Alienation arrangements where an individual’s personal services income (PSI) is derived through a personal service entity (PSE) that is conducting a personal service business (PSB) and profits are shared with related parties are at risk of being subject to the anti-avoidance provision in Part IVA.  

The Commissioner’s view about PSI, PSEs and PSBs is set out in 271 paragraphs TR 2022/3. Whether Part IVA applies to particular arrangements will always depend on the particular facts and circumstances – it will apply if a dominant purpose of the arrangement was to obtain a tax benefit. 

The Commissioner’s compliance guideline addresses aspects of an arrangement that may attract the ATO’s attention and hence raise questions about tax benefits and purpose. 

In this session – which builds on our previous topic Tax issues for professional practices – we consider: 

• the basis for the Commissioner’s view that income of professionals cannot be split with family members 
• provide some reasons why the Tax Commissioner might be relying on the threat of applying Part IVA to arrangements entered into by professional persons/practitioners to rein in, what was perceived to be, rampant income splitting 
• explain the difference between income of a personal services business and income from a business structure 
• explain the two thresholds or gateways which an arrangement entered into by an individual professional practitioner should pass as a prerequisite to self assessing tax risk associated with a profit allocation 
• calculate the effective tax rate for allocations of a professional firm’s profits in accordance with the Commissioner’s PCG 2021/4 for an individual professional practitioner and their associates in a simple case   
• indicators that are considered high risk and factors that will be a red flag to the Commissioner. 

This webinar will be presented by one of TaxBanter’s experienced tax trainers.