ATO are targeting lawyers – Are you ready?
The ATO has released updated guidelines on their compliance program targeting professional firms including law firms.
Their compliance program will be targeting principal practitioners that allocate profits through a partnership, trust or company structure to reduce their tax liabilities. It will begin with the 2014-15 financial year.
Practitioners that do not meet one of the 3 benchmark tests will be considered high risk and may be selected for a compliance review.
The 3 benchmark tests are:
1. Equivalent remuneration – The Principal Practitioner receives assessable income from the firm in their own hands above the level of remuneration paid to the upper quartile of the highest band of professional employees providing equivalent services.
2. 50% entitlement – 50% or more of the income to which the practitioner and their associated entities are collectively entitled is assessable in the hands of the practitioner.
3. 30% effective tax rate – the effective tax rate must be 30% or higher on both:
1. income from the firm to which the principal practitioner is entitled, and
2. income from the firm to which the principal practitioner and their associated entities are collectively entitled.
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 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 steve@nymbus.com.au
- Posted by Steve Pickering
- On July 9, 2015
- 0 Comments