ATO deputy commissioner Michael Cranston said professional practices may legitimately operate as a partnership of discretionary trusts or through similar structures but should be aware of the risks involved.
“We’ve released pragmatic, clear advice for professional firms about how to risk assess their remuneration arrangements.”
“The draft guidelines set out what we consider to be low-risk, legally effective arrangements and what we consider to be high-risk arrangements that might attract our attention,” Mr Cranston said.
Robert Jeremenko, The Tax Institute's senior tax counsel acknowledges the ATO’s need to risk assess professional practices but cautioned the work should not taint legitimate business structures.
“The guidelines are a blunt instrument based on effective tax rates rather than legislation and case law,” said Mr Jeremenko.
“The ATO should consult widely and publicly before finalising these guidelines to ensure that they are based on an understanding of how professional practices function in today’s economy,” Mr Jeremenko said.
The ATO raised concerns about these arrangements in the Compliance Program for 2011/2012, and has since consulted with a working group of representatives from industry, resulting in the co-design of these guidelines and the broader approach to managing these compliance risks.
The guidelines are being issued as a working draft for ongoing public consultation and will be applied from the 2014/2015 income tax year.