Financial Planning for Barristers and Law Firm Partners

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There are two legal careers and they have almost nothing financially in common.

A barrister is a sole practitioner with no employer, no partners, no goodwill and no saleable practice, whose income arrives late, unevenly and entirely from their own effort. An equity partner is taxed on profit before the firm has collected it, has usually borrowed to buy in, and holds an asset that returns capital but generally not value on exit.

Both are treated by most financial planning content as high income professionals who should salary sacrifice. Neither can. This page deals with what is actually different.

It forms part of how we advise high income professionals across Australia.

Why is a barrister’s financial position structurally different from a solicitor’s?

Because a barrister owns a practice that cannot be sold, cannot be shared, and cannot be transferred.

Five consequences follow, and each of them removes a tool that is standard advice for every other high earner.

There is no employer. No superannuation guarantee, no sick leave, no annual leave, no group insurance, no salary continuance. Every one of those has to be bought or funded personally.

There is no partnership. Barristers practise as sole practitioners. There is no entity between the work and the person, which is why the income splitting strategies used by other professionals do not apply at the Bar.

Chambers are a fixed cost, not an asset. Rooms are usually licensed rather than owned. The cost continues through a quiet quarter, a long trial that settles, illness and holidays. Fixed costs against variable income is the defining cash flow shape of the Bar.

Fees are collected long after they are earned. Work is done, fees are rendered, and payment arrives months later through the clerk. Receivables of six to twelve months are ordinary. The gap between earning and being paid is where most financial stress at the Bar actually sits.

There is nothing to sell at the end. A solicitor’s firm has equity. A medical practice has premises, equipment and sometimes goodwill. A barrister’s practice has a wig, a library and a reputation, none of which transfers. There is no exit event and no capital gain, which means the small business capital gains tax concessions that underwrite most professional retirements are simply not available.

That last point is the one that matters most, and it changes the whole plan: for a barrister, the superannuation balance and the investment portfolio are not a supplement to the sale of a practice. They are the entire retirement.

My income swings by hundreds of thousands between years. How do I plan around that?

By separating three things that most people run out of one account: tax, living costs and long term savings.

The pattern that works is unglamorous. Fees received are split on arrival, with a fixed proportion set aside for income tax and GST before anything else moves, a further fixed proportion moved to long term savings, and only the remainder used to fund a deliberately conservative drawing. The drawing is set at a level a poor year can sustain, not an average year.

Two tax specific points make the volatility worse than it looks.

Pay as you go instalments are calculated on the last assessed year. A barrister who has a very strong year followed by a quiet one pays instalments during the quiet year based on the strong one, and waits for the refund. The variation process exists but is not automatic.

And there is no averaging provision for professional income in Australia, unlike for primary producers or certain artists and sportspeople. A barrister who earns $900,000 in one year and $300,000 in the next pays more tax in total than one who earns $600,000 twice.

The lever that partly answers this is superannuation, covered below.

What does income at time of claim do to a barrister?

More damage than to almost any other occupation, because of how the benefit is now calculated.

Since 1 October 2021, insurers have been required to calculate income protection benefits on annual earnings at the time of the claim event, no older than twelve months, or, for people with variable income, on an average over a period appropriate to the occupation. Agreed value contracts ceased to be written from 31 March 2020.

For a barrister, the words “appropriate to the occupation” are the entire policy. A twelve month look back captures whichever year you happened to have. An averaging provision over two or three years captures the practice.

Two barristers with identical practices and identical monthly benefits can therefore be insured for very different amounts, depending on a definition neither of them read.

Three things to check on any income protection contract at the Bar.

The averaging period used to establish pre-claim income, and whether it can be nominated.

How chambers costs, clerk’s fees and other practice expenses are treated. Some contracts calculate the benefit on income net of practice expenses, some offer a separate business expenses benefit, and the difference is large when the fixed costs continue through the claim.

And whether income received during a claim from work billed before the claim reduces the benefit. Fees rendered months earlier and paid during a disability period have caused real disputes.

If you hold a pre-2020 agreed value contract, understand before you touch it that it cannot be replaced. Our risk insurance strategy page sets out how we compare terms rather than premiums.

I have just taken silk. What changes financially?

Usually the fee rate rises and the volume falls, at least for a period, while the junior work drops away before the senior work arrives.

Financially that produces a year with high fixed costs, a reduced volume of briefs and often significant one off costs. It is a predictable dip and it should be funded in advance rather than absorbed.

Two practical points. Reset the income protection sum insured after the practice has settled at its new level, not during the transition, and check what income the new figure is based on. And do not use the dip year to reduce superannuation contributions, because that is the year the carry forward concessional rules are most useful.

Can I split my income with my spouse?

At the Bar, no, and it is worth being direct about it because the question comes up constantly.

A barrister’s fee income is a reward for their personal efforts and skills. It is the textbook case of personal services income. It cannot be routed through a trust or a company to be taxed in someone else’s hands, and arrangements that attempt it are exactly what the personal services income rules exist to defeat.

What is available is narrower and legitimate. A spouse genuinely employed in the practice, doing real work, can be paid a commercially reasonable amount for it. Superannuation contributions can be directed to a lower balance spouse through contribution splitting and spouse contributions, which shifts wealth without shifting income. And investment assets acquired from after tax income can be held in the lower earning spouse’s name.

That last one changed in 2026 and needs re-running. From 1 July 2027 the 50 per cent capital gains tax discount is replaced for individuals and trusts by cost base indexation, and a minimum 30 per cent rate applies to capital gains made by Australian resident individuals, including gains attributed from a trust. Holding growth assets in a low rate spouse’s name no longer produces a low effective rate on sale. Our tax minimisation strategies page covers where that leaves asset location.

For a law firm partner the answer is different, and it is covered next.

I am becoming an equity partner. How should I fund the capital contribution?

Most firms require a capital contribution on admission, and most partners borrow it.

Three questions decide whether that is done well.

Is the interest deductible, and against what? Interest on money borrowed to acquire an income producing interest is generally deductible. Where the loan is drawn, whose name it is in, and whether it is mixed with private borrowing all affect that. Mixed purpose loans are the most common and most expensive mistake here.

Is the loan structured for the exit as well as the entry? Partnership capital is usually returned at face value on retirement, without growth. A loan amortised over the working life leaves you clear at exit. An interest only facility leaves you repaying a loan from a capital return that has not grown, in a year when the income has stopped.

Does the security reach the family home? Frequently it does. That is a decision to make consciously, and it is the point at which life and total and permanent disability cover for the loan amount stops being optional.

Why do I pay tax on money the firm has not collected?

Because a partner is taxed on their share of partnership net income, whether or not it has been drawn, and whether or not the client has paid.

Work in progress and unbilled fees sit inside the profit calculation. Lock up, the period between doing the work and being paid for it, is often measured in months. The result is a partner paying tax at the top marginal rate on profit that is currently sitting in a debtor’s ledger.

Three consequences to plan for.

The first year as an equity partner usually produces a tax bill and the first pay as you go instalment obligation in the same period, on top of the capital contribution. Three payments, one year.

Drawings are not income. They are advances against a profit share determined later. A partner who spends their drawings as though they were salary is exposed at the year end true up.

And a partner leaving mid-year can be assessed on a profit share for work in progress they will never receive a distribution from, depending on the partnership deed. Read the deed before you resign, not after.

How does the ATO’s professional firm profit guidance affect me?

The ATO’s compliance approach to the allocation of profits from professional firms, Practical Compliance Guideline PCG 2021/4, sets out how it assesses risk where a professional’s share of firm profit is directed to associated entities rather than returned in their own hands.

It is a risk assessment framework, not a rule that prohibits structures. It scores arrangements by reference to the proportion of profit entitlement returned in the individual professional’s hands and the effective tax rate on the whole arrangement, and it places the outcome in a risk zone.

Two things follow for a partner.

Your firm’s structure was probably designed with this guideline in mind, and your personal position sits inside it. Understand which zone your arrangement falls into before you make a decision that changes it, such as introducing a service entity, changing a distribution pattern or altering a spouse’s involvement.

And the guideline is about tax risk, not about whether the plan is sound. A structure that scores well on risk and leaves you with no superannuation, no insurance and no liquidity outside the firm is not a good outcome.

This is your tax adviser’s determination. We read it and build the wealth plan to fit it.

What is my superannuation strategy if nobody contributes for me?

Superannuation is the largest structural advantage available to both a barrister and a partner, and both routinely under use it because there is no employer making it happen.

Four points.

The concessional cap is $32,500 for 2026 to 2027, and it must be claimed by making a personal contribution and lodging a notice of intent to claim a deduction. Missing the notice is one of the most common and most expensive administrative errors in this group.

Carry forward unused concessional cap amounts from the previous five years are available where total superannuation balance was below $500,000 at the previous 30 June. This is the specific answer to lumpy income: a quiet year uses little of the cap, and a very strong year can use several years of accumulated cap at once. For a barrister with a $900,000 year, this is the single most valuable tool available.

Division 293 applies an extra 15 per cent to concessional contributions where income exceeds $250,000, so contributions are effectively taxed at 30 per cent rather than 15. That is still well below 47 per cent, and it is not a reason to stop.

Non-concessional contributions are capped at $130,000 for 2026 to 2027, with a bring forward of up to $390,000 depending on total superannuation balance at the previous 30 June, and nil where that balance was $2.1 million or more.

Where a barrister or partner runs a self managed fund, the fund can hold commercial property, which for a firm with its own premises opens a genuine option. It does not help a barrister, because chambers are licensed rather than owned. Our SMSF strategy page covers the mechanics.

What has to be in place before I stop?

For a barrister, everything, because there is no exit event. Retirement at the Bar is simply the day the briefs stop, and the plan has to be complete before that day rather than triggered by it. That means the superannuation and investment position, tested against a drawdown, is the plan. Our retirement planning work starts from that drawdown, not from a balance.

For a partner, three items.

The capital return, its timing and the loan it repays.

Any deferred profit share or retirement benefit under the deed, its tax character, and whether it is an employment termination payment or a partnership distribution, because they are taxed very differently.

And the moment when the firm’s cover ends. Group life, salary continuance and health cover attached to partnership generally cease on exit, at exactly the age when replacing them is most expensive and underwriting is least accommodating.

What we do

We work from the deed, the policy schedule and the actual fee pattern rather than from an annual income figure. For barristers that means building the plan around volatility and the absence of a saleable practice. For partners it means building it around lock up, capital and the exit.

We coordinate with your accountant and your firm’s advisers rather than replacing them. If you would like to work through your own position, request a consultation or call 03 7034 4888. We are at Level 1, 55 Collins Street, Melbourne, and we advise clients across Australia.

Sources

1. Australian Taxation Office, Working out if the PSI rules apply.
2. Australian Prudential Regulation Authority, Final individual disability income insurance sustainability measures, for the cessation of agreed value contracts from 31 March 2020 and the income at time of claim measures from 1 October 2021.
3. Australian Taxation Office, Contributions caps and Division 293 tax, for the 2026 to 2027 caps and thresholds.
4. Australian Taxation Office, Practical Compliance Guideline PCG 2021/4, Allocation of professional firm profits, ATO compliance approach.
5. Treasury Laws Amendment (Tax Reform No. 1) Act 2026, No. 49 of 2026, royal assent 26 June 2026, for the replacement of the capital gains tax discount with cost base indexation and the minimum 30 per cent rate on capital gains from 1 July 2027.