Gross trail is not the same as cash available to a buyer. A statement may show commission before an aggregator’s retention, broker or referrer splits, fixed charges, prior-period adjustments and other offsets. The amount deposited in the bank may be lower again because of timing or unresolved deductions.

A buyer should define each label, bridge gross trail to net payable and match that amount to cash. Use consistently supported net receipts for acquisition modelling—not a headline gross figure or unexplained deposit total. Net receipts are still revenue cash flow, not profit.

Define the income layers before comparing them

“Gross” is not a universal data field. In one report it may mean the commission calculated by the lender before the aggregator’s share; in another it may mean the amount allocated to the broker after that share but before other charges. Obtain the data dictionary and governing agreements rather than assuming two columns with the same name are comparable.

For due diligence, separate at least five layers:

  1. Lender-calculated trail: the commission generated under the lender’s schedule for eligible loans.
  2. Broker statement gross trail: the starting amount shown on the aggregator or payer statement, whose basis must be confirmed.
  3. Net payable: statement gross less itemised retentions, splits, fees, reversals and adjustments, plus or minus any stated tax treatment.
  4. Net cash received: the amount and date actually credited to the seller’s bank account.
  5. Maintainable acquisition cash flow: the buyer’s forecast after identifying continuing deductions, replacement costs and risks.

Australian regulations define “trail commission” by reference to indirect remuneration dependent on a consumer’s post-contract conduct, including repayments (Federal Register of Legislation). The amount still depends on the relevant commercial arrangements.

ASIC’s mortgage-broker remuneration review found that lenders primarily paid aggregators upfront and trail commissions calculated by reference to loan value. It also found varied aggregator charging models: some charged periodic fees, while others retained part of the commission before passing on the balance. Broker businesses could then retain a set amount or percentage before paying an individual broker (ASIC). The report is historical evidence, not a substitute for the current contracts applying to the target book.

Build a deduction map, not one “fees” line

Create a monthly bridge by payer and preserve every deduction as a separate category. A useful map includes:

Category Evidence to request Buyer question
Aggregator retention or percentage fee Aggregator agreement, commission schedule and statement calculation Is the percentage applied before or after GST, bonuses, reversals and lender adjustments?
Fixed aggregator or platform charge Fee schedule, invoice and statement line Does it continue after transfer, change by membership tier or sit outside the commission statement?
Broker, representative or referrer split Signed split agreement, loan ownership mapping and payment report Who remains entitled after completion, for which loans and for how long?
Clawback, reversal or correction Reason code, original payment, notice and later resolution Is it recurring, loan-specific, disputed or attributable to the seller before completion?
Other offset or withholding Contract clause, payer correspondence and ledger entry Is it a true cost, a timing item, a reserve or an unrelated debt netted against trail?
GST or tax-related line Tax invoice or recipient-created tax invoice, BAS mapping and tax advice Are all figures being compared consistently on a GST-inclusive or GST-exclusive basis?

Do not assume a deduction disappears because the seller calls it discretionary, or that every historic split follows the asset. Test who earned the commission, which rights transfer, any continuing personnel or referrer arrangements, and aggregator consent conditions.

Tax presentation can distort comparisons. ATO guidance in GSTR 2002/2 treats brokerage, commission and services arranging loan transactions as taxable where the requirements for a taxable supply are met (ATO). That does not determine the treatment of a particular sale or statement. Ask a tax adviser to confirm the entity, supply, GST basis, invoices and adjustments rather than simply removing one-eleventh from every line.

Request evidence for both the rate and the dollar amount

Ask for at least 24–36 consecutive monthly statements where available, together with the matching bank receipts and general-ledger postings. Also request:

  • current and historical aggregator agreements, fee schedules and variation notices;
  • lender commission schedules and effective dates;
  • sub-broker, employee, contractor and referrer split agreements;
  • invoices, recipient-created tax invoices and adjustment notes supporting GST treatment;
  • a loan-level export showing gross trail, each deduction and net trail by month;
  • details of minimum monthly fees, membership tiers, rebates, waivers and bundled charges;
  • unresolved commission queries, offsets, clawbacks and withheld amounts; and
  • a change log for aggregator migrations, entity changes and revised payment accounts.

Separate recurring costs from exceptions

Classify each deduction by cause, period, counterparty and expected post-completion treatment. Three labels are useful:

  • Recurring: expected to continue with the transferred book, such as a supported aggregator retention.
  • Conditional: triggered only if a stated threshold or event occurs, such as a tier change or particular loan adjustment.
  • Exceptional or unresolved: a one-off correction, disputed withholding or seller-specific offset requiring separate treatment.

Review the classifications across time. A fee called one-off but charged in six of twelve months is not convincingly exceptional. Model a waived fee at its contractual rate unless the waiver is transferable and documented. An add-back for the seller’s team may also overstate cash flow if equivalent servicing capacity must be replaced.

Hypothetical example: a monthly statement records $60,000 gross trail, less $3,000 aggregator retention, $9,000 representative splits, $600 fixed charges and a $1,400 prior-period correction, producing $46,000 net payable. The bank receives $46,000 after month-end. The cash bridge works, but the buyer still needs to determine whether the representative splits continue, whether replacement servicing costs arise, and whether the correction is recurring. These figures illustrate the method only and are not a benchmark.

Use ratios to find changes, not to replace investigation

Calculate net receipts as a percentage of defined statement gross for each month, then compare by aggregator, lender, responsible broker and loan cohort. Changes can expose fee-tier moves, revised splits, adjustments or data-mapping issues.

Investigate rather than average away:

  • net cash that does not match net payable after allowing for documented timing;
  • deductions without contract clauses, invoices or stable reason codes;
  • the same charge appearing in both the aggregator statement and general ledger;
  • seller adjustments to “normalise” receipts without a reproducible schedule;
  • purchase-price calculations applying a multiple to gross trail while the forecast assumes no equivalent deductions.

The final model should separately show reported gross, supported deductions, reconciled net receipts and costs after receipt. Legal advisers should confirm entitlement and transfer terms; accountants and tax advisers should assess presentation, GST and earnings treatment; and valuation advisers should determine how supported cash flows inform price.

Frequently asked questions

Is net trail on the statement the same as bank cash?

Not necessarily. Payment batching, month-end timing, withheld amounts or unrelated offsets can create a difference. Match payer, reference, amount and value date, and retain each unresolved difference in an exception register.

Can the buyer add back a seller’s broker splits?

Only with evidence. Confirm whether the recipient retains a contractual interest, whether their services or client relationships must be replaced, and whether aggregator approval changes the arrangement. An accounting add-back is not proof that the cash will belong to the buyer.

Should a valuation multiple be applied to gross or net trail?

There is no universal answer. The parties must define the income measure precisely and apply the chosen method consistently. A buyer should first establish reconciled net receipts, continuing deductions, servicing costs and run-off assumptions, then obtain valuation, accounting and legal advice.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.