As we come to the end of the financial year, we are hearing of some confusion about the state of play on the ATO’s guidelines on the allocation of professional firm profits.

The ATO issued new guidelines in the form of PCG 2021/4 in December 2021. These new guidelines only apply from next financial year, ie for profits distributions from 1 July 2022 onwards.

For the current year ending 30 June 2022, we should be looking to apply the ATO’s old suspended guidelines.

The new guidelines contain ‘gateways’ which must be satisfied before they can be used by owners/equity holders in professional firms.

You can read our detailed article on the draft version of the guidelines, PCG 2021/D2.

They also contain some important transitional relief. Existing owners/equity holders are able to continue to apply the old suspended guidelines for the next two financial years, i.e. years ending 30 June 2023 and 2024, provided they comply with those old guidelines, their arrangements are commercially driven and certain high risk factors are not present.

We are able to assist in advising on the application of the ATO’s guidelines to particular firm structures, as well as making submissions to the ATO in cases which do not strictly meet the gateways for applying the new guidelines.

In the meantime, a friendly reminder that trustee distribution resolutions must be made by 11.59pm today.