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  • Everett assignments

    When we published the Assessing the Risk: Allocation of profits within professional firms guidelines and Everett Assignment web material in 2015 we stated they would be reviewed in 2017.

    In reviewing the guidelines we have become aware they are being misinterpreted in relation to arrangements that go beyond the scope of the guidelines.

    We have observed a variety of arrangements exhibiting high risk factors not specifically addressed within the guidelines, including the use of related party financing and self-managed super funds.

    In light of these concerns, we have suspended the application of the guidelines and Everett Assignment web material as of 14 December 2017.

    Individual professional practitioners contemplating entering into new arrangements from 14 December 2017 are encouraged to engage with us through:

    Those who have entered into arrangements before 14 December which comply with the guidelines and do not exhibit high risk factors can rely on those guidelines. Arrangements entered into prior to 14 December exhibiting any of the high risk factors may be subject to review. We encourage those who are uncertain about how the law applies to their existing circumstances to engage with us as soon as possible.

    Recent consultation on the guidelines

    After suspension of the guidelines, we committed to consulting with professionals across the market to help us ensure the draft guidance product appropriately reflects the environment. Consultation has been ongoing since early 2018, with a view to publishing draft guidance.

    We have concerns with the following arrangements, which were noted during our review:

    • Lack of any meaningful commercial purpose regarding arrangements including, but not limited to  
      • 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 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 super fund.
    • Assignments where the arrangement is not on all fours with the principles of Everett and Galland.

    We encourage submissions as soon as possible as we work towards providing certainty.

    Next steps:

      Last modified: 21 Jan 2019QC 46120