ATO's view on allocation of professional firm profits

In 2021, the ATO released a draft guideline in respect of the allocation of profits by professional firms.

The ATO has now finalised its view and prepared a Practice Compliance Guideline PCG 2021/4 which applies from 1 July 2022.

The guideline will apply to a variety of professions including law, accounting, financial services, medical, architecture, engineering and management consulting.

The framework in the guideline will be used to differentiate risk and tailor the ATO’s engagement with Individual Professional Practitioners (IPP).

The final statement, contained in the Practical Compliance Guideline (PCG) 2021/4 includes examples as to how the ATO will apply the guidelines and with some concessions around the risk factors.

Professional firms should consider:

• How the gateways and risk assessment criteria affect your firm and its professionals
• What firms and professionals have to do to qualify for the two-year transitional period to 1 July 2024 for arrangements that were low risk under the Suspended Guidelines
• How the final PCG fits in with other tax compliance guidelines
• Identifying & addressing potential obstacles in adopting the new arrangements.

 To access the full Guideline document please visit the ATO website.