ChangeGPS Professional Firm Profits includes two mandatory Gateway assessments drawn from PCG 2021/4. Gateway 1 — Commercial Rationale (paragraphs 39–46) asks whether the profit allocation arrangement is entered into on a genuinely commercial basis, whether there are genuine non-tax reasons for the structure, and whether the IPP's profit allocation reflects their actual contribution to the firm. If any Gateway 1 question is answered No, the arrangement does not pass. Gateway 2 — High-Risk Features (paragraphs 47–60) screens for five specific structural features that the ATO has identified as particularly concerning — including Taxpayer Alert arrangements, income splitting with entities that do not genuinely contribute, and arrangements with a dominant tax reduction purpose. If any Gateway 2 high-risk feature is present, the arrangement automatically falls into the RED zone. Both Gateways must be passed before the Risk Assessment Factors are applied.
What is the difference between the two Gateway assessments in Professional Firm Profits?
Understand how Gateway 1 and Gateway 2 operate under PCG 2021/4, including failure conditions and RED zone triggers.