Commission sales persons considered as employees 043-03050020

Not all people working on a commission basis are necessarily self-employed. For example, a business selling real estate may employ 'commission only' sales persons.

Despite the freedom the sales person may have about how they perform the work, they are considered employees if they:

• only carry out the work as representatives of the organisation
• have calls made on their time
• have no control over advertising
• have no control over the form of contracts that buyers have to execute

A person is classed as an employee if the work they do is part and parcel of the business. Real estate salespersons are considered employees because their duties (selling real estate) are considered an integral function of the business entity for which they work. For the same reason an insurance salesperson is generally also regarded as an employee.

A person may be employed as an employee on a commission only basis, for example a commission only real estate salesperson. In these cases where commission is only payable if a result is obtained, the income is classed as ordinary income.

The gross income earned from commission is then treated as assessable income. The expenses incurred in generating commission income are not allowable deductions from the commission received. The only exception to this is when an allowance is paid for a specific purpose, for example Motor Vehicle Allowance. In this case the employee must keep a record of expenditure which can be claimed against the allowance and declare any unused allowance as income.