The ATO is watching your professional clients to see if they comply with the guidelines in PCG 2021/4 when allocating profits to individual practitioners. These guidelines apply to professional firms which include, but are not limited to, accounting, architecture, engineering, financial services, law, medicine and management consulting.
Direct quotes from the guidelines include –
- Para 25 – they “expect you to annually assess your eligibility to apply this Guideline” and “If you want to apply this Guideline, we expect you to document your assessment of, and also to review, your eligibility as your business or arrangement changes.”
- Para 107 – they will “”monitor outcomes over a period of time”
- Para 111 – they “may fact-check your assessment of your profit allocation. If you are unable to provide evidence to support your assessment, we may undertake further compliance activity.”
This new calculator will help you to assess any risk associated with profit allocations among your professional clients. The important features of this workbook include –
- It has a procedures checklist to assist with the process and to check on the client’s eligibility to apply the guidelines;
- You can do an actual risk assessment for 2024;
- And if any issues are found, you can project an assessment for 2025 with a view to making adjustments to future allocations of profit;
- You can use just one file to assess the risk for any number of practitioners within the same firm, from one to all;
- Automatic calculations are performed for income tax, FBT and superannuation contributions tax;
- For guidance, the file includes a sample assessment showing how to enter data for most situations; and
- You can copy suggested text explaining the guidelines and the client’s risk rating and paste it into an outgoing email or letter to your client.
Click here to see a video demonstration of this calculation.
This calculator cannot be used for the old guidelines suspended in 2017.
Calculations/2024/Professional Profits