Stepping away from a structured executive role—whether through redundancy, a career pivot, or personal decision—can open the door to a compelling next chapter: consulting.
For many executives, consulting seems like a logical progression. You’ve built decades of experience, developed strong networks, and now have the freedom to choose projects on your terms.
However, while launching a consultancy may look straightforward, missteps in setup and structure can turn opportunity into frustration, particularly regarding tax, risk exposure, and long-term wealth management.
Don’t Rush the Setup: Why Business Structures Matter
It’s tempting to act quickly — set up an ABN, register a company, and get started. Although, before you dive in, take a step back and consider three important questions:
- What’s the purpose of your consultancy? Is it a short-term venture, a long-term business, or a stepping stone to something else?
- What risks might you be exposed to? Do you need legal separation between personal assets and business activity?
- Who are your likely clients? Some organisations will only engage consultants via a registered company or trust—not as sole traders.
Whether you operate as a sole trader, company, or trust with a corporate trustee, each option carries distinct implications for tax, cost, and liability. Trading in your own name is cost-effective, but offers no protection for personal assets. Conversely, setting up a company or trust may involve more administration and cost upfront, but can offer significant asset protection.
For many professionals, a company structure often makes sense—but it’s rarely one-size-fits-all. Your unique goals and circumstances should shape the right approach.
The Income Splitting Myth (and PSI Rules)
A common question we hear is: “Can I split my consulting income with my spouse or retain profits in my company to manage tax?” The answer isn’t always yes—and this is where Personal Services Income (PSI) rules come in.
PSI applies when most of your income is derived from your own personal skillset. If you’re the sole person doing the work, and your client relationships are dependent on you, PSI likely applies—and that means your income may need to be attributed to you personally, regardless of how your business is structured.
However, if you meet certain criteria—such as having multiple unrelated clients, using employees or contractors, or maintaining systems that run independently of you—you may qualify as a Personal Services Business (PSB), which provides more flexibility.
PSI is one of the most misunderstood areas for new consultants. Even well-intentioned structures can land you in hot water if they don’t align with ATO rules. This is one area where tailored professional advice is not just helpful—it’s essential. Ensuring you receive tax advice at the right time, can help you understand to what extent you can income split.
Salary, Superannuation & Ongoing Tax Planning
Once your structure is in place, the next step is planning how and when you pay yourself. This includes setting aside money for Pay As You Go (PAYG) withholding, making regular super contributions, and forecasting for annual tax obligations.
We typically recommend:
- Paying yourself a regular, reasonable salary based on revenue. This helps maintain personal finances through a smoother cash flow and reduce the shock of large amounts of income being received at single points in time.
- Making monthly or quarterly super contributions, rather than scrambling to contribute a lump sum in June.
- Considering a blend of salary and dividends (where appropriate), to balance tax efficiency with stability.
If you’re someone who tends to spend income as it’s received, locking in regular salary and super contributions can help instil discipline and ensure your personal obligations continue to be met without stress.
Company Cars and the FBT Trap
The idea of buying a vehicle through your new business might sound appealing—but if not done carefully, it can be an expensive misstep.
Fringe Benefits Tax (FBT) can quickly erode any potential savings, particularly when the vehicle is used extensively for personal purposes. Here’s what to keep in mind:
- The ATO’s depreciation limit for cars is around $60,000—buying a more expensive car won’t necessarily increase your deduction.
- You’ll need a valid logbook to prove business use.
- If personal use dominates, your FBT liability could be more than $30,000 per year.
Unless you can clearly demonstrate significant business use, you may be better off purchasing the car personally and claiming only work-related usage.
Keep Your Finances Separate
A common early mistake is blending business and personal finances. Even if it feels harmless—like paying for a coffee or a dinner meeting—it can complicate your bookkeeping, blur the lines in case of audit, and undermine the professionalism of your business.
Open a dedicated business account and ensure all income flows into it. Use it only for business-related expenses. It’s a simple step, but a powerful one.
Aligning Your Structure with Long-Term Goals
We recently worked with a couple who had $3 million in personal investments and were operating a sole trader consultancy. After reviewing their goals, we helped them restructure by:
- Moving personal investments into a family trust with a corporate trustee to improve tax efficiency and support future estate planning.
- Transitioning their consultancy into a company structure for greater asset protection, especially when working with larger clients.
- Using a corporate beneficiary to retain earnings, enabling strategic income distribution in lower-income years or during retirement.
For them, it wasn’t just about tax—it was about creating a structure that aligned with how they wanted to live, work, and pass on wealth.
Moving Forward With Confidence
A consulting career after an executive role offers incredible freedom—but without the right structure, that freedom can come at a cost.
From PSI compliance and FBT traps to protecting assets and planning for long-term growth, getting your structure right from day one can make all the difference.
If you’re considering a transition into consulting, or want to review your existing setup, contact James Marshall at Executive Strategies at +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.
