Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p6
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 6/34)
Character Range: 1674473–1677504

if it is the income of another entity and is not promptly paid to you as salary.
      However, this does not apply if the other entity is conducting a personal services business.
      There are limits to the other entity's entitlement to deductions to offset against the amount treated as your income.

86‑5  A simple description of what this Division does
 (1) This diagram shows an example of a simple arrangement for the alienation of personal services income.
Note 1: Solid lines indicate actual payments between the parties. Dotted lines indicate other interactions between the parties.
Note 2: This Division also applies to different and more complex arrangements.
 (2) This Division has the effect of attributing the personal services entity's income from the personal services to the individual who performed them (unless the income is promptly paid to the individual as salary). Certain deduction entitlements of the personal services entity can reduce the amount of the attribution.

Subdivision 86‑A—General

Table of sections
86‑10 Object of this Division
86‑15 Effect of obtaining personal services income through a personal services entity
86‑20 Offsetting the personal services entity's deductions against personal services income
86‑25 Apportionment of entity maintenance deductions among several individuals
86‑27 Deduction for net personal services income loss
86‑30 Assessable income etc. of the personal services entity
86‑35 Later payments of, or entitlements to, personal services income to be disregarded for income tax purposes
86‑40 Salary payments shortly after an income year

86‑10  Object of this Division
  The object of this Division is to ensure that individuals cannot reduce or defer their income tax (and other liabilities) by alienating their *personal services income through companies, partnerships or trusts that are not conducting *personal services businesses.
Note: The general anti‑avoidance provisions of Part IVA of the Income Tax Assessment Act 1936 may still apply to cases of alienation of personal services income that fall outside this Division.

86‑15  Effect of obtaining personal services income through a personal services entity

Amounts included in your assessable income
 (1) Your assessable income includes an amount of *ordinary income or *statutory income of a *personal services entity that is your *personal services income.
Example: Continuing example 1 in section 84‑5: Assume that NewIT only provides services to one client. Ron's assessable income includes ordinary income of NewIT from providing the computer programming services, because the income is Ron's personal services income.
Note: The amount included in your assessable income can be reduced by certain deductions to which the personal services entity is entitled: see section 86‑20.
 (2) A personal services entity is a company, partnership or trust whose *ordinary income or *statutory income includes the *personal services income of one or more individuals.

Exception: personal services businesses