My partner and I wish to find a means of increasing our income. My partner earns 230K doing contracting work with an ABN number. I am currently unemployed and studying fulltime. I have heard that in this case it may be possible to funnel part of my partners income through as my income so I may pay my lower relevant tax portion. A trust is used for this purpose.
Is this still possible?
I would also like to make relevant contacts in canberra region who may be able to help us do this.
Thank you
Stephen
Unfortunately, transferring personal services income such as contracting income is harder now due to the PSI (Personal Services Income) rules. Does your partner contract to multiple parties, or is the contracting done to one (or predominantly one) party?
If your partner is contracting to one party, the PSI rules restricts deductions and income splitting. For instance, your partner would not be able to employ you, unless you were doing some of the contracting work. You couldn't be paid to do the bookkeeping, for example.
As for operating the contracting business through a trust, yes, this can provide options for income splitting, as long as the PSI rules have been passed.
The contracting is done to one party. Looks like we may have to look into operating the contracting through a trust.
Can you recommend any great sources/contacts for doing that?
Even if you operate through a trust, you will have issues splitting the income due to the Personal Services Income / Entity rules, as all the income comes from the one source.
You would need to find a good accountant in your area, who has his/her head around what can and can't be done in regards to the PSI rules.
Why not approach Dan, he seems to know this stuff.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Stephen,
Here is a copy of the ATO document relating to PSI income. It is written in ATO-ese rather than English, so if you would like any further information, send me a PM and I'll do my best to help you out.
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