Costs Disclosure Obligations for Australian Lawyers: What You Must Tell Clients About Billing

Every Australian law practice has a legal obligation to tell clients how much their legal services will cost. This is not a matter of best practice or good client relations — it is a statutory requirement under the Legal Profession Uniform Law 2014 (LPUL), specifically sections 174 through 178. Failure to comply can result in reduced fees, disciplinary action, and significant reputational damage.

Despite the importance of these obligations, costs disclosure remains one of the most commonly breached areas of legal regulation. Many practitioners treat disclosure as a tick-box exercise, producing generic costs agreements that fail to meet the specific requirements of the legislation. This guide explains what the law actually requires, when disclosure must occur, and how maintaining detailed billing records can help your practice stay compliant.

The Legal Framework: Sections 174 to 178 of the LPUL

The costs disclosure regime is contained in Part 4.3, Division 3 of the Legal Profession Uniform Law 2014. This legislation applies in New South Wales and Victoria (the participating jurisdictions under the Uniform Law framework), and equivalent provisions exist in other Australian states and territories under their respective Legal Profession Acts.

The key provisions are:

• Section 174 — the primary disclosure obligation, setting out what must be disclosed and when
• Section 175 — the obligation to provide ongoing and updated disclosure when circumstances change
• Section 176 — exemptions for sophisticated clients (government bodies, large corporations)
• Section 177 — the obligation to disclose settlement or lump sum costs offers
• Section 178 — the consequences of failing to comply with disclosure obligations

Together, these provisions create a comprehensive framework designed to ensure clients can make informed decisions about their legal costs before and during a matter.

When Must Disclosure Be Made?

Under section 174(1), a law practice must make costs disclosure to a client before, or as soon as practicable after, the practice is retained in a matter. The phrase "as soon as practicable" is not defined in the legislation, but it is generally understood to mean within a reasonable time after receiving initial instructions — not weeks or months later.

In practice, this means disclosure should ideally occur at the first substantive client meeting or in the retainer letter. If a client contacts you urgently and you need to begin work immediately, disclosure should follow within days, not after the matter is substantially progressed.

There is a de minimis threshold: the disclosure obligation under section 174 does not apply if the total legal costs (excluding GST and disbursements) are not likely to exceed $750. However, even in low-value matters, the practice must provide disclosure if the client requests it. This threshold is deliberately low — most legal matters will exceed it, so practitioners should default to providing disclosure in every retainer.

Timing for Referrals and Changes of Solicitor

If a client is referred from one law practice to another, or if a new solicitor takes over carriage of a matter, the new practice has its own independent obligation to make costs disclosure. The fact that a previous firm may have provided disclosure does not relieve the new firm of its obligations.

What Must Be Included in Costs Disclosure

Section 174 sets out a detailed list of information that must be included in every costs disclosure. This is not a vague requirement to "inform the client about fees." The legislation is specific, and each element must be addressed.

The Basis of Costs

The disclosure must explain the basis on which costs will be calculated. For time-based billing, this means specifying hourly rates for each practitioner who may work on the matter, including any different rates for partners, senior associates, junior lawyers, and paralegals. For fixed-fee arrangements, the scope of work covered by the fee must be clearly defined.

If you use a combination of billing methods — for example, a fixed fee for initial advice and time-based billing for subsequent litigation — each component must be separately disclosed. Vague statements like "costs will be charged at our usual rates" are insufficient.

An Estimate of Total Costs

If practicable, the disclosure must include an estimate of the total legal costs, or a range of estimates. If it is not practicable to provide an estimate (for example, in complex litigation where the scope may change dramatically), the disclosure must explain why an estimate cannot be given and describe the major variables that will affect the final costs.

This requirement is frequently under-served. Many firms provide a broad estimate at the outset but fail to update it as the matter progresses, which leads directly to the ongoing disclosure obligation discussed below.

Client Rights

The disclosure must inform the client of their rights, including:

• The right to negotiate a costs agreement with the law practice
• The right to receive a bill from the practice
• The right to request an itemised bill if only a lump sum bill is provided
• The right to have costs assessed by a costs assessor
• Any time limits that apply to exercising these rights

These rights exist regardless of what the costs agreement says. A costs agreement cannot waive or limit a client's statutory right to a costs assessment. For more on client rights and how cost agreements work in practice, see our guide on client cost agreements and billing transparency.

Disbursements and Third-Party Costs

The disclosure must also cover disbursements — expenses incurred on behalf of the client, such as court filing fees, barrister fees, expert report costs, and search fees. Where possible, estimates of anticipated disbursements should be provided. If a specific disbursement cannot be estimated, the disclosure should identify the type of disbursement and explain that the amount will depend on the circumstances.

Interest on Unpaid Bills

If the practice intends to charge interest on unpaid bills, the rate and basis of the interest charge must be disclosed upfront. This is a commonly overlooked requirement — many firms include interest provisions in their costs agreements but fail to include the details in their initial disclosure.

The Ongoing Obligation: Updated Disclosure Under Section 175

Costs disclosure is not a one-time obligation. Section 175 of the LPUL imposes a continuing duty to provide updated disclosure whenever there is a significant change to anything previously disclosed. The most common trigger is a significant increase in the estimated costs.

What constitutes a "significant" change is not precisely defined, but the Uniform Law Application Act 2014 and related guidelines suggest that an increase of more than 10 to 15 percent above the original estimate would generally require updated disclosure. However, the obligation is not purely mathematical — a change in the billing basis (for example, moving from fixed fee to time-based billing), a change in the practitioners working on the matter, or an unexpected expansion of the scope of work all require updated disclosure.

In practice, this means firms need robust systems for monitoring costs against estimates. If your initial disclosure estimated costs of $15,000 to $20,000 and the matter has already incurred $18,000 in costs with substantial work remaining, updated disclosure is almost certainly required.

Updated disclosure must be provided as soon as practicable after the practice becomes aware of the change. Waiting until the final bill is rendered to inform the client that costs have doubled is a clear breach of section 175.

Exemptions for Sophisticated Clients

Section 176 recognises that certain clients do not need the same level of protection as individuals and small businesses. The costs disclosure obligations under sections 174 and 175 do not apply to "sophisticated clients," which include:

• The Commonwealth, a State, or a Territory
• A public authority
• A corporation or entity with net assets exceeding $10 million
• Another law practice

However, even sophisticated clients can request disclosure, and the practice must comply with that request. Additionally, some firms choose to provide disclosure to all clients regardless of sophistication — this is good practice and eliminates the risk of incorrectly classifying a client as sophisticated.

Consequences of Non-Compliance

Section 178 sets out the consequences of failing to comply with costs disclosure obligations, and they are substantial.

Reduction or Disallowance of Costs

If a law practice fails to make proper disclosure, the client may apply for a costs assessment. On assessment, the costs assessor may reduce the amount of costs payable by the client. In some cases, particularly where the non-disclosure was significant and the client was prejudiced, the assessor may disallow the costs entirely. The practice may also be unable to commence proceedings to recover unpaid costs until proper disclosure is made.

Disciplinary Consequences

A failure to comply with costs disclosure obligations may constitute unsatisfactory professional conduct or, in serious cases, professional misconduct. This can lead to disciplinary proceedings before the relevant legal services commissioner or tribunal. Disciplinary outcomes can include reprimands, fines, conditions on practising certificates, and in extreme cases, suspension or cancellation of the practising certificate.

For a broader overview of billing compliance requirements under the conduct rules, see our article on billing compliance under the Australian Solicitors' Conduct Rules.

Reputational and Relationship Damage

Beyond the formal legal consequences, inadequate costs disclosure damages client relationships. Clients who are surprised by their final bill — particularly where the amount significantly exceeds any estimate provided — are more likely to dispute the bill, lodge complaints, and leave the firm. Transparent disclosure from the outset builds trust and reduces the likelihood of billing disputes.

How Detailed Billing Records Support Disclosure Obligations

Costs disclosure and billing records are two sides of the same coin. The disclosure tells the client what to expect; the billing records prove what was actually done. When these two elements are aligned, the practice is well-positioned to justify its fees and defend against any challenge.

Accurate Time Recording Enables Better Estimates

One of the most effective ways to improve the accuracy of costs estimates in your disclosure is to maintain detailed historical billing data. If your firm has records showing that a standard property conveyance typically takes 8 to 12 hours, you can provide a much more accurate estimate than a firm that guesses. Over time, this data becomes a strategic asset — enabling more confident fixed-fee pricing and more reliable estimates for time-based work.

Contemporaneous Records Support Updated Disclosure

The ongoing disclosure obligation under section 175 requires firms to know when costs are approaching or exceeding the original estimate. This is only possible if time is being recorded contemporaneously — that is, at or near the time the work is performed. Practices that allow practitioners to reconstruct their timesheets at the end of the week or month will inevitably miss the trigger for updated disclosure.

Itemised Bills Require Detailed Entries

Clients have a statutory right to request an itemised bill. An itemised bill must contain sufficient detail for the client to understand what work was done, by whom, how long it took, and how much it cost. Generic entries like "work on matter" or "correspondence" are insufficient. Each time entry should describe the specific task, identify the relevant practitioner, and record the time spent. This level of detail is also essential for costs assessment — a costs assessor will scrutinise individual entries when determining whether the costs charged are fair and reasonable.

For guidance on how AI-assisted billing tools can help maintain this level of detail while reducing administrative burden, see our discussion of AI legal billing and ethics in Australia.

Practical Steps for Compliance

Meeting your costs disclosure obligations does not require complex systems, but it does require discipline and consistency. Here are practical steps every practice should implement:

1. Use a disclosure template — Develop a standard costs disclosure document that covers all section 174 requirements. Customise it for each matter with specific estimates, rates, and scope descriptions.
2. Disclose before commencing work — Make it a firm-wide policy to send the costs disclosure before starting substantive work on any new matter.
3. Set internal review triggers — Configure your practice management system to alert you when costs on a matter reach 75 percent of the original estimate, so you can issue updated disclosure before the estimate is exceeded.
4. Record time contemporaneously — Ensure all practitioners record their time daily. This supports accurate billing, enables timely updated disclosure, and produces defensible records for any costs assessment.
5. Keep a disclosure register — Maintain a record of when disclosure was provided to each client and when any updated disclosure was issued. This creates an audit trail in case of any future dispute.
6. Train your team — Ensure all lawyers and support staff understand the disclosure obligations. Junior lawyers and new hires should receive training on these requirements as part of their onboarding.

Frequently Asked Questions

When must a lawyer provide costs disclosure to a client in Australia?

Under section 174 of the Legal Profession Uniform Law 2014, a law practice must provide costs disclosure to a client before, or as soon as practicable after, the client first instructs the practice in the matter. If the total costs are not likely to exceed $750 (excluding GST and disbursements), the disclosure obligation does not apply, though the practice must still disclose on request.

What happens if a lawyer fails to provide proper costs disclosure?

Non-compliance with costs disclosure obligations can have serious consequences. Under section 178 of the Legal Profession Uniform Law, the client may apply for a costs assessment, and the costs assessor may reduce the costs payable. The law practice may also be unable to recover any costs until proper disclosure is made. Additionally, failure to disclose may constitute unsatisfactory professional conduct or professional misconduct, exposing the lawyer to disciplinary proceedings.

Do lawyers need to update their costs disclosure during a matter?

Yes. Section 175 of the Legal Profession Uniform Law requires a law practice to provide updated disclosure if there is any significant change to anything previously disclosed, including if the estimated costs are likely to increase significantly. This ongoing obligation means firms must actively monitor matters and notify clients promptly when circumstances change.

Does costs disclosure apply to government and corporate clients?

Section 176 of the Legal Profession Uniform Law provides exemptions from costs disclosure for certain "sophisticated clients," including the Commonwealth, a State or Territory, public authorities, and corporations or entities with net assets exceeding $10 million. However, even for sophisticated clients, the practice must still disclose on request.