The professional bodies have released their joint submission to ATO, as part of its consultation, regarding draft Practical Compliance Guideline PCG 2021/D2 (Draft Guideline) – which is about how it will allocate auditing resources to structures and other arrangements professional firms put in place, that affect who the end recipient is, of the income of those firms. Various other professional bodies made separate submissions, as well.

See below, for further details.

[Tax Month – April 2021]



The Draft Guideline provides a risk assessment framework to ‘assist’ individual professional practitioners to self-assess their risk – which is controversial in that the tax profession and professional firms (who overlap considerably) see this as overly ‘corralling’ taxpayers into an overly restrictive range of structures and arrangements – steering firms into ‘swimming between the flags’, that are not supported by tax law. I’ve canvassed this in a previous TT article.

Chartered Accountants ANZ, CPA Australia, Institute of Public Accountants, the Business Law Section of the Law Council of Australia and The Tax Institute (“joint bodies”) have made a joint submission on PCG 2021/D2. Among other things, it states that there has been a significant shift in the risk scoring of arrangements between the suspended guidelines and the new Draft Guideline. Not only is the ATO’s basis for that shift not explained, it is not justified by reference to either the apparent rationale for suspending the original guidelines or the Pt IVA provisions.

Chartered Accountants ANZ has released its additional¬†separate submission on the Draft Guideline. The submission states that the structure of the Draft Guideline fundamentally reverses the approach under the prior guidelines, “but no justification has been provided for this change”. The structure of the suspended guidelines was that if an individual professional practitioner (“IPP”) met one of the 3 criteria, there was an assumption that their arrangements were commercially justified, and no further work was required in this regard. The Draft Guideline now requires the commercial justification to be made out as a Gateway and then having made this out, if the economic outcomes are not at acceptable levels, the justification is effectively rejected. CA ANZ members have queried why such there has been such a fundamental change and what is the ATO’s justification.

Also, the Law Council of Australia has made its own submission too.

[28.4.21 – LTN 78, 27/4/21]


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