Finding Balance Within the Allocation of Profits within professional firms Guidelines PC 2021/4

Traffic Lights

The industries that are affected by the Allocation of Professional Firm Profits Guidelines are the service-based businesses where you are selling knowledge or expertise. If you are using a trust or a company to run your service-based business, they want to attribute as much money as they can in the expert’s (owner’s) name.

Let’s say Ben Walker runs Inspire; the more profit that ends up in his personal name, he gets taxed at a higher rate, and the less risk the ATO deems on potentially breaking these guidelines. 

The guidelines provide a self-assessment risk framework broken into three zones:

  • Green = low risk
  • Amber = moderate risk
  • Red = high risk  

The higher the risk, the more resources the ATO will allocate to understand the existing arrangement and may request you to make the required adjustment. The ATO may proceed with an audit if the arrangements remain high risk.

It doesn’t mean 100% of your business’ profit needs to end up in your own name, but we need to find the balance that we see as fair where we sit within these rules.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Share This

Select your desired option below to share a direct link to this page.
Your friends or family will thank you later.