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ATO anti-avoidance guidelines target professionals

September 2014

Recent guidelines issued by the Australian Tax Office has signalled how it is likely to apply anti-avoidance rules to professionals who derive income from consulting or advisory roles. 

While the guidelines are not law, they are indicative of how the ATO  will assess tax compliance risks in a wide variety of professional firms, including lawyers, accountants, valuers, management consultants, engineers, architects and many others. 

What is the the ATO's concern with professionals? 
The ATO specifically looking at the business structures used by individual professional practitioners (IPP), such as partnerships, trusts or companies, where equity holders contribute their skills to the business and the allocation of profits where the income of the firm is not Professional Services Income
 
Our initial perspective on the guidelines
While the ATO has said it will consult on practical issues that result from the application of the guidelines, we do not agree with the ATO's approach to their application to professionals. 
 
The main concern is that there is no legislation in place requiring that these guidelines should be applied, but secondly this is effectively an attempt to tax individual professional practitioners on an income equivalent to their highest paid employees. 
 
What we're doing for clients
In the meantime, Bates Cosgrave has written to our professional bodies (ITA, the newly merged ICAANZ and NTAA) to lobby on our behalf for our objections to these guidelines. 
 
We are also intending to work closely with our clients to ensure that they are appropriately covered while issues with the guidelines are flushed out. Keep an eye out for your October newsletter, where we will explore the guidelines in more detail. 

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Last updated September 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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