How to Start a Consulting Business in Australia

You can be trading as a consultant within a week: register an ABN, take out professional indemnity insurance, put a services agreement in front of your first client and send an invoice. What catches people out comes later — the personal services income (PSI) rules that quietly switch off deductions, a day rate set by dividing an old salary by 260, and clients who pay on 60-day terms. Here's the whole setup, with the traps, as at September 2026.

Sole trader or company?

Start as a sole trader unless you have a reason not to: the ABN is free, and the business goes on your personal tax return. A company adds a director ID, a separate tax return and accounting fees (figures as at September 2026).

	Sole trader	Company
Setup	$0 — the ABN is free	$636 ASIC registration
Ongoing	Nothing compulsory	$342 annual review, separate tax return
Tax	Your marginal rate: nil to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, then 45%, plus Medicare levy	Flat 25% for a base rate entity, then tax again on what you take out
Liability	Personal — your house is exposed	Limited, but directors still sign guarantees

The real reason consultants incorporate isn't tax — it's that large clients' procurement systems often won't onboard a sole trader. Ask two or three target clients before you spend the $636. Our guide to business structures covers trusts and partnerships too.

The part people get wrong: a company will not automatically cut your tax bill as a consultant. That is exactly what the PSI rules exist to prevent.

The PSI rules — read this before you incorporate

Personal services income is income produced mainly by your own skills, effort or expertise rather than by selling goods, using assets or running a structure with staff. For a solo consultant billing for their own brainpower, that's essentially all of it. When the PSI rules apply, income earned through a company, trust or partnership is attributed back to you personally and taxed at your marginal rate — so the 25% company rate buys you nothing — and some deductions switch off.

Are you a personal services business?

You're outside the rules if you qualify as a personal services business (PSB). Four tests:

Test	What it takes
Results test	For at least 75% of your PSI: you're paid to produce a specific result, you supply the tools needed, and you fix defects at your own cost. Pass this and you're a PSB whatever your client mix.
Unrelated clients test	PSI from two or more unrelated clients, won as a direct result of publicly offering your services — advertising, a website, tendering. Word of mouth alone doesn't count.
Employment test	You employ or subcontract others to do at least 20% of the principal work by market value. Admin and bookkeeping aren't principal work.
Business premises test	Premises used mainly for the work, exclusively by you, physically separate from your home and your clients', at all times in the year.

Then the gate that catches almost everyone: unless you pass the results test, you can only self-assess as a PSB if less than 80% of your PSI comes from one client and their associates. Fail that and you need a PSB determination from the ATO. Resign and let your ex-employer become your one big client, and you're caught in year one.

When the rules apply you can't claim rent, mortgage interest, rates or land tax on your home even though you work from it, payments to a spouse for non-principal work such as invoicing or admin, or super for an associate doing that work. You keep what an employee would get — PI insurance, laptop, subscriptions, travel between client sites, your own super. A company or trust must also withhold PAYG on attributed income. Talk to an accountant before you incorporate on tax grounds.

Price it by working backwards, not from your old salary

The classic mistake: take a $150,000 salary, divide by 260 working days, get $577, charge $600 a day and feel competitive. You'll go backwards, because you will never bill 260 days.

Work it out from the other end:

Available days. 52 weeks less 4 weeks leave and about 2 weeks of public holidays and sick days = 46 weeks, or 230 days.
Utilisation. A solo consultant who also does the selling, proposals, admin and invoicing bills 50–60% of those. At 55%: 230 × 0.55 = about 126 billable days.
Revenue needed. Target income of $150,000 plus overheads — insurance, software, accounting, phone, website — of roughly $20,000 = $170,000.
Day rate. $170,000 ÷ 126 = $1,349. Call it $1,350 a day, or $180 an hour over 7.5 hours.

Compare the $600 rate: 126 days × $600 = $75,600, less $20,000 of overheads, leaves $55,600 before tax — under half the salary you walked away from. Then stress-test a bad year at 40% utilisation: 92 days × $1,350 = $124,200, less $20,000 = $104,200.

How you package the rate matters as much as the number:

Day rate — easy for clients to approve, but caps you at hours worked and invites scope creep.
Retainer — a fixed monthly fee for defined deliverables. Worth chasing hardest: predictable cash flow, and it smooths the utilisation problem. Define it as a set number of days a month so it stays bounded.
Fixed project fee — priced on the outcome rather than your time. Better margin when you're efficient, but you carry the overrun risk, so it needs tight scope and a written change process.

Watch the $75,000 GST turnover threshold: at $1,350 a day you cross it after about 56 billable days, roughly 11 weeks of full-time work. Register as soon as you expect to pass it — business clients claim the GST back, so it costs them nothing.

Professional indemnity insurance

PI insurance covers claims that your advice caused a client financial loss. It's the policy a consultant can't skip, and corporate and government contracts routinely demand $5 million or $10 million of cover before they'll sign. Budget roughly $700–$3,000 a year for $1 million of cover as a solo consultant with no claims (as at September 2026).

One detail catches people out: PI is claims-made, so the policy must be live when the claim is made, not when the work was done — which is why you buy run-off cover when you stop consulting. Add public liability if you'll be on client sites. Our business insurance guide sets out the rest.

The contract: never work on a purchase order alone

A one-page services agreement, or a signed proposal with terms attached, is enough to start. Cover:

Scope and deliverables, with a written variation process. Scope creep is the biggest source of consulting disputes.
Fees, expenses and payment terms, including interest on late payment and the right to suspend work.
Intellectual property. Client templates usually assign everything you create to the client. Carve out your pre-existing methods, frameworks and tools and licence those instead — otherwise you sign away the asset your practice runs on.
Confidentiality both ways, a liability cap tied to fees paid, and termination terms covering notice and payment for work already done.

Australian Consumer Law guarantees still apply to services supplied for under $100,000, so no disclaimer shifts your obligation to work with due care and skill. Our types of business contracts guide covers the other agreements you'll sign.

Finding your first clients

Your first work comes from people who already know what you can do. In order of what converts:

Your existing network. Not a broadcast post — a list of 30 to 50 named people and an individual message to each saying what you now do and who you help. Do this in week one.
Your ex-employer. Often the fastest first contract, and the riskiest for both PSI and your employment contract.
LinkedIn, narrowly. Rewrite your headline as the problem you solve rather than your old job title, and post about that problem weekly. Buyers check you out before they call.
Subcontracting to bigger consultancies. Lower rate, no sales effort, useful while you build a pipeline.

Niche down while you're at it: "operations consultant" wins nothing, "warehouse layout for food wholesalers" gets referred. How to get your first 10 customers has the outreach detail.

Read your employment contract before you call anyone

Check for restraint of trade, non-solicitation and confidentiality clauses. A restraint is enforceable only so far as it's reasonably necessary to protect a legitimate business interest, and courts often read them down — but "probably unenforceable" is expensive to prove, and the lawyer's letter arrives long before the judgment. The government announced in March 2025 a ban on non-compete clauses for workers earning under the Fair Work high income threshold ($190,100 for 2026–27), intended to start in 2027; as at September 2026 the legislation hasn't passed, so assume your clause still bites.

Getting paid on 30–60 day terms

Consulting cash flow is punishing because the money lands long after the work. Start on 1 March, invoice on 31 March with 30-day terms, and a client who pays a fortnight late settles around mid-May — about 75 days after you began, with two months of your own costs already gone. What helps:

Bank a three-month buffer of personal and business costs before you resign. That's the real startup cost of consulting.
Invoice fortnightly or on milestones, never only at project end. It halves your exposure.
Ask for a deposit. 30–50% upfront on fixed-fee work is normal and screens out clients who were never going to pay.
Put terms in writing and invoice the day the work is done. Fourteen days is a reasonable ask; large clients insist on 30 or more, so price that in — and quarantine the GST as it arrives, because it isn't yours.

Our guide to chasing unpaid invoices covers the escalation path.

Key takeaways

Start as a sole trader unless a client's procurement rules force a company — incorporating purely for tax rarely works, because the PSI rules attribute the income straight back to you.
If one client supplies 80% or more of your income, you can only be a personal services business by passing the results test or getting an ATO determination.
Set your day rate from the income you need divided by realistic billable days — about 126 a year at 55% utilisation — not an old salary divided by 260.
PI insurance is claims-made: it must be live when the claim is made, not when the work was done.
Keep your pre-existing frameworks, templates and methods out of any IP assignment; licence them instead.
Register for GST once you expect to pass $75,000, and hold a three-month cash buffer against 30–60 day terms.

Where to get help

ATO (ato.gov.au) — personal services income, the four PSB tests, business determinations, GST registration and PAYG instalments.
business.gov.au — free ABN registration, business names ($47 a year through ASIC), licence checks, and the Payment Times Reporting register showing how quickly large businesses pay.
ASIC (asic.gov.au) — company registration ($636), annual review fee ($342) and director ID.
Your accountant — before you register anything: whether the PSI rules will apply, whether a company is worth the compliance cost, and what to set aside for PAYG instalments.
A commercial lawyer — an hour on your employment contract's restraint clause, and a services agreement template with the IP and liability terms you want.
ACCC (accc.gov.au) and your state small business commissioner — unfair contract terms and dispute resolution.