Planners need to be alert as ATO renews scrutiny of service trusts
The Australian Taxation Office (ATO) has confirmed that it is taking another look at the so-called 'service trusts' used by accountants and lawyers, especially in circumstances such as a partner in a firm earning less in taxable income than an employee.
ATO deputy commissioner Mark Konza this week told the Tax Institute of Australia that the ATO had been looking at service trusts for a number of years and that it was currently concerned with the economic performance of such arrangements.
“Put another way, we are seeing partners in professional practices who are returning incomes which are very low compared to partnership profits,” he said.
Konza said the ATO was consulting with the industry and looking closely at such arrangements to improve its understanding of their operation and to ensure the correct application of tax law.
He said the ATO had looked at only a small number of cases but that, at an early stage, there was a need for professional firms to ensure they were getting the fundamentals right.
Konza said such firms needed to make sure what they were doing made economic sense and that they were actually and legally completing what they said they were doing.
AUTHOR
Mike Taylor
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