Agency and consultant expenses in Australia: PSI rules, imported services, and home office

For an Australian agency or consultancy, two rules shape the books more than any expense category: the personal services income (PSI) rules, which can cap what a one-person consultancy deducts, and the GST treatment of the offshore software the business runs on. Both surprise people who assume a company structure alone settles the question. All figures below are sourced from ATO guidance in the Sources section.

The PSI rules

If your income is mainly a reward for your personal effort or skills, it is personal services income, and the PSI rules may apply even if you trade through a company or trust. When they apply, deductions are limited to what an employee could claim: you generally cannot deduct rent, mortgage interest, or rates for a home office, nor pay an associate for non-principal work such as bookkeeping or admin ^[1] .

You step outside the limits by self-assessing as a personal services business, for example by passing the results test (paid for a result, supply your own tools, fix defects at your own cost) on at least 75% of your PSI ^[1] . Knowing which side of this line you are on changes the whole deduction picture.

Offshore software and the reverse charge

Agencies run on offshore SaaS. Where the reverse charge applies, you self-assess GST at 10% on the offshore purchase and claim back any GST credit you are entitled to ^[2] . For a fully creditable agency the two net to nil; the reverse charge bites mainly when the business is not entitled to full credits ^[2] .

Contractors and home office

Agencies pay freelancers heavily. A contractor engaged mainly for their labour can be an employee for superannuation guarantee purposes even when they invoice you, so a contractor cost is not automatically super-free. Home office is claimable subject to the PSI limits, using the methods in the claim home office in Australia guide. Client travel follows the claim travel in Australia guide; entertaining clients is generally not deductible.

Advertising spend and GST registration

Paid media is the other large offshore line for most agencies: Google, Meta, and similar ad spend billed from outside Australia. The reverse charge that applies to offshore software applies to these advertising services too, so an ad-platform invoice with no Australian GST is a self-account rather than a claimable credit. Where you on-charge media to clients, your agency fee and commission are your own taxable supply and are separate from the pass-through media cost, so keep the two apart in the ledger. A growing agency must register for GST once turnover passes A$75,000, after which it charges 10% on its fees and lodges a BAS; the offshore reverse-charge entries flow through the same statement.

Where ExpenseFlow fits

An agency ledger is mostly recurring offshore subscriptions and contractor invoices. ExpenseFlow captures each receipt and tax invoice, extracts the line detail and currency, and syncs the transaction into Xero or QuickBooks Online with the source image attached for the five-year record-keeping window. Its cross-border checks flag a purchase from an offshore supplier that has not charged Australian GST, so it is recorded as a foreign-currency cost that may belong on the reverse charge rather than wrongly treated as carrying a claimable credit, and it flags contractor payments so the PSI and superannuation-guarantee questions are raised at capture. It does not decide whether the PSI rules apply, determine a contractor’s super status, or apportion your home office: those stay with you or your accountant. What it removes is the manual keying behind a busy subscription and contractor ledger.

Common mistakes

• Claiming home-occupancy costs or associate payments when the PSI rules limit deductions to employee level ^[1] .
• Treating an offshore SaaS invoice as carrying a claimable GST credit, or skipping the reverse-charge entry ^[2] .
• Assuming every contractor invoice is super-free when a labour-only contractor may attract the superannuation guarantee.
• Claiming client entertainment, which is generally not deductible.