In the case of Ariss, the Administrative Appeals Tribunal (AAT) ruled that income generated by the taxpayer, who worked as an IT consultant, and distributed through a trust arrangement to his wife, was actually Personal Services Income (PSI) and should be directly assessed to the taxpayer.
Facts of Ariss's Case:
Mr. Ariss, an IT specialist, possessed unique skills in Oracle software, making him highly sought after by clients. He mainly interacted with clients and operated from a dedicated home office.
His wife, though not formally employed, assisted him under his supervision. They became associates of Agency Resource Management Services (Global) Trust (ARMS) to simplify business administration.
Under the ARMS arrangement, Mr. Ariss informed them of his work hours for each client. ARMS invoiced clients, withheld PAYG and superannuation, and split the income 70% to the taxpayer and 30% to his wife after deducting fees. However, his wife didn't receive direct payments; all funds were deposited into the taxpayer's business account, reducing his taxable income.
Mr. Ariss was paid a daily rate, independent of project completion. The ATO audited his income for the 2010, 2012, and 2013 income years and issued amended assessments, treating trust distributions as salary and wages.
The taxpayer objected, but the ATO denied the objections. The matter was brought before the AAT for review.
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- Topics on Personal Service Income (1) – Overview of the PSI Rules (1)
- Topics on Personal Service Income (2) – Overview of the PSI Rules (2)
- Topics on Personal Service Income (3) – Overview of the PSI Rules (3)
- Topics on Personal Service Income (4) – Fortunatow’s Case (1)
- Topics on Personal Service Income (5) – Fortunatow’s Case (2)
- Topics on Personal Service Income (6) – Fortunatow’s Case (3)
- Topics on Personal Service Income (8) – Ariss’s Case (2)
- Topics on Personal Service Income (9) – Douglas’s Case
