Hi James,
I'm speaking from experience of operating a Pty Ltd company with a single employee (me), with (usually) a single client at a time, and hence a single income stream. By using the term "PSI entity", I mean the company declares that it's income is derived from PSI sources, which changes how the company and your personal tax return are assessed. But it is the company that still very much raised the invoices, received the money, paid the sole employee of the company a salary, and paid SGC payments on behalf of the sole employee. So it's not me receiving the money, it's the company, and the company acknowledges in its tax return that the income was derived from PSI sources. And what you said is correct, the number of things that the company can pay for before paying the rest out as a salary to its sole employee is very limited, but includes: . Superannuation Guarantee payments on your behalf . Work Cover . Statutory requirements (ASIC, etc) . Other professional insurances . Tools of trade, such as computer, software etc, etc . Business related library . Business related communications expenses (phone, internet etc) . Business related travel And yes the remainder has to be paid out as a salary to the sole employee of the company, you. As far as I understand it, the introduction of PSI, combined with FBT, has closed a lot of the loopholes that a lot of people, used to exploit when working as IT contractors. The benefits of working through your own company are significantly diluted over what they were, but there are still some. And having been through a PSI audit myself, this style of operating was described as "squeaky clean" by the ATO officers I dealt with. I guess the reason I responded originally was that the original poster (Michael) thought that working in this way was no longer possible, or that you were in some way in breach of ATO laws and regulations. I believe it is still possible, and in some cases preferable to operate in this way, rather than become a "temporary" employee of the particular contracting agency who finds you the work (if there is one). Alternatively, for some people working that way might suit better - e.g. they don't want to get into all the mucking about of lodging BASs, having a more complicated end of year tax preparation to do, etc, etc Cheers, Trevor From: ozdotnet-boun...@ozdotnet.com [mailto:ozdotnet-boun...@ozdotnet.com] On Behalf Of James Chapman-Smith Sent: Friday, 30 April 2010 12:37 PM To: 'ozDotNet' Subject: RE: Contracting to a single company Hi Trevor, I'm not sure I understand what you mean by "plan how you distribute the income that PSI entity receives"? The entity doesn't get the PSI, you do. You don't have a choice but to "distribute" it to yourself. Apart from the legitimate expenses that the company has it is as if you earnt the money as an employee. I also understand that a "one man band" also means that many of the otherwise legitimate company expenses are also no longer so. You almost only can claim personal tools, and work cover and professional insurances. That kind of thing only. Cheers. James. From: ozdotnet-boun...@ozdotnet.com [mailto:ozdotnet-boun...@ozdotnet.com] On Behalf Of Trevor Andrew Sent: Friday, 30 April 2010 11:58 To: 'ozDotNet' Subject: RE: Contracting to a single company Hi James, But if you are a "one-man company", and you do only have a single client and hence a single source of income, you can simply accept that you are a PSI entity. The only ramification to satisfy the ATO is that you pay the vast majority of your company's income as a single salary (to you) minus the legitimate costs of "running your company". About the only advantages this confers is that some costs you may have chosen to pay for out of your personal post-tax money, you can now pay for (partially / fully) from your company's funds. But not many. You definitely need the assistance of an accountant to ensure you do this appropriately. So as I understand it, it is still very feasible. You simply have to accept that you are earning your income as a PSI entity, declare that to the ATO, and plan how you distribute the income that PSI entity receives carefully. Cheers, Trevor From: ozdotnet-boun...@ozdotnet.com [mailto:ozdotnet-boun...@ozdotnet.com] On Behalf Of James Chapman-Smith Sent: Friday, 30 April 2010 11:21 AM To: 'ozDotNet' Subject: RE: Contracting to a single company Hi folks, You simply can't get away with PSI without serious implications from the ATO. You must earn at least 20% of your income from an independent source - ie no more than 80% from one company (or related company). You can NOT pay your spouse to do "secondary" tasks relating to your business to avoid PSI. Secondary tasks include accounting, marketing, etc. Primary activities would be like programming, installations, etc. So, "doing the books" does not count no matter if you have timesheets or not. The two biggest ways to avoid PSI is by having legitimate employees or by taking on projects that get you paid on completion not by the hour. You may have a single company as a client provided you don't charge by the hour and you must have a contract that clearly stipulates the deliverables required to get paid. Folks, the ATO has this sewn up and they are TARGETING IT professionals. Sorry for the bad news. Cheers. James. From: ozdotnet-boun...@ozdotnet.com [mailto:ozdotnet-boun...@ozdotnet.com] On Behalf Of Stephen Price Sent: Friday, 30 April 2010 00:17 To: ozDotNet Subject: Re: Contracting to a single company My wife is doing my books. You should hear her complain about it. And I have to really pay her to do it. The ATO understand. On Thu, Apr 29, 2010 at 3:12 PM, David Burstin <david.burs...@gmail.com> wrote: On Thu, Apr 29, 2010 at 5:03 PM, Trevor Andrew <tand...@tassoc.com.au> wrote: What they don't want to see is your company earns X, and you pay a salary of X/2 to you and X/2 to your wife for "doing the books". Unless your wife really is doing the books, has timesheets to prove it, and is just paid for her actual time at a commercial rate. Cheers Dave Cheers, Trevor From: ozdotnet-boun...@ozdotnet.com [mailto:ozdotnet-boun...@ozdotnet.com] On Behalf Of Michael Ridland Sent: Thursday, 29 April 2010 4:37 PM To: ozDotNet Subject: Contracting to a single company Hi I've heard from some people that there is tax implications of contracting to a single company for more than 75 percent of your income, is there any truth to this? Thanks,
