Accounting for Professional Services Firm
Bill the work, win the clients, grow the practice, and leave the numbers to us. From billable-hour reporting and work-in-progress accounting to personal services income, profit allocation and contractor payroll tax, Number Visions is the specialist accounting partner for Melbourne professional services firms.
Specialist Accountants for Melbourne Professional Services Firms
Professional services firms sell time, judgement and expertise rather than stock. That single difference changes how revenue is earned, when income is derived, how staff and contractors are engaged, and how profits can be distributed. A general accountant will keep your books. A specialist will tell you whether your profit allocation sits in the ATO’s green zone before the ATO does.
We work with practice owners and principals across Melbourne, including:
- Law Firms, Barristers and Legal practices — trust account obligations, partner profit allocation, Everett assignments
- Management, Strategy and IT consultancies — personal services income, contractor engagement, project profitability
- Architects, Engineers and Surveyors — long project cycles, work in progress, professional indemnity, R&D
- Marketing, Creative and Digital Agencies — retainer revenue recognition, subcontractor costs, pass-through expenses
- Recruitment, Labour Hire and HR consultancies — payroll tax and employment agency provisions, contractor classification
- Financial planners, Mortgage Brokers and Insurance Brokers — commission and trail income, licensee arrangements
Accounting Challenges Professional Services Firms Face
Income arrives when clients pay, not when the work is done. Without accurate WIP and debtor reporting, a firm can be highly profitable on paper and still unable to meet payroll, superannuation and BAS in the same month.
Revenue recorded against a matter or job without the labour, contractor and overhead cost that produced it tells you nothing useful. Firms that cannot see profitability by client, by service line and by fee earner end up cross-subsidising their worst clients with their best ones.
Unrecorded time, unbilled work and quiet write-offs are the three largest sources of revenue leakage in a professional practice. Most firms discover them at year end, when it is too late to bill.
Engaging a contractor does not end your obligations. The same arrangement can be genuine contracting for one purpose and deemed employment for another, with superannuation guarantee, PAYG withholding and Victorian payroll tax each applying their own test. Misclassification is assessed retrospectively, with interest and penalties.
Discretionary trusts, corporate beneficiaries and service entities are ordinary structures in professional practices. They are also the structures the ATO examines most closely, through the professional firm profit allocation guideline, section 100A and Division 7A. The structure is not the problem; an undocumented structure is.
BAS, IAS, PAYG instalments, superannuation guarantee, FBT, payroll tax, workers compensation and annual returns all run on different cycles. Missing one is a penalty. Missing the planning window before 30 June is more expensive than any of them.
Looking to simplify your professional services accounting processes?
Stay on top of inventory, payroll, tax compliance, and business performance with reliable financial support.
Our Accounting Services for Professional Services Firm in Melbourne
Our specialised accounting services in Melbourne assist your firm’s finances through bookkeeping, tax, payroll, financial analysis and project accounting solutions with accuracy, reporting and expert advice.
Bookkeeping & Financial Record Keeping
Our team is ready to help you with transaction processing, bank and credit card reconciliation, accounts payable and receivable, and expense capture — kept current, so the reports you make decisions from are current too. Our bookkeeping and management accounting service is built to hand straight into your practice management system.
Payroll, Superannuation And Contractor Accounting
We keep track of employee and contractor costs by maintaining payroll records, timely lodgements of single touch payroll and pay day supers, noting expenses and recording labour costs to provide you with the information needed to budget, report and make cost-effective decisions.
Work-in-Progress and Billable Hour Reporting
We build WIP reporting that ties recorded time to unbilled revenue, so you can see which matters are ready to invoice, which are ageing, and where recovery rates are slipping. For most firms this is the single report that changes behaviour.
Client & Project Profitability Tracking
We track revenue from clients and projects, including costs in terms of labour, contractors and other expenses to give you an insight into the profitability of projects, clients and services to help you make right decisions.
Business Structure & Entity Advice
We review your business structure and explain the related accounting, tax and compliance implications helping you understand the options available, and whether your entity structure will be suitable as your firm evolves. We model the tax, asset protection and succession consequences of each, and document the commercial rationale that the ATO will ask for later
Strategic Tax Planning
Pre-30 June planning that deals with profit allocation, distribution resolutions, Division 7A loan obligations, superannuation contributions and instalment variations while there is still time to act on them. See our strategic tax planning service.
Take Control of Your Finances Today
Stop guessing your numbers. Get clear insights into your cash flow, job profitability, and tax obligations with bookkeeping built for tradies. Keep your finances organised and your business on track with us today.
The Tax Rules That Apply to Professional Services Firms
This is the part a general accountant will not raise with you until it becomes a problem. Below are the rulings and guidelines that govern how a professional practice earns, allocates and distributes its profits in Australia, and what each one means in practice.
Personal Services Income and the Personal Services Business Tests
If more than half the income from an engagement is a reward for your personal effort or skill, it is personal services income. The PSI rules in Divisions 84 to 87 of the Income Tax Assessment Act 1997 then limit the deductions available and, unless you are a personal services business, attribute the income back to the individual who earned it regardless of which entity received it. You are a personal services business if you satisfy the results test, or if no one client provides 80 per cent or more of your PSI and you meet one of the unrelated clients, employment or business premises tests. Where the 80 per cent threshold is exceeded, a personal services business determination from the Commissioner is required. The Commissioner’s current view is set out in Taxation Ruling TR 2022/3. This is the first question we answer for any independent consultant, contractor or single-principal practice, because it determines whether a company or trust structure achieves anything at all.
Professional Firm Profit Allocation — PCG 2021/4
Practical Compliance Guideline PCG 2021/4, Allocation of professional firm profits — ATO compliance approach, applies from 1 July 2022 and is the framework the ATO uses to decide whether to review how an individual professional practitioner’s share of firm profit is allocated across their associated entities. Two gateways must be passed before the risk assessment is available. The first requires genuine commercial rationale for the arrangement. The second requires the absence of high-risk features such as non-arm’s-length financing, exploitation of differences between accounting and tax treatment, or arrangements that have no purpose beyond the tax outcome. An arrangement that passes both gateways is then scored against three risk factors: the proportion of profit entitlement the practitioner receives personally, the total effective tax rate across the practitioner and their associated entities, and the practitioner’s remuneration measured against a commercial benchmark for the services provided. The aggregate score places the arrangement in a green, amber or red zone, and the zone determines the level of ATO attention it attracts. We score your arrangement against the guideline, document the gateways, and tell you plainly where you sit — before the return is lodged, not after a review letter arrives.
Trust Distributions and Section 100A
Where a trust distribution is made to a beneficiary but the economic benefit is enjoyed by somebody else, section 100A of the Income Tax Assessment Act 1936 can treat the distribution as a reimbursement agreement and tax the trustee at the top marginal rate. There is no time limit on the Commissioner’s ability to raise an assessment under it. The Commissioner’s view is in Taxation Ruling TR 2022/4, and the compliance approach — including the white, green and red zones — is in Practical Compliance Guideline PCG 2022/2. Distributions to adult children, to loss entities and to corporate beneficiaries within professional family groups are the arrangements most often examined. Documentation and actual payment are what separate an ordinary family distribution from a reimbursement agreement.
Division 7A and Unpaid Present Entitlements
If your practice operates through a private company, money that leaves it for the benefit of a shareholder or their associate is not simply yours to spend. Division 7A treats loans, payments and forgiven debts as unfranked deemed dividends, taxable in the recipient's hands, unless the arrangement is put on a complying footing — generally a written loan agreement within the maximum permitted term, interest at the ATO's benchmark rate, and a minimum repayment made every year. The same question arises where a trust in your group distributes profit to a company and that entitlement is left unpaid on the balance sheet. How unpaid entitlements interact with Division 7A has been contested between taxpayers and the Commissioner for many years, and both the rules and the ATO's guidance have shifted more than once. Whichever way the position sits when you read this, the practical exposure does not change: amounts recorded years ago can be examined long afterwards, and the tax falls due well after the money has been spent. We review your group's loan accounts, distributions and unpaid entitlements, put complying agreements in place where they are needed, and schedule the repayments as a diary item rather than a June scramble. If you cannot say off the top of your head what your company is owed by its shareholders or by the trust, that is the review worth doing first.
Contractor Payroll Tax in Victoria
Victorian payroll tax is not limited to employees. Under the relevant contract provisions of the Payroll Tax Act 2007 (Vic), payments to contractors are deemed to be wages unless an exemption applies. The exemptions most relevant to professional practices include contractors who ordinarily perform services of that kind to the public, engagements of 90 days or fewer in a financial year, and services not ordinarily required by the business and required for fewer than 180 days in a financial year. Separate employment agency provisions apply where your firm procures the services of a worker for a client — a common structure in recruitment, labour hire and IT consulting. Medical, dental and allied health practices face particular scrutiny of practitioner service agreements following the line of cases on practice payment flows. Grouping rules can also aggregate related entities, so a practice, its service entity and a related company may share a single threshold. We review contractor arrangements against each exemption, document the basis for the position taken, and register your firm before a voluntary disclosure becomes the only option.
Service Entity Arrangements
Service trusts and service companies remain legitimate structures for professional practices, and they remain an ATO focus. The service fees charged must be commercially realistic for the services actually provided, and the arrangement must be documented and operated as documented. We review existing service entity arrangements against the Commissioner’s benchmarks and rebuild the documentation where it has drifted from practice.
Work in Progress and When Income Is Derived
For most professional practices, income is derived when a recoverable debt arises — generally on invoice — rather than when the work is performed. The distinction matters at 30 June, where the value of unbilled work in progress sits outside assessable income while the salaries that produced it have already been deducted. Getting the timing and the disclosure right is a routine matter handled correctly and an amended assessment handled poorly.
The Advantage of Smarter Professional Services Accounting
Clearer Profitability Insights
Detailed financial records ties revenue to labour & operating expenses clearly, and allows you to identify project's profitability, and places of adjustments to enhance profits.
Smarter Pricing Decisions
Efficient accounting helps you gain visibility into labour, overheads and project costs, and properly price your work, avoid undercharging and have more healthy profit margins.
Reduced Revenue Leakage
With track of billable hours, expenses, WIP and invoices, you can determine missed charges, unbilled work and outstanding invoices, and help your firm get the revenue it deserves.
Strategic Financial Decisions
Tracking cash flow, costs, margins and performance with timely financial reports, you can make informed decisions about hiring, investment, pricing and strategic business growth.
Greater Tax Efficiency
Organised accounting records can help the firm to better identify deductible expenses, compile accurate tax information and plan for tax liabilities while reducing compliance risks.
Scalable Financial Processes
Having well-designed accounting processes means having a solid framework for growth that keeps records, reports, and invoices all organised as your team, clients and revenue grows.
Industries We Support
A Streamlined Accounting Process Built for Professional Service Businesses
Our process of accounting is systematic and planned from identifying your needs to planning your growth strategy with the help of financial management.
Review and Diagnose
We examine your current structure, ledger, practice management system and last two years of returns, and identify the compliance exposures and the reporting gaps
Structure and Document
We confirm the right entity structure, test it against the PSI rules and PCG 2021/4, and put the documentation in place — distribution resolutions, service agreements, loan agreements, contractor records.
Run and Report
We take over bookkeeping, payroll and lodgements, and deliver monthly reporting on cash, WIP, recovery rates and profitability by client and fee earner.
Plan and Grow
We perform quarterly reviews and pre-30 June Planning covering profit allocation, distributions, superannuation, pricing and the next hire.
Why Melbourne Growing Professional Services Firm Trust Our Expertise
Genuine Sector Specialisation: We work with practices that bill for time and expertise every day. The rules on this page are not ones we look up when you ask — they are the framework we structure your practice within from the first meeting.
Proactive Financial Management:
We raise profit allocation, contractor classification and Division 7A before 30 June, when they can still be fixed, rather than reporting them in a return lodged ten months later
Registered, Certified and Accountable: Number Visions is a registered tax agent practice and certified across Xero, QuickBooks and MYOB. We hold a 4.9 star rating from google and are trusted by over 300 Plus Melbourne businesses.
Plain Answers to Technical Questions: You should be able to explain your own structure to your partner, your bank and your spouse. We make sure you can.
A Partner Who Knows the Practice: You deal with the same accountant each year, who knows why your structure was built the way it was and what changed last time.
Local to Melbourne: Our office is in Yarraville, and we work with practices across Melbourne including Footscray, Carlton, Richmond, St Kilda, Fitzroy, Docklands and Box Hill, Dandenong, Cranbourne in person or online.
Your Go-To Accounting Support for Melbourne Ecommerce
Manage your ecommerce business finances with greater clarity and confidence through tailored accounting support built around your operational needs.
FAQ
Frequently Ask Questions.
Ecommerce accounting is a specialised form of accounting designed for businesses that sell products through online stores, marketplaces and digital payment platforms.
Unlike regular accounting, ecommerce accounting must bring together information from multiple systems, including Shopify, Amazon, eBay, Stripe, PayPal, inventory applications and bank accounts. It must also account for platform fees, merchant charges, refunds, chargebacks, discounts, shipping income, foreign-currency transactions and inventory movements.
A properly structured ecommerce accounting system helps ensure that gross sales, expenses, GST, inventory and profitability are recorded accurately across each sales platform.
The amount deposited into your bank account by Shopify, Amazon, Stripe, PayPal or another platform is often not your total sales revenue.
Platforms may deduct merchant fees, marketplace charges, refunds, chargebacks and other adjustments before transferring the remaining amount to your bank account. Recording only the net deposit may understate both your sales revenue and business expenses. It may also result in incorrect GST reporting.
A proper payout reconciliation separates:
Gross sales
GST collected
Refunds and returns
Discounts
Shipping income
Platform and marketplace fees
Merchant processing charges
Chargebacks and other adjustments
The net amount deposited into the bank account
This provides a more accurate understanding of revenue, expenses and profitability.
An Australian ecommerce business will generally need to register for GST when its current or projected GST turnover reaches $75,000.
GST turnover is based on relevant business sales rather than business profit or the net amounts deposited into your bank account. This means platform fees, refunds and payment gateway deductions should be accounted for correctly when reviewing whether the registration threshold has been reached.
Once registered, the business will generally need to include GST in taxable Australian sales, claim eligible GST credits and report its GST position through Business Activity Statements.
Businesses approaching the registration threshold should monitor their sales regularly rather than waiting until the end of the financial year.
Goods sold to overseas customers may be GST-free when the relevant export requirements are satisfied. This generally requires the goods to be physically exported from Australia within the required timeframe and appropriate export records to be retained.
However, an overseas customer address does not automatically make every sale GST-free. The GST treatment can depend on where the goods are located, how they are delivered, who exports them and whether the required conditions are met.
Businesses selling digital products, services or goods stored in overseas warehouses may face different GST, VAT or foreign sales-tax obligations. Specialist advice may be required where products are stored or supplied outside Australia.
Each platform payout should be reconciled against the detailed settlement or transaction report provided by the relevant platform.
The reconciliation should identify the gross sales included in the payout, together with refunds, discounts, merchant fees, marketplace charges, chargebacks, GST and other adjustments. The final reconciled amount should agree with the net deposit received into the business bank account.
Depending on the number of transactions and platforms, separate clearing accounts may be established within the accounting software. These accounts help track amounts processed by each platform before they are transferred to the bank account.
Regular reconciliation helps identify missing deposits, duplicated transactions, unreconciled fees and GST reporting errors.
Yes. We can help establish processes for recording and reconciling refunds, customer returns, chargebacks, gift cards and store credits.
Refunds and chargebacks should be matched against the original sales and the related platform settlements. Where products are returned, the accounting records may also need to reflect the return of saleable stock or the write-off of damaged stock.
Gift cards and store credits require separate tracking because the business may still have an obligation to provide products to the customer in the future. Their accounting and GST treatment can depend on the terms of the arrangement and when the gift card or credit is redeemed.
Proper tracking helps ensure that sales, customer liabilities, GST and inventory records remain accurate.
The landed cost of inventory is the total cost incurred to purchase the products and bring them to their current location and condition.
Depending on the circumstances, landed costs may include:
- Supplier purchase price
- International and domestic freight
- Customs duty
- Freight insurance
- Customs clearance and brokerage charges
- Port and handling fees
- Packaging or preparation costs
- Other directly attributable costs
Accurate landed-cost accounting provides a more realistic cost of goods sold and gross profit margin. If only the supplier invoice is included, the reported product margin may appear higher than the actual margin.
Import GST should generally be reviewed separately because a GST-registered business may be entitled to claim an input tax credit where the relevant requirements are satisfied. The correct treatment will depend on the import arrangement and supporting documentation.
Inventory stored with a third-party logistics provider, fulfilment centre or external warehouse will generally remain part of the ecommerce business’s inventory where the business continues to own the products.
The accounting and inventory systems should track:
The quantity and value of stock at each location
Stock transferred between warehouses
Goods in transit
Products dispatched to customers
Customer returns
Damaged or missing stock
Samples and promotional products
Slow-moving or obsolete inventory
Adjustments identified during stock counts
The inventory records held by the business should be regularly reconciled against reports from the logistics provider. Ecommerce businesses are also generally required to account for the value of trading stock held at the end of the income year.
Yes. We can help record and reconcile foreign-currency sales, overseas supplier invoices, payment gateway settlements and foreign-currency bank accounts.
Foreign-currency transactions may include:
Sales received in currencies such as US dollars or euros
Supplier purchases from overseas
Foreign marketplace settlements
Currency conversion fees
Foreign payment gateway balances
International freight and customs costs
Exchange gains and losses
Australian tax-relevant amounts generally need to be translated into Australian dollars. The exchange rate and translation method used will depend on the transaction and applicable tax rules.
Maintaining separate records for foreign-currency transactions helps ensure that supplier costs, sales revenue, account balances and foreign exchange movements are reported correctly.
The reports required will depend on the size, sales channels and complexity of the ecommerce business. However, most growing online businesses should regularly review:
- Profit and loss statement
- Balance sheet
- Cash flow forecast
- Gross sales by platform
- Net sales after refunds and discounts
- Gross profit by product or product category
- Cost of goods sold
- Platform and merchant fees
- Shipping and fulfilment costs
- Advertising and marketing expenses
- Inventory value and turnover
- Slow-moving and ageing inventory
- Refund and chargeback analysis
- Accounts payable
- GST and income-tax provisions
- Budget versus actual performance
These reports can help business owners understand which products and sales channels are generating strong margins, where costs are increasing and how much cash may be required for inventory, tax and future growth.