The ATO has published a new guideline (titled PCG 2025/5), targeting Personal Services Business (PSB) structures that lack genuine commercial substance.

 

PSI and PSB: The Basics 

Personal Services Income (PSI) = income mainly from your personal skills and effort (e.g. financial professionals, engineers, consultants, IT professionals, medical practitioners, lawyers etc). 

The PSI rules restrict income splitting and deductions UNLESS you meet one of four PSB tests.  

Personal Services Business (PSB) = if you pass one of four tests, the PSI rules don’t apply.  

Most people pass the “unrelated clients test” (2+ clients) and no more than 80% percent generated by one client OR “results test” (paid for outcomes, not time).

 

What’s changed? 

The ATO published a guideline that highlights their approach to applying Part IVA (general anti-avoidance rules) to PSB arrangements that are artificial even if the PSI rules do not apply. 

Follow this guideline in good faith and the Commissioner will administer the law accordingly. Structure your arrangements as low-risk and the ATO won’t review them.

 

How the ATO will assess your risk 

Examples of low-risk arrangements (ATO review likelihood is low): 

• Net PSI distributed to the individual who earned it, taxed at their rate 

• Associates paid market rates for genuine work 

• Intention to temporary profit retention for genuine commercial purposes (e.g. to buy a business asset, hire new employees, working capital). Ensuring that intention is carried out. 

 Examples of higher-risk arrangements (ATO likely to review and consider Part IVA): 

• Individual receives less than commensurate remuneration 

• Income split to family members not performing equivalent work 

• Profits retained without clear commercial purpose 

• Retained profits used for personal purposes such loans made to related parties.

The fringe benefits tax (FBT) year ends on 31 March 2026. If your business provides non-cash benefits to employees or their associates, you may have an FBT obligation for the year. 

What counts as a fringe benefit? 

Common examples include: 

• Cars made available for private use 

• Car parking 

• Entertainment (meals, events, recreational activities) 

• Expense payments (gym memberships, school fees, private health insurance) 

• Low-interest or interest-free loans 

What you need to do now 

To prepare your FBT return, gather the following before we get started: 

• Logbooks and odometer records for any cars provided to employees 

• Details of any entertainment expenses paid during the year (including who attended and the occasion) 

• Records of any other benefits provided to employees or their family members 

• Declarations from employees where required  

Key dates 

The FBT return for the year ending 31 March 2026 is due 21 May 2026 if you lodge yourself, or 25 June 2026 if we lodge on your behalf. 

Tip: Not everything attracts FBT. Common exempt benefits include: 

• Cars with no or extremely limited private use (e.g. Ute or Van) 

• Minor and infrequent benefits valued under $300 per employee per occasion 

• Gift cards valued under $300 per employee (including GST and transaction fees) 

• Light meals and refreshments consumed on business premises during work hours (e.g. pizza to celebrate a promotion, birthday cake, pastries for staff) 

• Meals and drinks consumed by employees while travelling for work (e.g. a Brisbane-based employee dining in Sydney while attending a conference) 

 

If you think FBT may apply to your business, reach out to your Inspire accountant now so we have enough time to gather what we need before the lodgement deadline. 

Things to think about when thinking about payment terms

Newsflash:  Cash flow is still the number one priority to many businesses out there today and rightly so.  Some have described it as oxygen keeping their businesses alive, others see it as fuel that drives their commercial success.

For something so widely understood to be of such high value to enterprises, it’s surprising that more isn’t being done to safeguard it.  That doesn’t mean people are necessarily being careless with income and expenditure – far from it.  It may simply mean that the numbers behind the numbers are not being recognised for what they can do for or to your business.

What really counts

We’ve often said it but here at Inspire, we are numbers people and we’re proud to say that we’re the type of numbers people for whom everything counts.  That’s not just a snappy pun, it means that we like to think about why your costs and earnings are the way they are.  These days, going beyond mere reporting of what’s taken place is far from enough.  We (you) need to know where improvements can be made, how, why and when.

Here’s a way of improving your cash flow position starting right now

When you receive a hefty electricity bill, car rego notice or even a chunky supplier invoice there can often be feelings ranging from mild concern to white hot panic depending on your circumstances.  The further along the panic continuum you find yourself, the more urgently you find yourself looking for the due date.  And it feels great when you realise you still have a month to pay.  At this point you are relieved and grateful for that grace period and you might move on with your day from there.

But just because the government, the utilities suppliers or your telecommunications provider is happy to wait for its money, should you follow suit?  Keep in mind, they may be a national or international service provider, you might be a start-up.  They may have a cash sheet that looks more like old-school binary code because of the clusters of zeroes in the credit column, you may be slowly building something that will benefit your family.

Let’s contextualise this: If you’re a $1 million business and your customers, on average, take 30 days to pay you, imagine for a moment if they only took 29 days to pay you.  The positive effect on your bank balance is almost $4000 (based on $1m divided by say 253 normal work days).   That’s just one day’s difference.  $4000.  What if you brought that number from 30 days down to 10?  Suddenly you’re looking at numbers like $50-60k in additional liquidity!  These are important little equations that make a big difference to small businesses.

Why then, should you extend the same generous payment terms that essentially tie up your cash as a large corporation?  You’re not obligated to extend 21, 30 or 60 terms if it simply doesn’t suit your business model and your cash flow requirements.  If you are a small business or even a medium sized enterprise, base your payment terms on your cash requirements.  Here are a couple of tips to employ right now:

• Speak to your accountant about what your cash flow should look like.  Ask about what kind of terms would best benefit your business and accommodate growth and sustainability – based on the numbers.
• The moment a customer engages your services, ask for a deposit.  It signals to them that you are now committed to the work and by the same token it gives you a little bit of liquidity – and peace of mind.

We love a chat here at Inspire, as long as we’re chatting about numbers (only half joking here), so to make these tips and more part of your business as usual, drop us a line about your number one business priority along with the rest of them.