In Australian financial services, the terms referral fee and commission describe different types of payments with different regulatory implications.
Referral fee. A referral fee is paid to a professional for introducing a client to a service provider — without providing any advice or service to the client beyond the introduction. The referring professional does not need a financial services or credit licence. The fee is typically a one-off payment per settled transaction.
Commission. In the mortgage context, a commission is paid by the lender to the mortgage broker for successfully placing a loan. It includes an upfront commission (paid at settlement) and a trail commission (paid monthly over the life of the loan). The broker earns commission through the process of providing licensed credit services — not merely by making an introduction.
Conflicted remuneration. Commissions on financial product advice (not credit) are regulated under FOFA. Lender-paid broker commissions are subject to broker best interest duty obligations introduced in 2020. Referral fees paid to non-licensed professionals are generally outside both frameworks.
Why the distinction matters. Professionals who describe their referral income as a “commission” may inadvertently trigger regulatory scrutiny. The correct term — referral fee — makes clear that the professional’s role was an introduction only, not a credit or advice service. Using precise language in referral agreements and client disclosures is important for regulatory compliance.
