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The Tax Office’s 30-month-long review of how professional firms engage in income splitting has yet to result in draft guidance, let alone definitive guidelines, as the professional bodies take aim at the ATO’s consultation process.
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ATO cops backlash on delayed Everett assignment guidelines
24 July 2020
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In a scathing submission to the ATO, a group of organisations — including the joint professional accounting bodies — has now criticised the agency’s ongoing consultation process on guidance around how professional practices allocate income, which includes the use of service trusts and the Everett assignment.
They have complained that the ATO has failed to consult them on soon-to-be-released draft guidelines, despite setting up a working group back in early 2018 to specifically consult on the matter.
“Two and a half years have passed since consultation began,” said the joint submission. “We understand that a draft document is ready for release for public consultation.
“Members of the Working Group report they have not yet been consulted on a complete version of the draft guidelines.”
The submission has been signed by Chartered Accountants Australia and New Zealand, CPA Australia, Grant Thornton, Institute of Public Accountants, Law Council of Australia, Law Firms Australia, National Tax and Accountants’ Association Ltd, Pitcher Partners, the Tax Institute and William Buck.
Partners in professional services firms have been left waiting for new guidance after the ATO withdrew its “Assessing the Risk: Allocation of profits within professional firms guidelines” and “Everett Assignment” web material in late 2017.
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While no new guidance has been issued since, the ATO has sought to reassure partners who have entered into arrangements prior to 14 December 2017 that they can continue to rely on the suspended guidelines for the year ended 30 June 2020.
The joint organisations have now urged the ATO to provide them with the draft guidelines to help speed up the process of finalising new guidelines ahead of the 2021–22 income year.
“The Joint Organisations urge the ATO to engage in thorough consultation on the draft guidelines with the Working Group and the professional associations to ensure all relevant technical issues are considered prior to releasing the draft guidelines for public consultation,” the joint submission said.
“The Joint Organisations are not looking to delay the release of the draft guidelines. On the contrary, we consider that the uncertainty caused by the withdrawal of the original guidelines has gone on too long.
“Rather, we are trying to ensure that the guidelines have been carefully considered so that, upon their release for public consultation, they are not unduly further delayed by issues being raised in the public consultation process that could have been uncovered and resolved in a targeted consultation process.”
‘Does not represent consultation’
The submission has also taken aim at the ATO’s handling of the consultation process since it was initiated in early 2018.
The joint organisations argue that consultation was limited to a “handful of meetings” where participants were given just a short time to review documents, and were not allowed to hang on to these documents to be “given mature thought”.
“We understood that the Working Group was established to provide targeted consultation on the revised guidelines. Several Working Group members took it upon themselves to provide a confidential submission to the ATO in November 2019 in an attempt to make sure their views were formally provided to the ATO, particularly as they had felt unheard during the consultation process,” the submission said.
“The above-described process does not represent consultation on the revised guidelines in any meaningful [way].”
The joint organisations have requested that the ATO provide them with a two-week consultation window ahead of public consultation in September.
“This would give all taxpayers affected by the revised guidelines sufficient advance notice ahead of the start of the 2021–22 income year to determine the impact of the new guidelines,” the submission said.
“It also ensures a timely culmination of the targeted consultation process.”
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