How to create a Professional Firm Profit (PFP) Tax Advice Report

Take a few moments to learn how to best use multiple tax planning scenarios to create a quick and accurate client advice report for Individual Professional Practitioners (“IPP”)

The PFP Tax Advice Report will automate your advice document and risk zone assessment for Professional clients as per PCG2021/4 

Before generating the report be sure to follow these steps in the following order:

1. Add the client & scenarios and select a recommended scenario

Start a new TaxPlan and add the required entities manually or add single entities directly from XPM.

Very important: Ensure the first entity added to all the scenarios is always the relevant Individual Professional Practitioner (IPP). 

Do not include multiple Individuals in one TaxPlan as each individual needs a separate TaxPlan and advice report.

2. Create a Base Scenario which reflects the current income and distributions 

For the first entity IPP in the scenario include:

• The ATO has in September 2024 updated its website guidance to state that a professional’s proportion of profits retained by a Professional Firm at the end of a financial year should be included in their profit entitlement assessment under PCG 2021/4. So you need to enter in the “Net Business Profits” Cell of TaxPlan all of the following for the Professional:

  • Profit share received
  • Trust distribution received
  • Dividends received (including franking credits)
  • Share of any income retained by the Professional firm for the year

  IMPORTANT:

  If a Professional includes in their share of income retained earning by a Professional Firm Company and these are paid out to the Professional in a future year, you will need to REDUCE the income allocation to the Professional in the future year by the amount already assessed in their income in the prior year.

• Salary / Employment Income from Firm
• Concessional Super Contributions
• Grossed Up Fringe Benefits
• Other Non-Firm Income for a Company or Individuals.
• Firm related deductions (except concessional super). Deductions are added as follows:
  
  • Select "Professional Firm Deductions" option from Tax Deductions list
  • Add any other additional Non-Firm related Deductions separately

3. Produce the report to check the results and risk score for the base scenario

This report downloads as a MS Word document.

Review the Scenarios and validate the Risk Zone calculations and scores.

4. Duplicate the Base Scenario and create a new Recommended Scenario if required

Add a second recommended scenario to ensure you include a "Green Zone" scenario for your client. This scenario should reflect at least a scenario where the final risk score is less than or equal to 7. 

5. Download the final Tax Advice report and prepare to send to your client

This report downloads as a MS Word document.

Manually add the client's casual or first name in the opening and also closing paragraph.

Review the Scenarios and validate the Risk Zone calculations and scores

Create a PDF of the final report and send this using your preferred delivery method and save this in your client files.