In a sharp departure from their Big Four peers, EY and KPMG are continuing to allow partners to leverage Everett assignments — a legally sanctioned yet highly scrutinized tax-minimization strategy. Despite warnings from the Australian Taxation Office (ATO) and growing public criticism, both firms have opted to stay the course.
What’s an Everett Assignment? This structure, based on a 1980 High Court ruling, enables professional firm partners to assign part of their income to spouses or related entities, effectively reducing their tax liabilities. The ATO acknowledges the legality of these arrangements but flags many as "high risk" if lacking clear commercial justification.
Firm Positions:
EY reports that around 30% of its partners currently utilize Everett assignments.
KPMG allows the structure too, with fewer than 140 of its 700 partners participating. The firm emphasizes that uptake among new partners remains low.
In contrast, PwC and Deloitte have prohibited the practice for new partners, aligning more closely with ATO expectations.
What the ATO Thinks: Under PCG 2021/4, the ATO classifies income-splitting schemes using a risk matrix (green to red). As of July 1, 2024, high-risk arrangements may face enforcement actions. This marks a clear shift from transitional leniency to active scrutiny.
Public Sentiment: Senator Deborah O’Neill labeled the strategy "an affront to basic principles of equality." Advocacy groups like CICTAR have also criticized Everett assignments as opaque and exploitative.
What This Means for Online Business Owners: Even if your tax planning looks nothing like the Big Four's, the takeaway is clear: aggressive strategies are increasingly under the microscope. Legal isn’t always enough. Transparency and alignment with regulatory intent are becoming essential pillars of tax strategy.
Stay Tuned —> We’ll continue delivering insight on similar regulatory shifts and evolving strategies shaping the future of tax and compliance for businesses worldwide.
More insights coming soon.
— The Freedom Brief