Business advice
and accounting

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com.au

Level 13, 68 York Street,
Sydney NSW 2000

Professional Firms Allocation of Profits under review

29 March 2021

by David Prichard

The ATO has suspended the application of its guidelines in relation to the use of structures and Everett assignments as of 14 December 2017 which apply to professional practices such as lawyers, architects, doctors etc.

In 2015 the ATO released guidance in relation to Everett Assignments and the safe harbour metrics it would apply when considering the splitting of income from professional partnerships.

The guidance adopted an effective “look through” approach to the income levels of Individual Professional Practitioners (IPP).  The ATO provided three tests to determine whether a taxpayer is low or high risk.  These were as follows:

  • IPP receives 50% or more of the income in their own hands from the firm;
  • IPPs & associates effective rate of tax 30% or more; and
  • IPP receives an “appropriate return” for services provided.  Reference to professional staff in a firm who provide equivalent services (i.e. salaried partners) or comparable firms.

If one or more of the above was satisfied, then the ATO would generally consider the taxpayer to be low risk and therefore unlikely to be the subject of direct compliance activity.  Where none of the above tests can be satisfied then the taxpayer is categorised as high risk and is likely to face compliance activity.

The ATO historically stated that the guidelines would be reviewed in 2017 and as part of the process it has identified arrangements that go beyond the scope of the guidelines and demonstrate high risk factors, including the use of related party financing and self-managed super funds.

The use of self-managed superfunds has attracted the attention of the ATO across several areas due to the low tax rate within superannuation, the reduced ability to contribute into superannuation and also whether the sole purpose test is met.

In suspending the arrangements, the ATO advised that professionals who have entered into arrangements before 14 December 2017 which comply with the guidelines and do not exhibit high risk factors can rely on those guidelines.

Arrangements entered into prior to 14 December 2017 exhibiting any of the high risk factors may be subject to review with any new guidelines applying prospectively.

If you are considering changing your structure whether it be in relation to a professional practice or not, contact your ESV engagement partner to ensure the best structure is established for your business needs.