The ATO recently announced that it will be focusing on reviewing professional practices’ tax structures starting with the 2014-15 income tax year. Professional practices include lawyers, accountants, architects and medical professionals.
The ATO’s review will involve looking at how professional practices are structured to ensure that the principal practitioners of the practice are not breaching tax avoidance legislation with structures that allocate profits to their family and associated entities.
The tax structures that will be reviewed include companies and trusts and partnerships of companies or trusts.
Practitioners that the ATO considers as high risk may be selected for an audit as part of its compliance program.
Practitioners that satisfy one or more of the following guidelines will reduce the risk of being investigated:
- The practitioner receives assessable income in their own hands at least equal to the level of remuneration paid to the highest band of professional employees providing equivalent services in the firm; and/or
- 50% or more of the income to which the practitioner and their associated entities are collectively entitled (whether directly or indirectly through interposed entities) in the relevant year is assessable in the hands of the practitioner, and/or
- The practitioner and their associated entities both have an effective tax rate of 30% or higher on the income received from the firm.
We recommend that all professional practices should have their tax structure reviewed in light of these new ATO guidelines as a matter of urgency. We can determine whether you are exposed to an increased risk of audit or whether opportunities can be identified to more appropriately structure remuneration arrangements.
If you would like to discuss your situation with us, please contact Steve Pickering on 0434 275 273 or at firstname.lastname@example.org.
- Posted by Steve Pickering
- On February 17, 2015
- 0 Comments