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Contracting Through Discretionary Trust

Discussion in 'Finance & Banking' started by Wannabeamillionaire, 12th Feb, 2009.

  1. Wannabeamillionaire

    Wannabeamillionaire New Member

    12th Feb, 2009
    Hi All,

    My wife and I have a discretionary trust and both work full-time. My wife has been offered a couple weekends of work at her parent's business.

    Rather than go through the whole ordeal of signing a TFN declaration etc for a couple weekends work, we thought we could effectively contract her out and have the business pay into our Trust account. That way the Trust would effectively earn the money, then distribute it to the beneficiaries (which would be my wife anyway)....

    Can anyone tell me whether this is allowable? If so, does it matter how you invoice them and do we need any Trust minutes to show what it is we are actually doing?

    If it IS allowable, why don't people do this with their ordinary jobs? i.e. Have both employers pay the Trust instead adn then we could effectively distribute the income equally or otherwise amongst beneficiaries?

  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    It's called "Personal Services Income" - special legislation introduced as a result of the boom where everyone in IT went and set up their own companys to minimise their personal tax (ie pay company tax rate rather than personal tax rates).

    There's quite a bit of info on the ATO site about PSI and the tests they apply to determine whether the income is PSI or not (and thus taxable at personal income rates).