GST on Legal Fees in Australia: What Lawyers and Clients Need to Know

Goods and Services Tax applies to most legal services in Australia, but the details of how GST interacts with legal billing — particularly around disbursements, trust accounts, and different fee structures — are not always straightforward. This guide covers the essentials that every Australian lawyer and their clients should understand.

The Basics: GST on Professional Fees

Legal services are a taxable supply under the GST Act. If your law practice is registered for GST (which is mandatory if your annual turnover exceeds $75,000, and virtually all practising law firms will exceed this threshold), you must charge GST on your professional fees at the standard rate of 10 percent.

This means that if your hourly rate is $500 excluding GST, the client pays $550 per hour inclusive of GST. Your cost agreement should clearly state whether quoted rates are GST-inclusive or GST-exclusive. The standard practice in the Australian legal profession is to quote rates exclusive of GST, with GST added on the invoice.

GST on Disbursements

Disbursements create the most confusion around GST in legal billing. The treatment depends on whether the disbursement is an "agency" disbursement (where you are paying as the client's agent) or a "principal" disbursement (where you incur the cost and pass it on).

Agency Disbursements (GST-Free)

When you pay a cost on behalf of the client as their agent — such as court filing fees, search fees paid to government registries, or barristers' fees — these are not your supply. You are simply paying on the client's behalf. These disbursements are not subject to additional GST from your firm. You pass through the exact amount paid, and the original supplier (court, registry, barrister) deals with their own GST obligations.

Principal Disbursements (GST Applies)

When you incur a cost as part of providing your legal services and pass it on as part of your overall supply — such as photocopying charges, internal postage costs, or travel expenses that are bundled into your fees — these are considered part of your taxable supply and GST applies to the full amount.

The distinction matters because getting it wrong means either overcharging GST (and potentially owing the client a refund) or undercharging GST (and being liable to the ATO for the shortfall).

GST and Trust Accounts

Trust account transactions have specific GST implications. When you transfer funds from trust to your office account to pay an invoice, the GST obligation arises at the point the invoice is issued, not when the trust transfer occurs.

When clients pay money into trust for future costs, no GST liability arises at that point because no taxable supply has yet been made. The GST liability crystallises when you issue the tax invoice for the work performed.

This distinction is important for cash flow management and BAS reporting. Your practice management system should track these separately — trust receipts are not income for GST purposes until they are applied against an invoice.

How GST Appears on Legal Invoices

A compliant tax invoice for legal services must show the total professional fees excluding GST, the GST amount, the total amount payable including GST, each disbursement with its GST treatment clearly indicated, and your firm's ABN.

In practice, most legal invoices present time entries at their GST-exclusive rate, with GST calculated as a lump sum at the bottom. This is the standard approach in Actionstep, LEAP, Clio, and Smokeball.

GST in Billing Entries and Time Recording

When recording time entries in your practice management system, the standard approach is to record rates and amounts exclusive of GST. The system then calculates GST automatically when generating invoices.

This is important to understand when importing time entries from external sources. If you are importing entries from a CSV or XLSX file, the rate column should contain the GST-exclusive rate. The "GST" column in the import file typically indicates the GST treatment — "GST Exclusive" for standard taxable services, "GST Free" for exempt supplies, or "No GST" for out-of-scope items.

LexUnits generates billing entries with GST-exclusive rates and includes the appropriate GST flag for each entry. When you export to Actionstep, LEAP, Clio, or Smokeball, the GST treatment is already set correctly for direct import. For LEAP specifically, the correct GST value is "GST Exclusive" — not "GST Free", which has a different meaning in LEAP's system.

Fixed Fees and GST

If you charge fixed fees for certain work (conveyancing, simple wills, traffic offences), GST still applies. A fixed fee of $2,000 for a conveyancing matter becomes $2,200 inclusive of GST. Your cost agreement should clearly state whether the quoted fixed fee includes or excludes GST.

A common mistake is quoting a fixed fee verbally without specifying the GST treatment, then surprising the client with an additional 10 percent on the invoice. Always specify "plus GST" or "including GST" in all fee quotes and cost agreements.

Frequently Asked Questions

Do all law firms charge GST?

All law firms registered for GST must charge GST on their taxable supplies, which includes most legal services. GST registration is mandatory for businesses with annual turnover exceeding $75,000. Virtually all practising law firms exceed this threshold.

Are court filing fees subject to GST?

Court filing fees are generally GST-free when paid as an agency disbursement (on behalf of the client). The court does not charge GST on its filing fees, and the law firm should not add GST when passing this cost through to the client.

How should GST appear when importing time entries?

When importing time entries into a practice management system, enter rates GST-exclusive. The import file should include a GST treatment column — typically "GST Exclusive" for standard legal services. The practice management system will calculate the GST amount automatically when generating invoices.

Is there GST on barristers' fees?

This depends on whether the barrister is GST-registered (most are) and how the fee is structured. If you engage a barrister as the client's agent, you pass through the barrister's invoice (including any GST the barrister charges) as an agency disbursement without adding further GST. If you engage the barrister directly and charge the client as part of your overall supply, different rules may apply.

Last updated: March 2026. This guide is for general informational purposes and does not constitute tax or legal advice. Consult the ATO guidelines and your accountant for specific GST questions.