iscoverAs promotion season comes to an end and newly appointed professional services firm partners settle into their roles, they have been warned of looming practical and tax implications.
New partners should be wary of financial implications, accounting firm warns
25 July 2025
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9 minute read
With a promotion to partner comes the responsibility to be an aspirational role model; however, the significant practical and tax implications that also come hand-in-hand with the position can usually fly under the radar.
Speaking on a recent Under the Hood podcast episode, Ankit Sharma, partner at Pitcher Partners, said accounting firms needed to have conversations about what a partner role entails.
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The crucial conversations noted by Sharma included not only the role model responsibilities but the financial implications, such as how the structure of a practice impacted remuneration, tax payments, personal super contributions and insurance.
“Taking on the role of partner in a professional practice or as a newly appointed barrister is both exciting and challenging,” he said.
“The leap from employee to non-employee comes with a lot of opportunity and demands, but one element that is often overlooked is understanding the financial implications involved.”
Sharma noted that based on the structure of a firm an individual was working in or climbing the ranks in, once having become a partner, it was normal to become an “owner” of that business, as they would take up a stake in it.
“What I have found is, particularly when you go from a ‘pay as you go’ employee to a business owner, the structure starts coming into play, because obviously there’s certain business risk considerations, there’s certain tax considerations that sort of go hand in hand with that,” Sharma said.
“But I think what a lot of people don’t realise is that each professional services practice is structured differently. So, whether it could be as simple partnership company trust, or it could be a combination of all of those and particularly for some of the larger organisations, they also have various international entities that sort of flow into it.”
On the tax front, the structure of a business also impacted the remuneration of a partner, as it related to what parts of the business they had ownership interest in and the different sources they were paid from which impacted how they were taxed.
Sharma also flagged that no tax would be withheld from remuneration in the beginning, meaning the new role would come with a 12–14 month “tax-free holiday”.
New partners would receive gross payments and would only be taxed on these payments when they lodged their net income tax return, Sharma said.
“However, you will need to pay a significant lump sum tax payment to the ATO and then transition onto quarterly tax instalments. It usually takes at least two full year tax lodgements to reduce the lump sum tax payable upon lodgement of your tax return.”
To help mitigate this, Sharma recommended setting aside funds to fulfil the future payments as the “lumpy tax payables and associated quarterly instalments could be quite unpredictable”.
This could be done by having a separate offset or bank account for income tax payments or exploring potential tax planning opportunities within the new structure.
Along with these recommendations and cautions, Sharma said it was important as a newly appointed partner to enjoy the process, lean into it and say yes as often as possible.
“You’re going to be constantly learning as it’s a new skill set, it’s new things that you’re talking about, so it can feel like you’re a little bit lost at sea, but that’s quite normal. I don’t think you should ever be afraid to just have the conversation, ask the questions and keep learning.”
“The partner title does carry quite a bit of responsibility, but I think you’ve also got to sort of enjoy the ride and learn from every experience. We’re all human, and we’re going to make mistake,s but you must own up to those and just sort of run with it.”
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