find the latest legal job
Senior Associate - Litigation & Dispute Resolution
Category: Litigation and Dispute Resolution | Location: Melbourne CBD & Inner Suburbs Melbourne VIC
· Come work for a firm ranked in Lawyers Weekly Top 25 Attraction Firms
View details
Associate - Workplace Relations & Safety
Category: Industrial Relations and Employment Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Employer of choice · Strong team culture
View details
Freelance Lawyers
Category: Banking and Finance Law | Location: All Perth WA
· Freelance opportunities through Vario from Pinsent Masons
View details
Freelance Lawyers
Category: Other | Location: All Adelaide SA
· • Qualified lawyer with a strong academic background
View details
Freelance Lawyers
Category: Other | Location: All Melbourne VIC
· • Qualified lawyer with a strong academic background
View details
Final tax ruling for larger firms

Final tax ruling for larger firms

LAW FIRMS have been given 12 months notice by the Australian Taxation Office (ATO) to seek advice if needed and determine whether fees charged by their services trusts are appropriate. After…

LAW FIRMS have been given 12 months notice by the Australian Taxation Office (ATO) to seek advice if needed and determine whether fees charged by their services trusts are appropriate.

After consultation with professional and industry groups, the ATO last week issued a final ruling and guide to help law firms, mostly those with more than ten partners, as well as accountants and medical professionals, to determine whether fees paid under a service arrangement are tax deductible.

Tax Commissioner Michael D’Ascenzo said that since Federal Commissioner of Taxation v Phillips (1978), the Tax Office has accepted service arrangements as long as they were entered into for commercial reasons.

“However, we found deductions were being claimed for fees and charges which were grossly excessive relative to what most people would expect to pay for the services provided,” said D’Ascenzo.

“The final ruling confirms our view of the law that service fees will be deductible if the service arrangements are entered into for commercial reasons and the service fees are not grossly excessive,” he said.

Kelvin Fitzalan, Deloitte tax partner, said the ruling is a long time coming, but that his firm felt it contained no surprises. “The rule of thumb of what is an appropriate mark-up is quite low at three to five per cent but it is what we were expecting,” he said.

“The Commissioner has acknowledged that higher values could apply but at the same time made it clear that would need to be backed up by rigorous analysis.

“The firms this will affect most are those with practices of 10 or more partners, and I would strongly urge them to seek independent advice from an appropriately qualified specialist.”

A guide, also released by the ATO, is designed to help firms assess their own situation and provide them with “practical certainty”. But Fitzalan recommended that professionals using service trusts get advice to determine whether fees charged under current arrangements are appropriate. They cannot be disproportionate in relation to the benefits received, he said.

“Services performed by the trust must be distinct from the recipients’ activities. For example, the trust employs specialist staff to undertake the administrative functions relating to the trust,” he said.

“Where the size of the fees is not explained from a practical or business point of view, the Tax Commissioner may undertake a broader inquiry of the arrangements.”

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Final tax ruling for larger firms
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Jetski
Oct 23 2017
How to fail well
The legal profession is due for an attitude adjustment when it comes to perceived failures, accordin...
Consultation
Oct 23 2017
Lawyers slam rushed consultation for SA repeat offenders bill
The Law Society of South Australia has expressed concern for a proposal to roll out new laws amendin...
IBA
Oct 23 2017
The pursuit of happiness in the law
A panel of legal experts have explored how to define success in the legal profession, and how lawyer...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...