The Assistant Treasurer has today released the Board of Taxation's review into whether the tax rules on the alienation of personal services income are proving effective, including in curtailing the use of sham contracting arrangements.
The existing alienation of personal services income provisions were introduced in 2000 to answer concerns about the growing use of sham contractors.
They were designed to address both the alienation of personal services income through interposing an entity, such as where a company is used instead of a person being hired directly, despite the fact they are working effectively as a normal employee.
The rules were also meant to cut back on the capacity of individuals and interposed entities to claim higher deductions than direct employees providing the same or similar services.
The Board has suggested a range of possible reform options:
introducing a reporting obligation;
extending the attribution rules to personal services businesses;
clarifying and simplifying the deduction provisions;
implementing a test of 'employee-like' manner to clarify who is affected by the rules; and/or
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