This article walks you through the complete PFP workflow in ChangeGPS — from entering firm and practitioner details through to generating the risk assessment report. The Professional Firm Profits (PFP) module uses an eight-step wizard that guides you through the two Gateway assessments, three Risk Assessment Factors, and final results.
Before you begin
Before starting a PFP assessment, make sure you have the following information available:
The name of the professional firm and the Individual Professional Practitioner (IPP) being assessed
The assessment year
Details of how the firm's profits are structured — whether the IPP receives income directly, through a company, trust, or partnership, or a combination
The proportion of the firm's total profits received by the IPP directly versus through associated entities
The total taxable income and tax paid by the IPP and all associated entities that receive a share of the firm's profits
The IPP's salary or drawings from the firm (for the appropriate remuneration assessment in RAF 3)
Whether the arrangement is subject to any current ATO Taxpayer Alert
Step-by-step guide
Step 1 — Client Selection
Navigate to the Professional Firm Profits app. Please go to Access > Apps > ChangeGPS PFP. Select + New Assessment.
Select Import from CIM to search for the client or enter the firm and practitioner details manually.
Enter the Firm Name, Practitioner Name, and select the Assessment Year.
Select Next to proceed to Step 2.
Step 2 — Gateway 1: Commercial Rationale
Gateway 1 assesses whether the profit allocation arrangement has a genuine commercial rationale. Answer three questions covering PCG 2021/4 paragraphs 39–46:
Commercial basis — Is the arrangement entered into and maintained on a genuinely commercial basis?
Non-tax reasons — Are there genuine non-tax reasons that explain why the arrangement is structured the way it is?
Actual contribution — Does the proportion of profits allocated to or retained by the IPP reflect their actual contribution to the firm?
Each question has a Yes or No response. Add notes in the text field below each question to document your reasoning.
Important: If any Gateway 1 question is answered No, the arrangement does not pass Gateway 1. The ATO considers the arrangement high-risk and the module will flag this in the Results step.
Select Next to proceed to Step 3.
Step 3 — Gateway 2: High-Risk Features
Gateway 2 screens for five specific high-risk features identified in PCG 2021/4 paragraphs 47–60. Expand each feature and answer whether it applies to the arrangement:
Taxpayer Alert — Is the arrangement subject to a current ATO Taxpayer Alert relating to professional firm profits?
Income splitting with low-tax entities — Does the arrangement allocate income to entities or individuals who are not genuinely involved in earning the income?
Excessive deductions — Does the arrangement involve deductions that appear excessive relative to the commercial value of the services provided?
Round-robin financing — Does the arrangement involve circular financing that lacks genuine commercial substance?
Dominant tax purpose — Is the dominant purpose of the arrangement to reduce the IPP's tax liability?
If any high-risk feature applies, the arrangement does not pass Gateway 2 and is automatically classified as RED. Select Next to continue to the RAFs.
Step 4 — RAF 1: Proportion of Profit Entitlement
RAF 1 measures the proportion of the firm's total net income that is returned to the IPP directly, compared to what flows through associated entities.
Enter the IPP's direct income from the firm (salary, drawings, and direct profit share).
Enter the income received by associated entities that is attributable to the IPP's efforts.
Enter the total firm net income.
The RAF 1 Score is calculated automatically as a percentage and converted to a score per PCG 2021/4 paragraph 82–83.
If the IPP receives 100% of the firm's profits directly (the 100% rule), RAF 2 and RAF 3 are automatically skipped and the overall result is GREEN.
Select Next to proceed to Step 5.
Step 5 — RAF 2: Total Effective Tax Rate
RAF 2 assesses the total effective tax rate across the IPP and all associated entities that receive a share of the firm's profits (PCG 2021/4 paragraphs 84–99).
For each entity receiving profit allocations (the IPP individually, plus each company, trust, or individual beneficiary), enter:
Total taxable income
Total tax paid (income tax, including any trust distributions taxed in beneficiaries' hands)
The total effective tax rate across the group is calculated automatically.
The RAF 2 Score is determined based on the effective tax rate bracket per PCG 2021/4.
Select Next to proceed to Step 6.
Step 6 — RAF 3: Appropriate Remuneration
RAF 3 is optional (PCG 2021/4 paragraphs 101–105). It assesses whether the IPP is being appropriately remunerated for their labour contribution to the firm.
Indicate whether to include RAF 3 in the assessment. If excluded, the result is based on a 2-factor model using RAF 1 and RAF 2 only.
Enter the IPP's actual remuneration received from the firm (salary, superannuation, and other direct payments).
Enter the benchmark remuneration — the estimated market rate for the IPP's role and skill level if they were an arm's-length employee.
The RAF 3 Score is calculated based on the ratio of actual to benchmark remuneration.
Select Next to proceed to Step 7.
Step 7 — Results
Review the Gateway assessment results — whether Gateway 1 (Commercial Rationale) and Gateway 2 (High-Risk Features) were passed.
Review the individual RAF scores (RAF 1, RAF 2, and RAF 3 if included) and the total score.
The overall risk zone is displayed based on the total score per PCG 2021/4:
GREEN — Low risk. The ATO is unlikely to devote compliance resources to this arrangement.
AMBER — Medium risk. The arrangement warrants review before the year is finalised.
RED — High risk. The ATO is likely to scrutinise this arrangement. Specialist advice is recommended.
Select Next to proceed to Step 8.
Step 8 — Review & Send
Review the completed PFP advice report in the preview panel.
Export or deliver the report using the actions sidebar:
Export PDF — Download as a PDF
Export Word — Download as a Word document (.docx)
Add Pages — Merge additional documents using the Collate widget
Send Email — Email the report to your client directly from within the module
Tips and best practices
Run PFP annually. The ATO expects professional firms to review their profit allocation arrangements each year. Running PFP as part of the annual compliance process — before distributions are finalised — ensures any emerging risks are identified early.
Document your Gateway 1 reasoning. The notes fields in Gateway 1 questions are important. If the ATO queries the arrangement, a contemporaneous written explanation of the commercial rationale is strong evidence that the arrangement was considered carefully.
Use multiple scenarios to find the lowest-risk allocation. You can create multiple scenarios in PFP to model different profit splits and compare the risk zone and total RAF score for each. This helps you identify what changes would move the arrangement from AMBER to GREEN.
Check whether the 100% rule applies. If the IPP takes all profits directly with no associated entities involved, the assessment is automatically GREEN and RAF 2 and RAF 3 are not required. This is the simplest and lowest-risk structure.
Common issues
The arrangement is showing RED despite passing both Gateways. The overall risk zone is determined by the total RAF score even when both Gateways are passed. A RED zone from the RAFs typically means the IPP's direct income proportion (RAF 1) is very low and the total effective tax rate (RAF 2) is significantly below what would apply if the IPP received all profits directly. Review the RAF 1 and RAF 2 inputs to confirm the figures are accurate, and consider whether a different profit allocation would improve the score.
Gateway 2 is flagging a high-risk feature but I disagree with the classification. Gateway 2 questions are designed to flag specific structural features that the ATO has identified as concerning. If you believe a feature does not apply in the circumstances, use the notes field to document your reasoning. The module does not currently support overriding Gateway 2 results, but your documented explanation will form part of the advice report if the arrangement is ever reviewed.
RAF 3 is not available in the assessment. RAF 3 is an optional factor that you must explicitly opt into in Step 6. If RAF 3 was not included, the result is based on RAF 1 and RAF 2 only (the 2-factor model). To include RAF 3, return to Step 6, toggle the Include RAF 3 option on, and enter the remuneration data.
Need help?
If you are stuck or have questions about a PFP assessment, reach out through the chat widget or contact your account manager.