Document ID: chunk:federal_register_of_legislation:C2004A00662:clause:1_3:p7
Version: federal_register_of_legislation:C2004A00662
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 7/20)
Character Range: 17977–20823

services income of anyone else.
           Step 4. Subtract the amount under step 3 from the amount under step 2.
                  Note 1: Step 4 ensures that, before entity maintenance deductions can contribute to the reduction, they are first exhausted against any income of the entity that is not personal services income.
                  Note 2: If the personal services entity receives another individual's personal services income, see section 86‑25.
           Step 5. If the amount under step 4 is greater than zero, the amount of the reduction under subsection (1) is the sum of the amounts under steps 1 and 4.
           Step 6. If the amount under step 4 is not greater than zero, the amount of the reduction under subsection (1) is the amount under step 1.
Example 1: Continuing example 1 in section 84‑5: Assume these additional facts:
  *   $120,000 of NewIT's income is Ron's personal services income;
  *   NewIT has deductions (including superannuation contributions) of $50,000 relating to Ron's personal services income (step 1);
  *   NewIT has entity maintenance deductions of $8,000 (step 2);
  *   NewIT has investments that produce income. NewIT's assessable income, disregarding Ron's or anyone else's personal services income, is $20,000 (step 3).

 Because the step 4 amount is less than zero (‑$12,000), step 5 does not apply and, under step 6, the amount of the reduction is $50,000. Therefore the amount included in Ron's assessable income is:

Example 2: Assume, as an alternative set of facts, that NewIT's assessable income under step 3 was only $2,000.

 The step 4 amount would have been $6,000, and, under step 5, the amount of the reduction would have been $56,000 (adding the amounts under steps 1 and 4). The amount included in Ron's assessable income would then have been:

Note: The personal services entity's deductions that do not relate to your personal services income and that are not entity maintenance deductions cannot reduce the amount included in your assessable income under section 86‑15.

86‑25  Apportionment of entity maintenance deductions among several individuals

  If, in the income year:
 (a) the amount worked out under step 4 of the method statement in section 86‑20 is greater than zero; and

Note: This happens if the entity has entity maintenance deductions that form some or all of the reduction under section 86‑20.
 (b) the *ordinary income or *statutory income of the *personal services entity includes another individual's *personal services income (as well as your personal services income); and
 (c) the other individual's personal services income is included in the other individual's assessable income under section 86‑15;
the amount worked out under step 4 is taken to be:
where:

original step 4 amount is the amount that would be the amount worked out under step