The ATO has announced that it is reviewing arrangements where members of an SMSF (typically at, or approaching, retirement age) purport to divert income earned from their personal services (that is, PSI) to their fund, which results in minimising or even avoiding tax altogether on that income.

The ATO says these arrangements typically display all or most of the following features:

  • An individual performs services for a client, or an acquirer of the personal services (client), for which the individual does not directly receive any (or adequate) consideration for the services provided.
  • The client does not pay or remit funds to the individual directly; rather the client remits the consideration for, or in respect of, the services provided by the individual to a company, trust or other non-individual entity (which may be an unrelated third party).
  • The entity then distributes the income to an SMSF, of which the individual is a member, purportedly as a return on an “investment” of the SMSF in the entity.
  • The trustee of the SMSF treats the income received as subject to a concessional rate of tax, or as exempt current pension income of the SMSF.Readmore