Chartered Accountants Australia and New Zealand and the Institute of Public Accountants (the Joint Bodies) have lodged a submission on PCG 2024/D2 Personal Services Businesses and Part IVA of the Income Tax Assessment Act 1936 (Draft PCG).

The practical approach of the Draft PCG and the 13 examples provided are welcomed. However, the Joint Bodies are concerned that the examples do not reflect the commercial reality of running a business.

• The examples relating to the retention of income by companies is narrow.
• Example 4 indicates that in the ATO’s view, calculating profit and bonus figures prior to 30 June should be the norm and that undertaking the calculations after year end is only acceptable in one-off special circumstances. This does not reflect commercial reality.
• While materiality is referred to paragraph 37 in context of an inefficient use of ATO resources we would appreciate greater clarity on the ATO’s views in relation to materiality thresholds in terms of percentages and amounts.
• Employees in the low-risk examples are paid in accordance with the relevant State award. In practice, many private businesses may pay their employee higher than State award wages and we suggest that the wording should be amended to simply reflect that the employees are being paid commercial, market value wages and salary.
• All the examples relate to providers of professional services, with some references to administrative support. It would be useful if there were examples that included taxpayers working in the trades.