Professional firm profit allocation arrangements: assessing the risk

The ATO recently published PCG 2021/4 Allocation of professional firm profits – ATO compliance approach for individual professional practitioners (IPPs) when considering the allocation of profits by professional firms.

The ATO recently published PCG 2021/4 Allocation of professional firm profits – ATO compliance approach for individual professional practitioners (IPPs) when considering the allocation of profits by professional firms.

PCG 2021/4 is about arrangements where: taxpayers redirect their income from a business or activity to an associated entity that includes income from their professional services; the outcome is that they significantly reduce their tax liability. PCG 2021/4 applies from 1 July 2022 and clarifies how the ATO assesses the risk and their compliance approach to the allocation of profits in professional firms.

The ATO requires professional clients to have an average tax rate of between 30% – 35% other the ATO are likely to review and start the “please explain” process that may lead to a tax audit.

The ATO are actively contacting IPPs who may be in a higher risk category to:

  • understand their unique arrangements and structures
  • provide them with practical assistance and guidance about how they can mitigate any risks that may present.

If an IPP wishes to discuss their profit allocation arrangement with us, they can contact us by email us at maria@fctax.au

Unit 5 /12 Navigator Pl, Hendra, Queensland 4011.

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