On 28 August 2024, the Australian Taxation Office (ATO) published Draft Practical Compliance Guideline PCG 2024/D2 (Draft PCG) on Personal services businesses and Part IVA of the Income Tax Assessment Act 1936.
The Draft PCG explains when the ATO will be more likely to apply compliance resources to consider the application of the general anti avoidance rules in Part IVA to an alienation arrangement where an individual derives personal services income (PSI) through a personal services entity that is conducting a personal services business.
The Draft PCG has the now familiar in PCGs classification into ‘low risk’ and ‘higher risk’ arrangements and includes 13 examples. Unlike PCG 2021/4 that concerned the allocation of professional firm profits, the Draft PCG when finalised will be relevant to all businesses that derive PSI.
The Draft PCG, while considering Part IVA, only has one passing reference to a court case on Part IVA. Consistent with recent ATO views, arrangements to transfer or split income with a taxpayer on a lower tax rate – including so-called Everett assignments – are considered higher risk.
Submissions on the Draft PCG can be made until 11 October 2024.
Neil Brydges
Principal | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E: nbrydges@sladen.com.au
Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327 | T +61 3 9611 0105
E: dsmedley@sladen.com.au
Kaitilin Lowdon
Principal Lawyer
M +61 402 859 214 | T+61 3 9611 0120
E: klowdon@sladen.com.au
Rob Warnock
Principal Lawyer
T +61 3 9611 0155 | M +61 419 892 115
E: rwarnock@sladen.com.au
Edward Hennebry
Senior Associate
T +61 3 9611 0113 | M +61 428 439 730
E ehennebry@sladen.com.au