How Much Should I Charge for I.T. Consultation?

Hi fellow OzBargainers.

For the past year I have been doing some “cash” jobs for a friend’s business. as of recent, work has picked up a lot, and he no longer wants to pay me a “cash” rate.

He suggested that I register an ABN and business account for him to pay into. The cash rate i charged him used to cover my time and travelling expenses, however if he now pays me through my ABN obviously this income will be declared and become taxable hence I will lose out.

What would be a fair amount to raise my charges by?

EDIT: How much should I charge for I.T. consultation - what's the going rate these days?

Comments

  • About tree fiddy

    • lolollloll that's right - three dollars and fifty cents. Damn those loch ness monsters!!

      OP on a serious note it would help if you revealed what work you were doing.

      • I.T. consultation

        • +8 votes

          That’s vague too.

          Programming.

          IT support.

          System admin.

          DBA.

          Cyber sec.

          Giving advice ( talker )…

          Etc…

          • @SF3: all of the above except dba and cyber security.
            plus also marketing at selected job sites (photography, video, editing, social media etc)

        • Between $60 and $120 per hour depending on how critical you are to the business.

          • @Mechz: i am at the closing end of each of the company’s transactions, so on top
            of the consulting services i make sure the client is happy with everything. would you call it somewhat critical?

  • Increase by about 40%.

  • Double

    • Yes, absolutely this, double (at least). It may initially seem overly simplistic advice but it is seriously not. As well as the additional base expenses incurred that you have alluded to (tax etc.), operating under an ABN will suck up some of your time (unpaid time) periodically (3-monthly 'BAS' statements, more complex tax return each year, etc.). There is no reason why you should 'suck all this up' because your mate prefers it. Just tell the dude, you're happy to keep the arrangement 'as is', but if you have to go down the ABN route your rates will have to double. If they know anything much about the 'real world', they will understand this completely.

      • thanks for taking the time to elaborate. information i can use to support my justification.

        • I agree. You have to absolutely take into account what obligations and implications this change presents. For your mate, whatever you charge him will now be tax-deductible to his business, so that's a benefit to him (but his benefit may not be offset by the necessary rate increase). There are many other reasons it may suit him better to have you 'on the books' - not least of all the risk to him/his business should anything go wrong on one of your jobs (something happens to you, the client's equipment, etc…)

          As for you, since you have 80K+ income outside of this work, as a sole trader (registering for an ABN but without forming an actual company) you will add your income from this work to your existing main income and thus your tax rate will be calculated accordingly. This means you'll be likely paying 32.5c on every $1 you earn from your work for him. Therefore, even if you double your rate to $100 per hour you'll be making $67.5 in pocket so that's an actual increase of only $17.5 per hour and that needs to cover all of your additional expenses (whatever they may be - e.g. accounting, invoicing, etc.) That may be fine, but just so you can get a concept of how the numbers might work at a high level.

          You should not have to register for GST unless you're making more than $75K per year from this work so you won't have to do BAS statements or charge GST on your invoices. You may also be able to tax-deduct certain things necessary for you to perform your work including some travel/car expenses.

          Good luck, hope this helps.

          (Disclaimer: I am not an accountant - you should definitely speak to an accountant about the specifics of this.)

          Edit: this link may be useful in figuring out the tax on your additional income https://moneysmart.gov.au/income-tax/income-tax-calculator

  • Were you really expecting any serious answers with such vague information?

  • Are you even getting minimum wage? At least aim no less than that, but it doesn’t sound it from “cover my time and travelling expenses”…

    Domino’s pizza-gate.

  • How is this any cheaper for him?

    • i am not entirely sure, but he is adamant on paying me through abn. maybe some accountants in here can shed some light?

      • You better sort out how much your “friend” will pay you first. Once you know (a) you may no longer have a friend or (b) payment is acceptable to you, then setup abn. Effectively you become a sole trader.

      • He wants you as a contractor.

        How much do you earn a year outside this?

        After offsets you can earn up to $23000l without paying any tax.

        • 80k /yr outside
          the work i do for him will exceed 23k

          • +2 votes

            @Hiroko: Increase by 40%

            • @deme: thank you
              if the company provides a vehicle (but not fuel) do you think the 40% increase is still justified?

              • @Hiroko: I strongly suggest you and your friend go through this tool: https://www.ato.gov.au/calculators-and-tools/employee-or-con...

                It sounds like they are trying to do the right thing but as the same time you might not be a contractor. Later down the line this may cause issues like ATO charging penalties against your friend for unpaid super.

                Would be good to do this to avoid any problems (especially since you are friends) in future.

                • @deme: thanks for this, ill look into it

                  • @Hiroko: Some it consultancy firms can simply handle the "back-office" side of things for you. You give them a time sheet and they invoice your friend at your rate and usually a fixed fee to cover the bookkeeping overheads. This means you don't have to register an abn yourself and do all the business accounting stuff like payg tax, bas statements, source liability insurance, workcover insurance etc..

              • @Hiroko: I do think 40% is justified , what's your current rate?

              • @Hiroko: Yes. You still need to pay your super as well as all your administration. 40% only really covers your tax.

                Have a look on Seek and see what contractors doing your sort of work make. Typically an IT contractor makes $100+/hr

                • @Quantumcat: thank you, that is great advice. will check on seek!

                • @Quantumcat:

                  Typically an IT contractor makes $100+/hr

                  hahaha no they don't. Yes lots do, but your typical IT contractor isn't making $180k+ a year.

                  • @JimmyF: Yes they are. They have to pay all their tax, their super, insurance, sick leave, annual leave (you don't get paid when not working for any reason), and usually a bookkeeping/administration company out of that. Plus savings for when they're between projects. They'd only end up with about half of it after all costs and taking leave and time in between projects.

                    https://www.seek.com.au/job/51712855
                    https://www.seek.com.au/job/51687631
                    https://www.seek.com.au/job/51662703
                    https://www.seek.com.au/job/51674735
                    https://www.seek.com.au/job/51678462

                    • @Quantumcat:

                      Yes they are

                      I see you're in ACT, well yes you live in a skewed bubble of the world just like all pollies. Go have a look at the rates outside of the ACT and come back to me and see if $100/hr+ is still your 'typical' rate.

                      Also all your example jobs are for 'Senior' roles, again skewing the results. Why didn't you post these ACT IT jobs instead?

                      https://www.seek.com.au/job/51635037

                      https://www.seek.com.au/job/51672756

                      https://www.seek.com.au/job/51689420

                      https://www.seek.com.au/job/51678042

                      • @JimmyF: Do you know what a contractor even is?

                        The role is a full time permanent position

                        Permies get sick leave, annual leave, super, their tax taken care of, and no uncertainty. Contractors get none of that and have to worry about getting new roles every 3, 6, 12 months and being able to be fired for any reason at all with no notice (eg project lost funding, they don't like the way you dress, anything).

                        Consultants and contractors also do not do low level IT help desk stuff which is what you've picked there (the one position you listed that isn't IT help desk and is actually a contract doesn't have a hourly rate listed). They do stuff that requires subject matter experts.

                        Go have a look at the rates outside of the ACT and come back to me and see if $100/hr+ is still your 'typical' rate.

                        How about Sydney?

                        $1000/day https://www.seek.com.au/job/51706534

                        $800-$900/day https://www.seek.com.au/job/51652307

                        $950/day
                        https://www.seek.com.au/job/5164156

                        $950-$1100/day https://www.seek.com.au/job/51674326

                        • @Quantumcat:

                          How about Sydney?

                          Again cherry picking roles that have nothing to do with what the OP does. Remember them saying they do the IT support/System admin work for this company?

                          So def not a Senior Adobe Experience Manager Developer, Senior Tableau Developer or a PMO Manager!

                          Again your claim was the typical IT contract gets paid $100+/hr. It appears your view of a 'typical' IT contractor is skewed to be a Developer or Project Manager.

                          • @JimmyF: There are a huge variety of IT roles. The thing they have in common though, is that those who are experts in those roles can command very good money as contractors. We don't know what OP does exactly but it is expert enough that his friend doesn't want to just hire a random help desk guy permanently. OP has more skills than that and the friend is willing to pay for them.

                            Contractors can ask that much money because the companies do not need to worry about overheads like leave or continuing to pay them when there are no projects for them to do. They have to cover the periods they're not working. It is like hiring a car - very expensive per day but you don't have to deal with rego and insurance and you can dump it as soon as you've used it for what you need.

                            Permanent staff get less (even if they're also experts) because companies have to worry about leave and continually finding work for them to do. That's when you'll see salaries that you're thinking of. Experts may choose this way of working just to get stability in their life (eg if sole wage earner where 3 months with no income would be a disaster). If you've got a bit of appetite for risk and you manage yourself well you can make a little more money as a contractor overall, even taking out all costs and leave.

                            Permies are like owning a car, much lower cost per day but you have to worry about paying rego and insurance, and have to keep paying even when you're not using it.

                            I think you're just confused between contractors and permies. I work (as a permie) in a company that has a recruitment wing, so I hear a lot about contractors and also work with many of them in client sites.

                            • @Quantumcat:

                              There are a huge variety of IT roles. The thing they have in common though, is that those who are experts in those roles can command very good money as contractors

                              Umm all jobs/roles in IT can be a contract or perm, there is nothing saying they have to be specialist to be a contract role like you claim.

                              I don't see any IT helpdesk contractors asking for $100hr as claimed nor is the general IT admin either, but there are LOTS of these contract roles around.

                              Sure specialist roles like the ones you cherry picked earlier, can and do ask high amounts and I'm not saying they don't. I'm saying these are NOT your 'typical' IT contractor as you keep claiming.

                              I think you're just confused between contractors and permies.

                              I'm not confused at all. But thanks for the talking down about the differences.

                              I work (as a permie) in a company that has a recruitment wing, so I hear a lot about contractors and also work with many of them in client sites.

                              So your knowledge is all 3rd hand and you have never been a IT contractor or applied for a contractor job? Yet somehow you are a expert in IT contract hourly rates?

                              Next you'll be telling my car dealer mechanic is getting $150/hr as that is what the dealer is charging me on the invoice!

                              • @JimmyF:

                                Umm all jobs/roles in IT can be a contract or perm, there is nothing saying they have to be specialist to be a contract role like you claim.

                                Only people with more specialised skills are recruited as contractors, as the whole point is the company needs a specific skill for a project for a short time. You don't find contractor roles wanting only general skills.

                                you cherry picked

                                I didn't cherry pick anything, I just searched for the word contract under the IT category on Seek, and copied urls of ones that gave the rate of pay.

                                I don't see any IT helpdesk contractors asking for $100hr as claimed nor is the general IT admin either, but there are LOTS of these contract roles around.

                                All those roles for IT help desk you found were permie jobs not contract. Hint: if you see an hourly or daily rate that means it in a contract role.

                                IT general admin and IT help desk you will not find as contract role. Two reasons. First, IT help desk and admins are needed long term, not for short stints on a limited time project. Second, IT help desk people do not have specialised technical skills needed for short projects.

                                From your comment you still don't seem to understand the difference. Here is a resource https://www.mtr.com.au/blog/contract-vs-employment/

                                Potential benefits of contracting:

                                • Rates are typically higher as they contain weighting for leave and the reduced job security – rates generally sits at around 20% more than an employee salary equivalent
                                • Hours can be more flexible, dependent on the client and project
                                • Increased flexibility to move between contracts on completion and ‘test out’ a wider range of organisations
                                • Flexibility to take extended (unpaid) time off in between contracts with no limit on annual leave, sick leave or personal leave
                                • Project-based and varied work, which can allow contractors to progress more quickly in their skills and experience, and avoid being pigeonholed
                                • Building extensive networks is made possible by working with a larger pool of professionals, which can lead to valuable future opportunities
                                • Opportunities to travel nationally / internationally may be higher

                                Potential challenges of contracting:

                                • Minimal job security; contracts can be terminated at any time and notice pay could be as little as one day to four weeks depending on the contract
                                • Uncertainty and the negative financial impact if finding a new contract takes some time
                                • Mortgages and loans may be more challenging to obtain
                                • No entitlement to paid annual leave, sick leave, personal leave or public holidays, which can be tough during company shut down periods over the holidays
                                • No access to paid long service leave or paid parental leave
                                • Exclusion from / limited access to employee benefits such as discount schemes, bonuses & incentives, corporate partnerships and other employee perks
                                • Less likely to be offered learning & development opportunities than an employee
                                • No designated growth trajectory within the company, meaning no direct internal career progression
                                • More risk and administration for PTY Ltd contractors who are responsible for organising their own company tax, insurance cover, superannuation and other requirements
                                • Visa restrictions may not allow you to engage in contract work as this is not classed as ’employment’

                                Potential benefits of being an employee:

                                • Being seen as part of the team, rather than a temporary addition
                                • More job stability, meaning less frequent job searches, and easier access to loans & mortgages
                                • Entitlement to paid annual leave, personal leave, sick leave and public holidays
                                • Opportunity to progress internally within the organisation, with a clearer growth trajectory
                                • More likely to be offered learning & development opportunities funded by the employer
                                • Access to paid long service leave and paid parental leave, if eligible and available
                                • Eligibility for redundancy pay where appropriate
                                • Access to the full range of employee benefits and perks offered by your employer, including discount schemes, bonuses & incentives, corporate partnerships and more
                                • Superannuation payments and income tax deductions are arranged by your employer
                                • Minimal financial risk, with insurance cover the responsibility of your employer

                                Potential challenges of being an employee:

                                • A lower salary than an equivalent contractor rate – typically 20% less
                                • Less variety in your work due to typically longer time spent in a role
                                • Set number of paid annual / other leave, often limited to 20 days (although purchased annual leave / unpaid leave may be an option depending on the employer)
                                • More involvement in company politics
                                  Less flexibility with typically a four week notice period to terminate your employment
                                • @Quantumcat:

                                  Only people with more specialised skills are recruited as contractors

                                  Oh I should have stopped reading at this point but sadly I didn't and it didn't get any better.

                                  So you think the only contractors out there are specialised skilled workers. Oh my you are so wrong

                                  Ok, here is one for you, level 1 helpdesk, $32/hr CONTRACTOR (as we all know thats what they really want to pay, not the higher amount)

                                  https://www.seek.com.au/job/51556968

                                  You don't find contractor roles wanting only general skills.

                                  You do know contractor is just a fancy name for casual in the corporate world?

                                  All those roles for IT help desk you found were permie jobs not contract. Hint: if you see an hourly or daily rate that means it in a contract role.

                                  Errr my mistake earlier as I thought I had filtered them by contract, here knock yourself out, the listings are endless for CONTRACT helpdesk roles. Hint: don't patronize me

                                  https://www.seek.com.au/helpdesk-jobs/contract-temp

                                  Lots in the $30ish/hr range there.

                                  IT general admin and IT help desk you will not find as contract role

                                  Yeah wrong. Please see links above

                                  Two reasons. First, IT help desk and admins are needed long term, not for short stints on a limited time project. Second, IT help desk people do not have specialised technical skills needed for short projects.

                                  Also so wrong again on both, see links above.

                    • @Quantumcat: Those aren't jobs for a hack that thinks he is an IT consultant.

    • +2 votes

      Probably realised paying cash in hand will get a visit from ato

      • how are they gonna know? Only way I can think of is if he snitches or someone in the company snitches…..

    • How is this any cheaper for him?

      Cash drawings have to be accounted for in the 'books or they have to skim cash off the top.

      If skimming off the top, then its better in the owners pocket than the OPs!

      Under a ABN, its all above board and can be paid directly to the OP without any creative accounting.

  • @ato @acurrentaffair

  • Whats more important to you? your friendship or the money you are getting from him

    You might just want to walk away and that will probably not affect your friendship.

    However if you are currently charging mates rates and then you need to double that rate or more you may find you are not friends anymore.
    Seems like you are charging way under market.

    • both important 50/50 :)
      100% agree with you though, money and friendships rarely end well, but it would be great if we could find a “balance” somehow.

      • +1 vote

        Friendship and business does not mix well at all.

        Treat the business side of the relationship, as if you were dealing with a random employer. When you bring friendship into the mix, either of you will feel used/taken-advantaged of.

        What is likely to happen in the future is, you'll both gain greater depth into the business world and see things differently from today. If your business relationship is held together via friendship (rather than a "cold" employer/employee relationship) at some point, both/either of you may see things differently and take a different path (e.g. either of you, may think you are better than the other person, this may then mean you'll go your separate ways).

        Just have an honest conversation on it and not to bring You/I'm your friend into the mix, and see how you go.

        Good luck.

  • It’s advisable that you get liability insurance to protect yourself and your assets in case a job goes wrong and you’re sued. Some consultancies require liability coverage up to $20 mil. A couple mil would likely be sufficient in your case.

    • FYI As a contractor you may be covered under your mate's PI/PL insurance in respect to the end-client, but you won't be covered if your mate decides to sue you so it's worth considering.

    • thank you, will look into this

  • i work in IT consulting currently and we charge $165ex per hour but only deal B2B

  • Depends how good your bikies are

  • I'm not sure in your situation, being both supplier and lackie. Have a look at geeks2u (officeworks). They charge $250+ (I can't remember exactly) and pay the geek ~$50.

  • How long is a piece of string?

    It really depends on the type of work you're doing.

  • How much is your "cash" rate?