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Professional firms – will your arrangements for distributing profits be reviewed by the ATO?

[Webinar running time: 1 hr 25 mins]

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The ATO has issued new guidance about when it will review and audit professional businesses, based on how they distribute profits to their principals and associated entities.

The ATO is looking particularly at businesses operating in the accounting, architectural, engineering, financial services, medical services and legal industries. The ATO’s concern is that businesses in these industries are diverting income away from the individuals providing services, in a way that results in less tax.

In PCG 2021/D2, the ATO sets out two ‘gateway’ tests, and then a scorecard, to determine whether a business’s arrangements are low, medium or high risk.

Using case studies to work through the ATO’s draft PCG, as well as the correct application of the law, after this webinar, you will be able to identify:

  • whether a business’s income is personal services income or business income that is caught by the draft PCG
  • whether a business passes the ATO’s first ‘gateway’ test of having a sound ‘commercial rationale’
  • when the ATO is unlikely to accept ‘asset protection’ as a reason for a business’s structure
  • the documents the ATO expects to see and be followed in practice
  • specific types of arrangements that will cause a business to fail the ATO’s second ‘gateway’ test
  • the information you need to complete the ATO’s scorecard for identifying risk
  • the documents you will need to show that a business is in the low risk zone
  • what happens if a business is in the medium or high risk zone.