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Personal Services Income rules were set up to reduce tax avoidance via sham contracting, but also dis-incentivises start-ups in Australia. PSI is often vital for cashflow and working capital in start-up businesses and, to tax it at personal tax rates rather than company tax rates is utterly counter-productive. The rules should be changes to not apply where the company is undertaking genuine entrepreneurial risk, including having to bid for work, investment of the PSI revenue in R&D or other business development work, etc. In Australia, under the current PSI rules, the earnings of an entrepreneur who charges a fee for his/her service, are treated likel a secure salary. This puts a lie to Government claims that it support entrepreneurs and just says "become a salaried employee - its easier".
Why the contribution is important
Allow PSI to be used as a source of working capital and cashflow. Distinguish between secure incomes from salary and wages, vs contracted income that has to be bid or involves entrepreneurial risk. Remove the bias away from start-up businesses and entrepreneurial risk-taking, thta presently taxes that activity the same as wages and salaries. Remove PSI rules that effectively render useless the company tax reductions, which can't be applied to PSI.
by Curiozity on November 08, 2017 at 05:48PM