What are the guidelines about?

PCG 2021/4 sets out the ATO’s compliance approach to the allocation of profits or income from professional firms in relation to an individual professional practitioner (IPP).

Who does it apply to?

The guidelines are relevant to “professional firms”.  A professional firm is any business structure that provides professional services, ie. customised, knowledge- based services.

Examples include:

Additional conditions for the guidelines to apply are:

• The individual professional practitioner (IPP):
  • provides professional services to clients of the firm; and/or
  • is actively involved in the management of the firm.
• The IPP is an equity holder, directly or through an associated entity.
• The income of the firm is not subject to the Personal Services Income (PSI) rules.

(the income may be income from personal services, but must not be subject to the PSI attribution rules)

EXAMPLE

Steven is a sole director in a management consulting firm.  He provides advice directly to clients as well as employing and managing a team who assist with providing advice and administrative work.  The firm’s income is not subject to the PSI rules.  Steven owns the shares in his company via his discretionary family trust.

Steven is an IPP and equity holder in a professional firm and the guidelines would apply to him.

Click here to download our fact sheet, which explains the guidelines in more detail and how professionals can self assess the risk level of their arrangements.