The ATO have released new guidelines on how they approach common trust distributions and allocations of professional firms’ profits. In summary, this means that tax planning may look slightly different this year as we account for these new guidelines when discussing your distributions, which may have to change from previous years. During our usual tax planning meeting, we will make sure we are taking into account any changes of risks, and put forward a plan that you’re comfortable with.
Do you have a trust?
If you have a trust, you may need to change the way you distribute your profits. If you have previously distributed to people such as adult children and parents, we may need to make changes as to how they receive their benefit based on the ATO’s new guidelines.
What this means for you
We will be in touch to organise a tax planning meeting before the end of June as normal. During this meeting, we will work with you to understand how these changes may affect you and reduce or manage your risk accordingly. This may mean making adjustments to how we have previously distributed your profits.
In the meantime, if you have any questions or concerns please feel free to get in touch before then. As always, we’re here to help.
Do you own or operate a professional firm?
“Professional firms” refers to if you operate a business offering customised, knowledge-based services to clients in professions such as accounting, architecture, engineering, financial services, law, medicine and management consulting.
If this is you, the ATO has updated their guidelines on how they approach the way you distribute the profits of your business to ensure you are paying a reasonable amount of tax, and we may have to reconsider how you allocate your profits to reduce and manage your risk.
What this means for you
The ATO have created a framework of three tests to determine whether you are paying a reasonable amount of tax. During tax planning, we will have a discussion to assess your risk level, and make adjustments to reduce or manage risk where necessary.
As always – please don’t hesitate to contact us with any concerns, we’re more than happy to help.
