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21 Oct 13 ANAO report - Administration of the Taxation of Personal Services Income

On 15 October 2013, the Australian National Audit Office (ANAO) tabled Audit Report No 5 2013-14 entitled "Administration of the Taxation of Personal Services Income".

According to the ANAO, "(a)t the time of preparation of this report, the ATO’s PSI data was limited to taxpayers who declare themselves subject to the PSI regime. In 2011–12, ATO data indicated that 462,824 taxpayers declared the receipt of PSI income and, of these, 328,261 were assessed as personal services businesses and therefore exempt from the PSI rules. The remaining 134,563 entities, for whom the PSI rules applied, reported $3.1 billion in net PSI."

The objective of the audit was to assess the effectiveness of the ATO’s administration of the personal services income regime.

The ANAO has made one recommendation aimed at strengthening the assessment of the PSI compliance risk and the effectiveness of PSI compliance activities, by estimating the population of non-compliant taxpayers and the magnitude of revenue at risk.

The ATO provided the following summary comment to the audit report:

"The ATO welcomes this performance audit and considers the report supportive of our overall approach to administering the personal services income (PSI) regime. The audit recognises that the ATO has effectively administered key elements of the PSI regime including the development of sound governance arrangements, appropriate business planning, risk management and reporting processes.

The ATO agrees with the report’s recommendation that the assessment of the alienation of PSI risk and the effectiveness of PSI compliance activities can be further informed by estimating the number of non-compliant PSI taxpayers, and developing a methodology to assess the potential magnitude of the revenue at risk from the estimated non-compliance."

For a copy of the report and audit summary, go here

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