Private ruling: Part IVA - Personal Services Income (PSI) - Retained profits
Published: August 2013
Ruling period: Year ended 30 June 2012. | Year ended 30 June 2013.
Date scheme commenced: 1 July 2011

Ruling: Q1: Do the General anti-avoidance provisions apply to any profits retained within the Company? | A1: No.

Relevant facts and circumstances: The Company has a sole shareholder and director. The Director performs medical procedures for patients on behalf of the Company. The Company employs non-principal doctors (the Doctors) with supplementary skills on a profit share basis to perform various procedures on patients. The Company employs other staff whose duties include; administrative functions, nursing of patients, assisting the doctors before, during and after procedures are performed. The Company deducts from the Doctors' salary a fee for the use of their premises and for consumables used. The Company received a private ruling that determined the income earned by them was from a business structure, not PSI. The Company made a net profit in the year ended 30 June 2012. The Company provides services to more than two unrelated clients annually. No one client of the Company provides more than 80% of the income. The Company advertises to the public via its website and through word of mouth. The Company intends to pay the Director a salary commensurate with their skills and experience and for the excess profits to be retained with the Company. The profits will be used in the growth of the business and to provide sufficient working capital. The Company intends to invest in high cost capital items in the immediate future. The Company has recently expanded its services into specific technology research and other associated medical fields.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 177C | Income Tax Assessment Act 1936 section 177D | Income Tax Assessment Act 1936 section 177F | Income Tax Assessment Act 1997 section 84-5

Reasons for decision: Summary: As advised in our notice of decision, we consider the income and profits derived by the Company are profits from a business structure and not personal services income. Therefore, profits are able to be retained in the business structure for reinvestment into the growth of the business and business assets without the general anti-avoidance provisions applying.