Personal Services Income
The Australian Taxation Office continues to run cases to contest aspects of the Personal Services Income regime.
One aspect was recently challenged in the case Park vs Commission of Taxation (2011) AATA567. In that case the taxpayer, an I.T. Specialist who provided their services through a Company Structure, claimed that the Personal Services Income rules did not apply because the results test was satisfied by the Company.
In this case it was identified that the services were provided through a labour hire firm with the taxpayer being required to submit weekly timesheets for approval. It was found that there was no evidence that their company was engaged to produce a result even though the Contractor was contracted to work on substantial projects.
As such the Tribunal found that the taxpayer did not conduct a personal services business during the relevant years as the ‘results test’ was not satisfied. The income was therefore attributed to the applicant and a penalty applied.
This reinforces further the ATO’s focus on the Personal Services Income regime. It also confirmed the Administrative Appeals Tribunal felt a 25 per cent penalty was appropriate.
This area is complex and if taxpayers do get it wrong the penalties can be very significant. If you feel that your circumstances need to be reviewed contact Surry Partners.