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The ATO has recently released guidance on how they will approach the allocation of professional profits to individual professional practitioners (IPP) and related entities.
These guidelines apply from 1 July 2022. However, there are transitional provisions in place for pre-existing arrangements to continue applying the superseded guidelines until 30 June 2024.
Risk factors have been identified to help indicate if an IPP's income is being taxed appropriately or if the arrangement warrants the attention of the ATO. Professional practitioners operating through an entity where income is distributed/attributed to anyone other than the IPP may be affected, e.g. partnership, trust or company.
This encompasses all of the professional areas, including:
- Doctors & Medical Centres
- Lawyers
- Allied Health Practitioners
- Psychologists
- Accountants
- Engineers
- Architects
- Other professions requiring credentials to maintain practice
The ATO has provided a framework to assess the risk weighting of each arrangement. The framework considers where profits are allocated, how much they are taxed and whether practitioners are appropriately remunerated.
Assessment under the framework is not required by law but considered prudent in managing the risk of an ATO audit.
If you would like an assessment of your current arrangements -
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Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
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