What a clawback is
When a lender pays a broker an upfront commission at settlement, it is paying for a loan it expects to keep for years. If the borrower refinances, sells or pays the loan out soon afterwards, the lender has paid for something it did not get, and its commission agreement lets it recover some or all of that upfront from the broker. That recovery is the clawback.
It applies to the upfront only. Trail commission is not clawed back; it simply stops the month the loan closes. And it is not a penalty on the broker's conduct: it applies whether the client left because of a better rate elsewhere, because they sold the property, or because they came into money. The only question the schedule asks is how many months have passed since settlement.
Why lenders do it
Upfront commission is front-loaded. On a typical residential loan the upfront is worth roughly three to four years of trail, so a loan that leaves in year one has cost the lender more in commission than it earned in interest margin. Clawback aligns the broker's incentive with the lender's: write loans that stay, and be careful about moving a client you settled recently.
It also sets the terms of competition between lenders. Shortening the window, tapering the recovery, or dropping clawback on selected products are all ways a lender makes itself more attractive to brokers without touching the headline rates. That is why the schedules differ, and why they change.
The common schedules
Almost every Australian residential schedule is one of four shapes.
Two steps over 24 months. The most common: 100% of the upfront is recoverable if the loan closes inside the first 12 months, 50% from month 13 to month 24, nothing after that.
Two steps over 18 months. The same 100% first year, with the 50% step ending at month 18 rather than 24. Several lenders have moved to this since 2023.
Pro-rata. The recoverable percentage falls a little every month, in a straight line, reaching zero at the end of the window, typically 18 or 24 months. A loan that closes at month 12 of a 24-month taper carries a 50% clawback; at month 18, 25%.
First year only. 100% inside 12 months, nothing afterwards. Rarer, and usually paired with a lower upfront.
A small number of lenders charge no clawback at all on some or all products. That is not a gift to the broker; it is usually priced into the product or recovered from the borrower as a risk fee on early discharge, which is a factor in whether the product serves the client.
See each schedule on a real loan
Pick a clawback schedule, enter the loan and the months since settlement, and see what you would repay if the client left today.
How the amount is calculated
The calculation has three parts, and the order matters.
First, the upfront. It is the settled loan amount, net of any offset balance under most current agreements, multiplied by the upfront rate. A $650,000 settlement at 0.65% is $4,225 before GST.
Second, the months since settlement. Lenders count from the settlement date to the date the loan is discharged, and most round to whole months. Whether the trigger is the discharge itself or the date the payout request lands differs between lenders, and it matters at the boundary of a step.
Third, the percentage the schedule assigns to that month, applied to the upfront.
$2,112.50
Clawback at month 14 on a $4,225 upfront under the two-step, 24-month schedule
At month 9 the same loan would owe the full $4,225. At month 25 it would owe nothing. Under an 18-month schedule the exposure would already be zero at month 19.
Two things follow from this. The amount does not depend on the loan balance at the time of discharge, only on the upfront that was paid. And the exposure on a whole book is simply the sum of each loan's upfront multiplied by the percentage its schedule assigns to its current age, which is why every loan settled in the last two years belongs on a list with its date.
What triggers it and what does not
A full refinance to another lender triggers it. So does a sale of the property with the loan paid out, and a full repayment from the borrower's own funds. Those three account for almost every clawback a broker sees.
Partial repayments generally do not trigger it. A lump sum that reduces the balance is a balance reduction, which lowers trail but leaves the loan in place; some agreements set a threshold below which a very large reduction is treated as a discharge, so it is worth knowing where that line is.
Changes within the same lender are the grey area. A re-fix or a rate switch on the same account is a variation, not a discharge, so no clawback applies. An internal refinance to a different product or a new account is treated differently by different lenders: some waive the clawback, some apply it and pay a fresh upfront on the replacement, some apply it and pay nothing. This is the case to check in the schedule before recommending a switch.
Who pays, and when
The broker pays. Under the arrangements in place since the broker remuneration reforms of 2021, the cost of a clawback cannot be recovered from the borrower, so the broker's agreement with the client cannot include a clawback fee and the lender does not charge one to the borrower on the broker's behalf.
Mechanically, the lender notifies the aggregator and the aggregator deducts the amount from the broker's next commission run, usually one to two months after the discharge. On the statement it appears as a negative upfront line, sometimes with the original loan reference, sometimes without. A broker who does not reconcile statements can carry a clawback for months without knowing which loan caused it.
Where the broker's share of commission runs through a split, the aggregator typically recovers the same split of the clawback, so a broker on 85% of upfront repays 85% of the amount the lender recovers. Agreements differ; read yours.
Managing the exposure
Clawback is the most predictable cost in a broker's business, because every loan carries the date its exposure clears from the day it settles. The management routine is short.
Keep a list of every loan inside its window, with the upfront paid and the month the exposure clears, and know the total. A $48m book with a normal settlement rhythm has somewhere between $30,000 and $60,000 of upfront inside its windows at any time.
Watch the signals that precede a discharge on those loans: a fixed rate expiring, an interest-only period ending, a rate that has drifted above what the lender offers new customers, a client asking for a payout figure. Each is a reason to call before the client does.
Reprice rather than refinance where it serves the client. A rate reduction with the same lender keeps the loan in place and the upfront safe; a refinance elsewhere inside the window costs the upfront and starts a new one.
And where a refinance is the right answer for the client, do it, and record why. The best interests duty applies to the recommendation, and a clawback avoided by keeping a client in the wrong loan is a far more expensive problem than the clawback.