Tax for Agencies, Consultancies and Professional Firms

The three issues that define services firm tax

1. PSI is the perimeter. A solo consultant billing through a company lives or dies on the PSI tests: hourly work inside one client's team fails the results test and the 80/20 gate, attributing the income personally and unwinding the structure's entire point. Agencies escape as they genuinely scale, with employees doing at least 20% of the principal work the cleanest pass, but "agency" branding over one billable human is still PSI. The profession-level overlay is sharper again: the ATO's profit allocation guidance for professional firms risk-scores how much of the firm's profit reaches the practitioners personally, and service trust splitting that leaves principals on token incomes sits in the high-risk zone by design.

2. WIP, retainers and the timing fights. On accruals the questions never stop: unbilled work in progress, generally not income until billed though the boundary is fact-dependent; retainers received in advance, assessable when derived and often on receipt for services businesses; reimbursable client costs, in and out or margin; and bad debt write-offs on the client who ghosted. A services reconstruction is mostly timing work, and getting it right period by period routinely beats the ATO's flat estimates built from gross receipts.

3. The contractor bench. The freelance designer, developer or paralegal bench is the sector's classification exposure: regular, labour-only, integrated contractors are inside the super net whatever the agreements say, and payroll tax's relevant-contract rules draw a similar line. Agency margins are rarely priced for either. The bench audit is standard scope in any firm engagement.

Catch-ups for firms - yes, it happens to you too

Accountants and lawyers behind on their own lodgments is a genre, not an exception - the cobbler's children, plus shame with credentials attached. The sequence is unchanged: BAS and super first, returns behind, with the Division 7A loan accounts and trust resolutions that firm structures accumulate reconstructed en route, remission on voluntary disclosure, and the structure and profit allocation position reviewed while the books are open anyway. Discretion is assumed, nothing about a tax catch-up is reportable to a professional body, and registered practitioners behind on personal obligations have a specific, time-sensitive reason to fix it.

General information only - not personal tax, financial or legal advice. Consider your own circumstances or speak to a registered tax agent. Remission of penalties or interest and payment plans are decisions of the ATO and outcomes can't be guaranteed.