Alienation of PSI

Alienation of PSI occurs when the services of an individual are provided through a business entity (company, partnership or trust) rather than directly by the individual who performs the services.

Alienation occurs when personal services income received is retained by the entity and/or diverted to associates, allowing a lower rate of tax to be paid on that income. The use of these arrangements is also used by some taxpayers to create an entitlement to a range of deductions which would not be available to an individual providing the same services as an employee.


Arrangements where your PSI is alienated and is taxed at a lower rate than if you had received the income yourself, may attract the general anti-avoidance provisions (GAAP).

End of danger
    Last modified: 14 Sep 2016QC 17216