For a principal running their own agency in NSW, the structure usually starts with a company that holds the corporation licence and trades the business, often with a discretionary trust in the ownership chain and the rent roll held separately. Licensing comes before tax: a corporation carrying on business as an agent needs its own corporation licence and a licensee in charge holding a class 1 licence. If you are still selling on commission under someone else’s licence, personal services income rules will generally stop a company or trust from changing your tax position.
What Makes an Agency Structure Different From a Standard Business
Licensing drives the entity, not the other way around. The licence, the trust account and the trading entity are tied together, so moving the business into a new company later is not a paperwork exercise. It means a new corporation licence, a new trust account, and a transition your clients and your franchisor both notice.
Trust money sits outside the business entirely. The agency’s trust account holds rent, deposits and other client money under the Property and Stock Agents Act, with its own record keeping and audit obligations. It is never agency cash flow, and a structure that blurs the two creates problems on both the compliance side and the reporting side.
The rent roll is usually the real asset, and it deserves its own thinking. Holding it separately from the sales business insulates it from sales side risk, makes a partial or staged sale possible, and can change the tax outcome materially when you do sell. Principals who only look at this at sale time have far fewer options than those who set it up early.
Personal services income is the trap for agents stepping up. Commission earned for your own personal effort, particularly while operating under another agency’s licence, is likely to be attributed back to you regardless of the entity that invoices it. Once you employ salespeople, hold your own licence and run your own office, that changes, and that is usually the real moment to restructure.
Franchise agreements and exit planning bracket the whole decision. A franchisor may specify the entity and the naming, and the small business capital gains tax concessions available on an eventual sale depend on how the business and the rent roll are held. Both are far cheaper to accommodate at the start than to unwind later.
Thinking About the Structure Behind Your Agency?
If you are moving from selling under a licence to running your own agency, our accounting for real estate agents page covers how we work with principals. You can read more about the firm at MYC Partners Accountants, or get in touch to talk through the structure with Kylie before you commit to it.