Allocation of profits within professional firms

By Ashley Davidson - December 20, 2017

The ATO has recently released a bulletin on the professional services income splitting guidelines.

When the ATO published the 'Assessing the Risk: Allocation of profits within professional firms' guidelines and Everett Assignment web material in 2015 it stated they would be reviewed in 2017.

In reviewing the guidelines the ATO have become aware they are being misinterpreted in relation to arrangements that go beyond the scope of the guidelines.

The ATO have observed a variety of arrangements exhibiting high risk factors not specifically addressed within the guidelines, including the use of related party financing and self-managed super funds.

In light of these concerns, the ATO is suspending the application of the guidelines and Everett Assignment web material as of 14 December 2017. Individual professional practitioners contemplating entering into new arrangements from 14 December 2017 are encouraged to engage with the ATO through early engagement or via professionalpdts@ato.gov.au.

Those who have entered into arrangements before 14 December which comply with the guidelines and do not exhibit high risk factors can rely on those guidelines. Arrangements entered into prior to 14 December exhibiting any of the high risk factors may be subject to review.

The ATO will begin consulting with interested stakeholders in early 2018 on replacement guidance and the application of any required transitional arrangements, noting new guidance will apply prospectively.

What should you do?                                                                         

If you are uncertain about how the law applies to your existing circumstances you should engage with a Pitcher Partners advisor as soon as possible.


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