A lawyer should look for an accountant who understands law practice trust accounting, the ATO’s rules on how profits from a professional firm are allocated, and the structures law practices commonly use. Beyond technical fit, look for a chartered or Registered Tax Agent credential, regular planning contact through the year, and someone who explains the numbers in plain language.
Questions That Show Whether an Accountant Understands Law Practices
Start with trust accounting. In NSW, law practice trust accounts run under the Legal Profession Uniform Law, with a trust account year ending 31 March and an annual external examination. An accountant who works with law firms should understand trust reconciliations, the strict separation of trust and office money, and what the external examiner will look at, even though the examination itself is done independently.
Next, ask how they approach profit allocation. The ATO’s guideline PCG 2021/4 sets out how it assesses the way principals of professional firms, law firms included, split profits between themselves, family members and related entities. A capable accountant can tell you which risk zone your arrangement sits in and whether it still makes sense as the practice grows.
Structure matters at every stage of a legal career. The right setup for a sole practitioner is rarely the right one for a partnership or an incorporated legal practice, and many structures were set up early and never reviewed. Ask whether they review structure proactively or only when you raise it.
Law firms also have their own financial measures. Work in progress, unbilled time and the gap between billing and collection often decide cash flow more than revenue does. An accountant who reads those numbers with you, and helps budget for decisions like hiring or new premises, adds far more than one who only prepares the year-end return.
Finally, look at how the relationship works day to day. Check credentials (a CA ANZ chartered accountant or CPA, and a Registered Tax Agent), ask how often you’ll meet, and ask who your regular contact will be. Responsiveness matters in a practice where deadlines are fixed and your own time is billed.
Looking for an Accountant Who Knows Law Practices?
Our accountants for lawyers cover trust accounting, practice structure, and billing and collections, and explain each in plain language. MYC Partners Accountants is a CA ANZ chartered firm, and if you’d like to talk through your practice, get in touch to book a free discovery call with Kylie.