Allocation of profits by professional firms - draft guidelines released

In brief - Finalised guidelines will apply from 1 July 2021 although transitional provisions may apply to arrangements entered into before 14 December 2017

The Australian Taxation Office (ATO) has released its draft guidelines on the allocation of profits by professional firms in PCG 2021/D2.

The draft guidelines seek to provide a framework to assess the tax risk of arrangements under which a professional diverts profits from a professional services business of which they are a member to an associated entity to reduce income tax.

When finalised, the draft guidelines will replace the suspended and interim guidelines in place since 2014. My 2018 article Allocation of profits within professional firms interim guidelines released considers the suspended and interim guidelines in more detail. The ATO intends to review the new guidelines regularly and revise them if necessary.