On 28 November 2025, we released PCG 2025/5 Personal services businesses and Part IVA of the Income Tax Assessment Act 1936 outlining our compliance approach to personal services businesses (PSB) who alienate Personal services income (PSI). As we're increasing scrutiny of higher-risk arrangements, particularly those involving significant diversion of PSI, we strongly encourage you to review your circumstances and take steps now to address any PSI alienation risks.
Where you make a genuine attempt to move your arrangement to low-risk by 30 June 2027, we won't seek to apply Part IVA if you're selected for review.
Small Business Assistant Commissioner, Tony Poulakis addresses some common questions about our compliance approach to PSI.
Is this approach an amnesty or safe harbour?
No. This approach is not an amnesty or a safe harbour. It's a targeted call to action.
We encourage you to promptly assess your circumstances and take any necessary action. We'll continue to review higher-risk arrangements, and will evaluate if you've taken (or are in the process of taking) genuine corrective action.
If we select your arrangement for review, we'll consider the voluntary steps you've already taken to correct matters in deciding whether we pursue Part IVA compliance action.
In short, this approach is about recognising taxpayers who act early and show they're genuinely trying to move to a low-risk position.
In what circumstances will the ATO refrain from Part IVA compliance action?
If a PSI review begins, between 28 November 2025 and 30 June 2027, we won't consider applying Part IVA where you can demonstrate that you've made a genuine attempt to move your alienation arrangement to low risk.
A genuine attempt involves taking timely, meaningful steps. You should:
- self-assess whether PSI has been inappropriately diverted
- take action to address higher-risk behaviours
- ensure your current years return is compliant.
For arrangements involving significant diversion of PSI, you may also need to correct previous years' returns. If you're selected for review, we'll discuss your circumstances with you, including any additional steps you need to take.
What if a review or audit has already commenced or been finalised?
For reviews and audits currently underway, we'll work with you to discuss any additional actions required to correct historical non-compliance and provide you the opportunity to take those actions.
If we've already completed a review or audit of your alienation arrangement and issued a decision, such as an assessment, amended assessment or Part IVA determination, that decision will stand. However, you still retain your right to lodge an objection if you disagree with the outcome.
How does PCG 2025/5 interact with the compliance approach in PCG 2021/4 Allocation of professional firm profits – ATO compliance approach?
We recognise that businesses evolve over time. As your activities grow, you may move along a spectrum, from a business that mainly relies on your personal services, to a broader professional practice supported by systems, staff and capital.
Different ATO guidance about income alienation arrangements applies at different points along that spectrum.
PCG 2025/5 applies where a PSB is being conducted and provides practical guidance for when there's a risk that Part IVA may apply where the net PSI is not distributed to the individual whose services generated the income.
Where income is generated by a broader professional practice, rather than mainly by an individual’s personal services, the income isn't PSI. In these circumstances, we apply the professional firm profit allocation compliance approach in PCG 2021/4. That approach accepts that some profit may be retained in the firm or shared with other entities, provided the individual is appropriately remunerated for their personal services.
The key takeaway is that movement along the business continuum doesn’t eliminate alienation risk. It simply changes how it's assessed.
We'll continue to prioritise education and guidance to support you to understand and meet your PSI obligations. For advice tailored to your tax and superannuation circumstances, speak to your registered tax practitioner.
Visit personal services income for more information.
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