Labour Hire Firms and Splitting Income Warning
The Tax Office has recently highlighted its concerns regarding an arrangement where a labour hire firm utilises a discretionary trust for the purpose of splitting the incomes of workers with their spouses (or other related people). Workers may be entering into these arrangements in an attempt to reduce their tax bills; however, they may not be aware that the arrangement, or parts of it, may be ineffective under the tax law. Tax Commissioner Michael D'Ascenzo said he was concerned that firms involved in such arrangements may not be withholding the required amount of tax or providing the correct amount of superannuation to their workers.
TIP: The Commissioner has given anyone who has participated in such arrangements until 30 April 2011 to contact the Tax Office for guidance. Mr D'Ascenzo said taxpayers will be entitled to a reduction in any penalties that might apply if an arrangement is proved to be ineffective.
