We understand that the personal services income (PSI) rules and how it interacts with the general anti-avoidance provisions (Part IVA) can be difficult to navigate.
That’s why we’ve developed a new guideline to help taxpayers and their advisers better understand and manage their PSI obligations when they operate a personal services business (PSB).
The new guideline is relevant for taxpayers who earn PSI through a personal services entity (PSE) conducting a PSB. These alienation arrangements create a compliance risk when they’re used to retain income in an entity (retention of profit arrangements) or divert income to associates (income splitting arrangements), or both, so that it’s taxed at a lower rate.
It outlines the types of arrangements we consider to be at ‘low’ or ‘higher’ risk of Part IVA applying and likely to attract our attention.
While Part IVA can apply to any higher risk arrangement, we're more likely to target arrangements where there are substantial distributions or payments made to associated lower taxed persons or entities. However, your clients should not be concerned that we will apply to compliance resources to pursue Part IVA where they have made a genuine attempt to move their arrangement into low risk by 30 June 2027.
For more information, visit PCG 2025/5 Personal services businesses and Part IVA of the Income Tax Assessment Act 1936.
For more information about PSI, visit ato.gov.au/psi