Commission Agreement Template | Sprintlaw Australia

If your business relies on sales, referrals, partnerships, or performance-based revenue, paying commission can be a smart way to grow without locking yourself into high fixed costs. But commission arrangements can also create misunderstandings fast.

The good news is you can prevent most problems by putting the deal in writing. Using a well-drafted commission agreement template (tailored to your business) helps you set expectations upfront, protect your margins, and avoid disputes about who gets paid what (and when).

In this guide, we’ll walk through what your Australian small business should include in a commission agreement, the common pitfalls we see, and how to tailor the document to your real-world sales process.

What Is A Commission Agreement (And When Do You Need One)?

A commission agreement is a contract that sets out how you’ll pay someone for generating sales, leads, referrals, or other revenue outcomes for your business.

It’s commonly used when you engage:

Sales agents who earn a percentage of each sale they close
Business development contractors who source leads or introductions
Referral partners (including other businesses) who refer customers to you
Affiliate marketers who drive online sales
Employees who have a commission component in their remuneration

Even if you have a great relationship with the person you’re paying, commission arrangements can become messy because they usually involve:

long sales cycles
refunds and chargebacks
partial payments and instalment plans
multiple people contributing to the same deal
customers changing scope after signing

That’s exactly why a tailored commission agreement is so valuable. It forces you to define the rules before money is on the line.

What To Include In A Commission Agreement Template (Australia)

A commission agreement template should be more than “you get 10% of sales.” If you want it to actually work in practice (and hold up if there’s a dispute), it should clearly cover the commercial mechanics and the legal protections.

Here are the key clauses most Australian small businesses should consider including.

1) The Parties And The Relationship (Employee vs Contractor vs Agent)

Start by clearly stating who the parties are and what the relationship is. This matters because employees, contractors, and agents can have very different legal rights and obligations.

If the person is an employee, the commission terms usually sit within (or alongside) an Employment Contract - and you’ll also need to ensure the overall pay arrangement complies with the Fair Work Act, any applicable Modern Award or enterprise agreement, and minimum entitlements (for example, minimum rates, overtime/penalties, and record-keeping). “Commission-only” employee structures can be high-risk if they result in underpayment.
If the person is a contractor or sales consultant, the commission terms are often built into a contractor agreement - but you should still consider worker classification carefully, and whether superannuation obligations may apply even where someone is a contractor.
If the person is an agent representing your business to customers, you may also need to be clear about authority and boundaries (for example, whether they can bind you to a deal).

A common mistake is calling someone a “contractor” in the agreement, but managing them like an employee day-to-day. That mismatch can create serious risk later. In Australia, labels aren’t determinative: if the practical reality (and the rights and obligations created by the contract) looks like employment, you may be exposed to employment law obligations and penalties.

2) What “Commissionable” Activity Actually Means

Your commission agreement should spell out exactly what triggers commission. For example:

Is commission earned when a lead is introduced, when a quote is accepted, or only when the customer pays?
Does commission apply to new customers only, or also repeat business?
Does commission apply to upsells, renewals, extensions, or variations?
What happens if the customer cancels, doesn’t pay, or requests a refund?

This is one of the most important parts of the contract. If you only define commission as “10% of revenue,” you’ll quickly run into grey areas like deposits, staged invoices, refunds, or accounts that churn after month one.

3) The Commission Structure (Percentages, Fixed Amounts, Tiers)

Commission isn’t always a flat percentage. Your template should allow you to specify the structure clearly, such as:

percentage of revenue (e.g. 10% of net sales)
percentage of profit (more complex, but can protect your margins)
fixed amount per sale (e.g. $200 per closed deal)
tiered commission (e.g. 5% up to $50k, 8% beyond $50k)
accelerators (higher rates once targets are exceeded)

What’s “right” depends on your pricing, margins, average deal size, and sales cycle. The key is that your agreement should reflect how your business actually earns money. If the commission arrangement applies to employees, it’s also worth checking whether “commission” counts as part of ordinary earnings for entitlements like superannuation, and ensuring your payroll setup can administer the plan correctly.

4) “Gross” vs “Net” Sales (And What Gets Deducted)

Commission disputes often come down to one question: commission on what number?

Your agreement should define whether commission is calculated on:

gross sales (total sale amount before deductions), or
net sales (after specified deductions)

If you use net sales, specify the deductions clearly. Common examples include:

GST (or whether figures are GST-exclusive/GST-inclusive)
payment gateway fees
refunds, chargebacks, credits
discounts and promotions
shipping (if you want it excluded)

Being clear here protects your business and also helps the salesperson understand how to maximise their earnings.

It can also reduce tax confusion: for example, contractors may charge GST (if registered), whereas employees don’t - and different withholding rules can apply depending on the relationship.

5) Payment Timing And Conditions (When You Pay Commission)

Most small businesses benefit from tying commission to customer payment, rather than to signing or invoicing.

Your commission agreement template should set out:

when commission is calculated (e.g. monthly)
when it’s paid (e.g. within 14 days after month-end)
whether you pay commission only after you’ve received cleared funds
what happens if a customer pays in instalments
whether there’s a minimum threshold for payout

If your customers often pay deposits or staged invoices, it’s usually worth including an example calculation in the agreement so everyone’s on the same page. For employees, you should also ensure the payment cycle and payslip reporting aligns with payroll obligations (including PAYG withholding and superannuation), and that any “holdbacks” or adjustments are implemented lawfully.

6) Territory, Channels, And Deal Ownership

If you have multiple salespeople, multiple channels (online vs in-store), or multiple regions, you should define “ownership” rules.

Common areas to address include:

exclusive vs non-exclusive territories
what happens if two people touch the same lead
how inbound leads are assigned
whether commission applies to online purchases made by a lead they introduced

This is the clause that prevents internal conflict as your team grows.

7) Authority And Restrictions (What They Can And Can’t Promise)

Commission-based sellers are often highly motivated. That’s great, but it can also create risk if they promise discounts, delivery timeframes, or product inclusions that you can’t deliver.

Your agreement should make it clear:

what they are authorised to do (and not do)
whether they can sign contracts on your behalf
what approvals are required for discounts or special terms

This also ties into your broader contract process. If your business uses standard customer terms, it’s worth keeping them consistent with your commission arrangement. For example, if you’re issuing quotes, clarify whether they’re binding or subject to approval (and align it with how you manage pricing and scope). Questions around whether an quotation is legally binding can become very relevant when commission is triggered by “acceptance”.

8) Confidentiality And Ownership Of Leads

If a salesperson is building relationships with your customers under your brand, you’ll usually want to protect your customer list, pricing, strategy, and pipeline data.

Your agreement should cover:

confidential information (what it includes)
how it must be handled during the relationship
return/deletion of business materials on exit
whether leads, CRM data, and customer relationships are owned by your business

If you rely heavily on lead generation, these clauses can be crucial to protecting the business value you’re building.

9) Term, Termination, And Post-Termination Commission

Commission gets especially sensitive when the relationship ends. Your template should set clear rules for:

how long the agreement runs for
how either party can terminate (notice periods, termination for breach)
what happens to “in-progress” deals at termination
whether commission is payable after termination (and for how long)

There’s no one-size-fits-all answer here. But you do need a clear answer. Otherwise, you risk paying commission indefinitely on accounts you continue to service long after the salesperson has left. If the commissioned person is an employee, also consider how commission is treated on termination (including any applicable Award/contract terms, and timing of final pay).

10) Dispute Resolution And Record-Keeping

You don’t want to negotiate commission calculations in the middle of a conflict. A simple dispute resolution clause can save a lot of time and cost.

Your agreement can also set expectations around record-keeping, such as:

what system is the “source of truth” (e.g. CRM records)
who records leads and when
how disputes about attribution are handled

Common Pitfalls With Commission Agreements (And How To Avoid Them)

Even well-meaning businesses run into trouble when commission isn’t defined carefully. Here are the pitfalls we see most often, and how you can avoid them.

Pitfall 1: Vague Triggers (“Commission Is Payable On Sales”)

If you don’t define what counts as a “sale,” you can end up with disputes over:

signed contracts vs paid invoices
deposits vs final amounts
refunds and cancellations

How to avoid it: define the trigger in one sentence, then add the edge cases (instalments, refunds, chargebacks, partial performance).

Pitfall 2: Forgetting About Refunds, Chargebacks, And Bad Debt

If a customer refunds after you’ve paid commission, do you deduct it from the next commission payment? Can you require repayment?

How to avoid it: include a clear adjustment mechanism for refunds/chargebacks (often called a “clawback”), and make sure it’s enforceable for your situation. In particular, if the commissioned person is an employee, deductions from wages are tightly regulated and generally require proper written authorisation and compliance with workplace laws - you often can’t simply “deduct it” without a compliant process.

Pitfall 3: Accidentally Creating An Employment Relationship

Some businesses use a commission agreement to engage a “contractor,” but then manage them like staff (set hours, require exclusivity, provide tools, direct day-to-day work). That can raise legal risk if the relationship is challenged.

How to avoid it: make sure the agreement matches the reality. If you need an employee, it’s often safer to have an employee arrangement in place and document commission properly in the employment terms. Also consider the practical and legal indicators that separate employment from contracting, and get advice if you’re unsure - the consequences can include backpay, leave entitlements, tax withholding issues, and superannuation liabilities.

Pitfall 4: Commission That Incentivises The Wrong Behaviour

If commission is based on “revenue booked” rather than “revenue collected,” you can encourage discounting, rushed deals, or poor-fit customers that churn quickly.

How to avoid it: consider tying commission to collected revenue, or building in quality metrics (like retention) for ongoing accounts.

Pitfall 5: Not Aligning Commission Terms With Customer Terms

Your commission agreement doesn’t exist in a vacuum. If your customer contract allows cancellation, refunds, or price changes, your commission clause needs to account for those.

In some businesses, cancellation fees and refund rules can be a key part of the commercial model. If that’s you, it’s worth ensuring your customer-facing documents and your commission calculations are consistent with your approach to cancellation fees.

Pitfall 6: Treating A Free Template As “Set And Forget”

A free commission agreement template can be a helpful starting point, but the risk is that it won’t reflect your exact sales process, your payment flow, or your industry-specific issues.

How to avoid it: treat your template as a framework, then tailor it to your business model (including the edge cases you already know happen in your business). It’s also worth sanity-checking the tax and payroll handling (for example, whether GST applies to the commission payment for contractors, whether PAYG withholding applies, and how superannuation and payroll tax may be affected).

Commission Agreements And Australian Consumer Law (ACL): Where Small Businesses Can Trip Up

Commission agreements are usually “internal” documents (between you and a salesperson or referral partner). But the way sales are made can still create consumer law risk for your business.

Under the Australian Consumer Law (ACL), you need to be careful about:

misleading or deceptive conduct (for example, over-promising a result, timeline, or product feature)
false discounting or unclear price representations
warranties and guarantees that can’t be excluded

That’s why it’s important your commission agreement includes guardrails around what a commissioned seller can say, offer, or promise, especially about pricing and deliverables.

Practically, it also helps if your customer-facing contracts are clear on quality expectations and remedies. Many businesses run into issues when there’s a mismatch between what was sold and what the contract actually provides. Getting your terms aligned with your obligations under Australian Consumer Law guarantees can reduce disputes and protect your reputation.

How To Tailor A Commission Agreement Template To Your Sales Process

A solid commission agreement template should be customised to match how your business actually makes money. When you tailor it, you’ll usually want to work through the following questions.

Are You Selling Products, Services, Or Subscriptions?

Products: returns, chargebacks, shipping, and discounts tend to matter more.
Services: scope changes, staged milestones, and non-payment risk are common.
Subscriptions: churn and retention become central (for example, paying commission monthly vs upfront).

Is Your Sales Cycle Short Or Long?

If you have a long sales cycle (like B2B services or high-value projects), you may need to define what happens when:

someone introduces a lead but another person closes it later
the deal closes months after the introduction
pricing changes between quote and signing

Do You Use Deposits Or Progress Payments?

If customers pay in instalments, you’ll need a clear approach to commission, such as:

commission paid only as instalments are received
commission paid on deposit and reconciled later
commission paid when the project reaches defined milestones

Will The Commissioned Person Be Client-Facing Under Your Brand?

If they represent your business to customers, you’ll likely want stronger clauses around:

brand and messaging
confidentiality
authority to negotiate
use of templates and approved documents

In many cases, it also helps to have a separate “process document” (not necessarily part of the contract) that sets out how leads are recorded, how quotes are approved, and who can offer discounts.

What Other Legal Documents Should You Consider Alongside A Commission Agreement?

A commission agreement is often only one piece of your sales and legal setup. Depending on how your business operates, you may also want to consider:

Customer contract or terms: so your obligations, scope, payment terms, and cancellation rules are clear in writing.
Terms of trade: especially if you sell products or supply goods on account, your Terms of Trade can help manage payment risk and expectations.
Privacy compliance: if the salesperson collects leads (names, emails, phone numbers), your business should consider whether it needs a Privacy Policy and appropriate collection notices.
Employment documentation: if you engage commission-based employees, proper employment terms and workplace settings matter, including Award compliance where relevant, and what happens at exit and final pay (for example, where payment in lieu of notice might be relevant depending on the circumstances).
Shareholder arrangements (if relevant): if your “sales partner” is also a co-founder or receives equity, you may need a Shareholders Agreement rather than (or in addition to) a commission agreement.

The right mix depends on whether you’re selling online, selling high-value services, hiring staff, and how you manage customer payment risk.

Key Takeaways

A commission agreement helps you avoid disputes by clearly setting out what triggers commission, how it’s calculated, and when it’s paid.
A good commission agreement template should define the relationship (employee, contractor, agent), commissionable activity, commission structure, deductions, payment timing, and what happens on termination.
Most commission disputes come from vague wording, especially around “sales”, refunds, instalments, and deal ownership.
Your commission terms should align with your customer terms, especially where cancellations, refunds, or scope changes are common.
Be careful not to misclassify workers; calling someone a contractor doesn’t remove employment law risk if the working relationship looks like employment in practice - and employee commission arrangements may also need to comply with Modern Awards and minimum entitlements.
Templates are a helpful starting point, but tailoring your agreement to your sales process (and your real edge cases) is what makes it effective. It’s also worth checking the tax and payroll handling (for example, GST for contractors, PAYG withholding, and superannuation) so the commercial deal works in practice.

If you’d like help putting together a commission agreement that fits how your business actually sells (and protects you if things change), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Official Sources to Check

Rules and regulator guidance can change. Check the current official material most relevant to this issue before relying on the article:

ACCC: Contracts and unfair contract terms

Commission Agreement Template: Key Clauses And Common Pitfalls In Australia