Tax Arrangements for Professional Firms - Time to Get Serious

Like a lot of news, the impact hits on first announcement, then as time goes on there is always plenty more going on to take our attention. The ATO’s issuing of its compliance approach to the allocation of professional firm profits could well fall into this category. Issued during 2021, there has since been plenty of tax guidance material on other matters to more than fill a tax practitioner’s mind. However, whilst the ATO indicated transitional arrangements can apply in some cases, now is the time to ensure both your own house and that of relevant clients are in order, including:

• Which industries, services and arrangements do the guidelines apply to?
• The “gateways” and what is required to pass through them, including:
  • action to take if “gateways” tests cannot be passed
• How to assess a firm’s risk rating
• ATO’s compliance approach based on the various risk levels
• ATO have indicated the starting point for a review of an arrangement will be reviewing supporting “contemporaneous” documentation:
  • what type of documentation should you be retaining
• With recent ATO success using Part IVA, is this now a more potent weapon of choice to use against certain professional firm arrangements?
• How would Phillips (TR 2006/2, IT 276) be placed if he applied PCG 2021/4 to his practice arrangements?
• Practical examples