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    [201806] Professional firms – Allocation of profit guidelines and Everett Assignment web material

    Registered: February 2018

    Expected completion: December 2019

    Status

    The ATO is compiling feedback provided by the working group and assessing alternative risk assessment methodologies proposed.

    In June 2018 the ATO provided further certainty regarding the year ending 30 June 2018, stating that those taxpayers who have entered into arrangements prior to 14 December 2017 which comply with the guidelines and do not exhibit any of the high risk factors outlined below can continue to rely on the suspended guidelines for the year ending 30 June 2018.

    Purpose

    To review existing ATO guidance products with a view to issuing revised and updated guidance.

    Description

    The 'Assessing the Risk: Allocation of profits within professional firms guidelines' and Everett Assignment web material published in 2015 stated that they would be reviewed in 2017. In reviewing the guidelines the ATO has become aware they are being misinterpreted in relation to arrangements that go beyond the scope of the guidelines.

    The ATO is consulting with interested stakeholders on replacement guidance.

    Some of the concerns identified to date include the following arrangements:

    • lack of any meaningful commercial purpose regarding arrangements such as:            
      • disposal of an equity interest through multiple assignments
      • the creation of new discretionary entitlements such as Dividend Access Shares
      • utilising amortisation leading to differences between tax and accounting income
    • disregard for Capital Gains Tax (CGT) consequences and inappropriate use of CGT concessions
    • assignments where profit sharing is not directly proportionate to the equity interest held
    • the creation of artificial debt deductions
    • undertaking an assignment to dispose of an equity interest to a self-managed superannuation fund
    • assignments where the arrangement is not on all fours with the principles of Everett and Galland.

    Who we are consulting

    • professional bodies, including representatives of tax and accounting professional associations
    • tax practitioners

    Contacts

    Simon Webster, Director, Professional Firms
    Simon.Webster2@ato.gov.au telephone (03) 9275 5328

    Chris Hill, Law Interpretation officer, Private Wealth
    Christopher.Hill@ato.gov.au telephone (03) 9275 4277

      Last modified: 08 Jul 2019QC 54486