Brokers) reforms — two-year clawback cap and prohibition on passing costs to consumers
• ASIC — Report 516: Review of mortgage broker remuneration
• Treasury — consultation on unfair trading practices protections for small businesses and franchisees (closed 10 July 2026, no legislated outcome yet)
• Competition and Consumer Amendment (Unfair Trading Practices) Bill 2026 — consumer-focused reforms, passed mid-2026, commencing 1 July 2027; does not extend to small-business or broker clawback protections
• FBAA — submission to the above Treasury consultation, as reported by The Adviser and Australian Broker
• FBAA — data on the increase in clawback costs, 2018–2021
• FBAA / CoreData — broker clawback survey
• MPA — reporting on NAB’s clawback sliding scale effective 1 September 2024, and on lender clawback variation across majors and non-banks
• Australian Broker — reporting on CBA clawback structure changes
• Broker Daily — industry commentary on the case for a regulatory clawback standard
• Lender commission and clawback schedules as published via aggregators

Always verify against your own aggregator’s current commission and clawback schedules. Clawback terms change and vary by lender, product and settlement date, and the terms in force when a loan settled are the terms that govern it. This guide explains the mechanics; it is general information, not financial, tax or legal advice.

This is general information, not legal advice. Legislation and guidance change — confirm your current obligations with your licensee, aggregator or a qualified adviser.