Legislation Commentary: Draft Attribution Rule
Draft Attribution Rule
Where a person (the interposed person) is interposed between a person purchasing services (the service purchaser) and an individual who personally performs the services (the service provider), the net income for an income year of the interposed person from the services (calculated as if that person had no other gross income or expenditure and before any amount attributed under this section) shall for income tax purposes be attributed to the service provider where,--
(a) The interposed person and the service provider are related persons; and
(b) During the income year the interposed person receives 80 percent or more of its service income, either directly or indirectly, from one service purchaser and associated persons of that service purchaser; and
(c) During the income year, 80 percent of the fee income relates to the personal services provided by the service provider and associated persons; and
(d) During the income year, significant and substantial assets (owned or not), other than intangible assets, do not form a structural part of the process of deriving the interposed person’s income from the services.
(e) This rule shall not apply where the net amount to be attributed is less than $5,000 (for partnerships this $5,000 amount is calculated after allocation of partners' salaries for personal exertion); and
(f) Where the net amount is to be attributed to more than one person, it shall be reasonably apportioned between those persons; and
(g) Where the net income of the interposed person is less than the amount that would otherwise be attributed, otherwise than because of losses brought forward or offset from another group company, that lesser amount shall be the amount attributed; and
(h) Where the interposed person is not a partnership, the amount attributed shall be regarded for tax purposes as monetary remuneration incurred by the interposed person in the course of deriving its gross income and paid to and derived by the service provider in that income year, but not as a source deduction payment; and
(i) Where the interposed person is a partnership the amount attributed shall be regarded as an allocation in that income year of the partnership income; and
(j) The amount attributed shall be reduced by any dividend, including any imputation credits, paid during the income year or within six months after its end or any beneficiary or partnership income allocated in respect of the income year by the intermediary person to the service provider from an amount that would otherwise have been attributed to the service provider in that income year; and
(k) Where there is more than one interposed person, their income and expenditure shall, for tax purposes, be adjusted as appropriate to reflect the intent of this rule; and
(l) An interposed person for this purpose includes a partnership.