Congratulations on passing the bar exam! This is a huge milestone marking the beginning of what we hope will be an illustrious and fulfilling career at the bar. Before starting the Bar Practice Course, there are a number of things you need to do, including applying for an ABN, applying for professional indemnity insurance and applying for your barristers practising certificate.

Self employed practitioner

Barristers are self-employed practitioners, but for tax and commercial purposes you’re conducting a business enterprise via the sole trader business structure. As a sole trader, you have certain obligations to the Australian Taxation Office (ATO) for instance, in operating your business using the sole trader structure, you're personally liable for financial or tax debts. This means that assets in your name can be used to pay business debts, and as a result operating as a sole trader makes you more personally liable than operating your business using other business structures, such as a company structure, which has limited liability and operates as a separate legal entity, run by directors and owned by shareholders.

Apply for an ABN

Sole Traders are required to register for an Australian Business Number (ABN). The Australian Business Number (ABN) is a unique 11-digit identifier issued by the Australian Tax Office (ATO) to businesses operating in Australia. It's used for tax and business purposes, allowing the ATO to track business income, withhold tax, and ensure compliance with taxation regulations. This number is also linked to the Australian Business Register (ABR), which maintains essential business information, including business names and details of business owners.

It's important for businesses to have an ABN to legally operate, issue tax invoices, claim fuel tax credits, and access various benefits like business insurance.

A practical tip for applying for an ABN:

When applying for your ABN, it's important that you state that you are taking steps towards starting your business, otherwise ASIC may decline your ABN application. If you haven’t registered for an ABN yet and need help registering, contact us today.

Register for GST

If you think your income will exceed $75,000 in your first year, it's a good idea to register for GST. Once you're registered for GST, you will have to start completing quaterly Business Activity Statements (BAS) which report on the GST you have collected on the government's behalf. We can help you with the preparation and lodgement of your Business Activity Statements.

A practical tip when registering for GST:

Even if you think it's likely your income won't exceed $75,000 in your first year, it's still usually a good idea to register for GST. In the event that your income is below $75,000, we can lodge a BAS declaring that you are under the $75,000 threshold.

Tax deductions for junior barristers

Setting up as a barrister can be an expensive process. There's subscription to the Bar Association and Law Society, PI insurance, floor fees, robing and court attire costs, not to mention the accounting and taxation costs incurred in setting up your sole trader structure.

Did you know that many of the costs incurred can be offset against your income in the form of tax deductions? Understanding what is and isn't tax deductible is crucial for junior barristers looking to optimise their finances.

Deductions are a way you can legally lower your taxable income. By making the most of the tax deductions available to you, you can minimise your tax liabilities while staying compliant with the law. For a comprehensive list of deductions, read our article tax deductions for junior barristers.

Paying tax as a new barrister

When you were working as a solicitor, your employer set your tax aside on your behalf, however, now that you're practising as a barrister via the sole trader business structure, you'll be responsible for ensuring you set aside enough to cover your tax liabilites. The way the Australian Taxation Office (ATO) helps you do this is by entering you into the Pay As You Go Instalments tax system. It’s the ATO's goal for you to pay your income tax in advance based on your prior year income levels. To learn more, read our article paying tax as a new barrister.

Lodging your annual tax return

If you aren’t registered with a tax agent, you’re required to prepare and lodge your annual income tax return by the 31st of October each year for the prior financial year, which ends on 30 June. If you’re with a registered tax agent you can defer lodgement (and payment of tax if there’s tax payable) to the 15th of May the following calendar year.

It’s essential to have experienced tax accountants on hand to help you navigate your tax obligations to the ATO. Our firm has over twenty years of experience helping barristers with their tax compliance.

Apply for Professional Indemnity insurance

Professional Indemnity insurance protects you against claims of negligence or breach of duty made by a client arising from the services or advice you provided to them. You won't be able to receive your practising certificate without including evidence you have applied for and received confirmation of your Professional Indemnity insurance.

Steps to take before obtaining your barrister's practising certificate

Apply for a certificate of fitness and good standing from the Law Society

In order to apply for your barristers practising certificate, you will need to obtain a certificate of fitness and good standing from the NSW Law Society. Note, the certificate cannot be more than two months old when you apply for your barristers practising certificate.

Surrender your solicitors practising certificate

You will not be able to receive your barristers practising certificate without official confirmation from the NSW Law Society that your solicitors practising certificate has been surrendered. You will need to contact the Law Society to receive official confirmation via email of the date of surrender of your solicitors practising certificate.

Certify your copy of certificate of admission 

When applying for your barristers practising certificate, you will also need to provide to the NSW Bar Association a certified copy of your certificate of admission. Note, your certificate of admission is not your practising certificate, it is a different document and it needs to be witnessed and signed by someone who has the power to certify it.

Next Steps

As a barrister you're legally required to operate your business using the sole trader business structure. When you were a solicitor, the company you worked for was responsible for your employer and super obligations, but now that you're a self employed practictioner, you're responsible for your own super obligations and for making sure you pay tax at the approriate amount.

As a sole trader, you're legally responsible for all aspects of your legal business, including managing business income, business profits, operating expenses and tax obligations.

We have been helping barristers in Sydney for over two decades and have a wealth of experience working with everyone from Senior Counsel to readers starting out in their first year. If you need help setting up your sole trader business structure, or managing business profits and tax obligations, reach out to us today for a complimentary consultation.

About Causbrooks

At Causbrooks, we’re dedicated to helping legal professionals with their taxation and accounting needs. If you’d like to discuss your own situation, please complete the form below.

We have been working with legal professionals for going on three decades and during that time we have helped many barristers in the early stages of their careers by establishing a strong foundation of tax compliance, bookkeeping, cashflow budgeting, and tax planning.

Disclaimer

Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.

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