Professional Services Firms

The traditional hourly billing model, long favoured by professional services firms, is facing scrutiny and disruption in the face of technological advancements and evolving client expectations. As technology enables greater efficiency and transparency, it is often wondered if the billable hour is necessarily a true measure of value. Many firms are re-evaluating their approach to pricing, turning towards value-based models that prioritise outcomes over billable hours.

The ATO has been concerned about arrangements involving individual professional practitioners who redirect their income from an activity or business that includes their professional services to an associated entity where it has the effect of significantly reducing your tax liability.

The timing for owning and operating a Professional Services firm is now - it always is. A 2017 Australian Financial Review article reasoned that Australia was fast-becoming a Professional Services nation - with the sector reflecting the greater business sentiment found across a broad range of industries.

In the latest episode of the Building Your Business podcast, Chris Lewis hosts Ian Bloemendal - Partner at Clayton Utz, alongside Ian Walker (AGR Executive Chairman) as they discuss Ian's journey to partnership, a career within one of Australia's leading law firms and his practice responsibilities with Clayton Utz - a "Big Six" firm in Australia.

Personal Services Income, or PSI, is the income derived by an individual mainly as a result of their personal work or exertion, rather than the sale of goods or use of assets. The individual may operate as a sole trader, or through a trust, partnership, or company structure. You can receive PSI in almost any industry or profession, but it is commonly seen within the Professional Services sector (namely among accountants, lawyers, consultants and engineers, etc) and medical practitioners.

As of 1 July 2022, new legislation has now taken effect which details the Australian Tax Office’s compliance approach to the allocation of profits or income from Professional Firms as assessable income to the ‘Individual Professional Practitioner’ (IPP).

The Archer Gowland Family Office is your single, trusted point of contact for your business advisory, taxation, insurances and wealth management.

Last week the Dow fell more than 1,000 points. Today we have seen the Australian share market experience the same volatility as in the 2012 global financial crisis with a four per cent slump equating to almost $60 billion being wiped from the value of Australian companies.

This blog article has been written for high net worth professionals, business owners, and partners and directors of professional services firms, including law firms.

"Am I Paying Too Much Tax?" is a common and valid question in the market. Partners and directors of professional services firms (including law firms, financial services, IT, HR and management consultancies) need to regularly assess their taxable situation and generate tax efficiencies wherever possible.