If you only need email — no Word, Excel, Teams or the rest of the Microsoft 365 suite — Exchange Online is the standalone licence that does the job. Staff still reach that mailbox through the familiar Outlook apps, including Outlook on the web and Outlook mobile, because Exchange Online is the cloud messaging service sitting behind them, and an Exchange Online plan licenses the mailbox itself rather than the app. The catch is that it ships in two flavours, Plan 1 and Plan 2, and roughly half the businesses Frontrow talks to are on the wrong one. Some are paying for Plan 2 features they never switch on; others are on Plan 1 and quietly carrying a compliance gap they don't know about. This guide walks through the real differences, what they cost in Australia in 2026, and the cheaper archiving workaround that can save you the upgrade entirely.
The short version
Plan 1 is the entry-level mailbox: a 50GB mailbox, plus a basic archive that does not auto-expand. Plan 2 doubles the primary mailbox to 100GB, adds an unlimited auto-expanding archive (up to 1.5TB per user), and unlocks the retention and compliance features most regulated businesses eventually need — litigation hold, in-place hold, and Data Loss Prevention (DLP). Everything in Plan 1 is in Plan 2; Plan 2 is purely additive.
What you actually pay (indicative AUD, 2026)
Microsoft publishes these as monthly per-user prices on an annual commitment. The headline global list is roughly USD $4/user/month for Plan 1 and USD $8/user/month for Plan 2. Translated and sold through Australian partners and CSP resellers, that lands at around $5–6/user/month for Plan 1 and around $10–12/user/month for Plan 2.
- Exchange Online Plan 1 — approximately $5.50/user/month (indicative AUD list, ex GST — confirm at purchase)
- Exchange Online Plan 2 — approximately $11/user/month (indicative AUD list, ex GST — confirm at purchase)
- Exchange Online Archiving add-on — approximately $4/user/month (indicative AUD list, ex GST — confirm at purchase)
Two notes on those numbers. First, exact AUD pricing moves with the exchange rate and your reseller's margin, so treat the figures above as a planning baseline, not a quote. Second, Microsoft prices these in USD and bills annually — paying monthly-with-no-commitment, where it's even offered, costs more per seat. Always confirm the final AUD figure on your order form before you commit a whole tenant to it.
Mailbox size and archiving — the part most people get wrong
The 50GB versus 100GB primary mailbox difference is easy to understand. The archiving difference is where the real money and risk sit, and it's poorly explained almost everywhere.
Plan 1 gives you an archive mailbox, but it's a fixed size and it does not auto-expand. Once it fills, it stops. Plan 2 gives you auto-expanding archive: Exchange keeps allocating additional storage as the archive fills, up to a practical ceiling of 1.5TB per user. For a long-tenured staff member with fifteen years of email, that's the difference between an archive that quietly works forever and one that hits a wall and starts bouncing or stops capturing.
Compliance: litigation hold, in-place hold and DLP
This is the genuine dividing line for regulated Australian businesses — financial services, healthcare, legal, government suppliers and anyone with a records-retention obligation.
Litigation hold and in-place hold let you preserve a mailbox so that anything a user deletes or edits is silently captured and kept in a hidden Recoverable Items folder. If you're ever subject to discovery, an investigation, or a Fair Work or regulator request, this is how you guarantee nothing has been quietly purged. It requires Plan 2 (or an enterprise plan like Microsoft 365 E3/E5). It is not available on Plan 1 on its own.
DLP — Data Loss Prevention — is the other Plan 2-only capability. It inspects outbound mail for sensitive content (think credit card numbers, tax file numbers, health identifiers) and can warn, block or encrypt automatically. For any business handling regulated personal information under the Privacy Act, DLP is often the cheapest way to put a real control in front of accidental data leakage over email.
The cheaper archiving workaround
Here's the angle most comparison articles skip. If the only reason you're considering Plan 2 is the auto-expanding archive — not litigation hold, not DLP — you don't necessarily need to upgrade the whole seat.
Microsoft sells a standalone Exchange Online Archiving (EOA) add-on at roughly USD $3/user/month (around $4 AUD indicative, ex GST — confirm at purchase). Bolt it onto a Plan 1 mailbox and you get the auto-expanding archive, without paying the full Plan 2 premium. That can make sense when you have a handful of heavy-mailbox users on an otherwise Plan 1 tenant.
How to decide quickly
- 1Do you have any legal, audit or records-retention obligation to preserve mailboxes? If yes — Plan 2. Stop here.
- 2Do you need to inspect or block sensitive data leaving over email (TFNs, card numbers, health data)? If yes — Plan 2 for DLP.
- 3Are your mailboxes simply large and growing, with no compliance need? Plan 1 plus the Exchange Online Archiving add-on on the affected users is likely cheaper.
- 4None of the above, mailboxes comfortably under 50GB? Plan 1 is all you need.
What Frontrow would actually do
In practice Frontrow rarely recommends buying standalone Exchange Online for a whole organisation in 2026. If a business needs more than email — Office apps, Teams, SharePoint, OneDrive — Microsoft 365 Business Standard or Business Premium usually delivers far better value per seat than Plan 1 or Plan 2 on its own, and Business Premium bundles the Plan 2-grade compliance features anyway. Standalone Exchange Online earns its place in specific scenarios: shared mailboxes, service accounts, kiosk and frontline staff who only need email, or organisations deliberately keeping their estate lean.
The usual move is to mix licences rather than treat the tenant as one tier. Put your knowledge workers on the M365 plan that fits, drop email-only and shared accounts onto Exchange Online Plan 1, and reserve Plan 2 (or the EOA add-on) for the specific users with a compliance hold or archive-growth reason. Licensing per-need rather than per-tenant is where most of the savings — and most of the avoided risk — actually live.
Before you commit, audit who genuinely needs litigation hold or DLP versus who just has a big mailbox. That single distinction usually settles the Plan 1 versus Plan 2 question for the whole organisation, and often reveals you're over-licensed on one side and exposed on the other.