Guidance on paying yourself

@Scott No Mates Good point, i suppose from my point of view i have set my self up with a long term vision, a sole trader setup would have done perfectly fine for now, if not better in some respects for the short term... I'm really just trying to minimize costs where i can with my current setup

@Terry_w noted, thank you

Will have a chat to my accountant again, thanks gentlemen

 

I would explore the personal services rules with the tax adviser as they prevail over all else. Failing to address this can result in double tax concerns, penalties etc. Not all brokers are recognised as deriving small business income.

 

@Paul@PFI

Thanks Paul, reading up on that now

 

The PSI rules can be easy to self diagnose as "OK" when its not. And I have even seem some very favourable views given by the ATO in cases where I had solid doubts. The Commissioners opinion can be wise in some cases.

 

Little bit confused whether or not PSI rules apply

Came across this comment;

"I think because we are businesses, not contractors. We get paid for work for different clients but are paid by the aggregator who is a conduit for the banks. Otherwise technically even businesses like doctors would be treated as PSI because they are all paid by one entity, Medicare. "

Seems to hold some weight for PSI rules NOT to apply - thoughts guys?

 

Disregard random comments from the average joe blow as they are generally worthless. Even my comment below. You will comments backed up by legislation to be authoritative and even then there may be different interpretations or facts.

The answer is that It will depend on the circumstances. Generally broker businesses would not be subject to the PSI rules, but a small broker could be.

Doctors usually are subject to the PSI rules - those working as specialists in hospitals and GPs contracting to a business for example.

 

I'll walk through what my understanding is:

Results tests:
Q1: Under your contract or arrangement, will you only receive payment when the work has been completed that is, after producing the contracted result?
Yes

Q2: Do you need to provide the equipment or tools necessary to do the work?
No

Q3. Do you have to rectify defects in the work, or are you liable for the cost of rectifying defects?
Tricky one to answer, Other then a completely fraudulent/misrepresented loan, i don't see how this would make its way for brokers to be liable for any lender loss ... i would have to say No here

Results tests = failed

80% rule:
Q: Is 80% or more of your personal services income comes from the same client?
No, multiple lenders

Unrelated clients test:
Q. Does the business provide services to 2 or more clients who are not associates of each-other, or are associated with you
Passed

Employment Test
Q. Does Employees perform 20% by market value of the work your being paid for or one or more "apprentices" for at least half the income year
My understanding is the ATO will consider this if it will be met in future income years, which is reasonable to say for compliance staff to be on-boarded - Passed

Business Premises Test
Q. Used solely for the predominant purpose of the business and not for personal use
For now, i don't have a separate office and am working from home, again, reasonable to consider that would move into a office space in future income years - Passed

Therefore Personal Services income does not apply to a Fiance Broker operating under a company with a sole director/sole shareholder structure

To the tax experts, Is my logic sound for the above?

Source:
youtube.com/watch?v=ICaYJ4sLjzI
Personal Services Income rules | H&R Block


EDIT:
Also have gone through the PSI decision tool via the ATO website and same result is that PSI does not apply

 

H&R Block!

why is the answer to question 2 no? Who supplies the tools?
same with 3. If there is a stuff up who would fix it? If PSI - the boss would, but if there is no boss = you

 

Sorry i actually removed that line in my edit, the PSI test i did on the ATO website had yes to #2 and #3 - didn't change the result