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
Recommended for you
AZ NGA has entered into a strategic partnership with national advice firm MiQ Private Wealth, as a way to provide a succession solution, as well as career development opportunities for staff.
While the advice profession struggles under growing operating costs, Adviser Ratings has found more than half of practices – some 58 per cent – that generate less than $250,000 in revenue report no profit at all.
The Federal Court has ordered the freezing of assets and the appointment of receivers to two entities linked to Australian Fiduciaries, ASIC’s latest move in an ongoing investigation into the company’s managed investment schemes.
Off the back of the August adviser exam results, the profession has seen 17 new entrants hit the Financial Adviser Register (FAR) this week, helping numbers return to positive territory.
