Example
Sandi is an architect who works through her company Sandi's Architecture Services Pty Ltd.
Sandi completes 2 contracts on behalf of Sandi's Architecture Services Pty Ltd, generating $40,000.
This $40,000 is PSI, and Sandi has also worked out that the PSI rules apply. In addition to the PSI, the company earned $2,000 in interest income.
Sandi's Architecture Services Pty Ltd:
- promptly paid $30,000 to Sandi as salary or wages
- incurred $20,000 in allowable deductions
- incurred $5,000 in entity maintenance deductions.
The attributed amount is worked out as follows:
- $40,000 PSI is received by the company
- $30,000 salary or wages promptly paid to Sandi
- $3,000 entity maintenance deductions remaining after offsetting them against the other income first (the $5,000 entity maintenance deductions is first offset against the $2,000 interest income, leaving $3,000)
- $20,000 allowable deductions
- −$13,000 (net PSI loss).
The income position of Sandi's Architecture Services Pty Ltd would be as follows:
|
PSI |
$40,000 |
|---|---|
|
PSI deductions |
$50,000 ($30,000 promptly paid salary or wages plus $20,000 PSI deductions) |
|
Other income |
$2,000 |
|
Entity maintenance deductions |
$5,000 |
|
Net PSI loss claimed by Sandi |
$13,000 |
|
The company has net taxable income of |
$0 ($2,000 other income less entity |
Sandi's Architecture Services Pty Ltd will need to:
- advise Sandi of her $13,000 net PSI loss (the company cannot use this loss)
- report this $13,000 net PSI loss as a reconciliation item, under Non-deductible expenses in the company tax return
- indicate the company's income includes an individual's PSI
- include Sandy's PSI amount of $40,000
- include the total amount of $53,000 deductions for PSI – the amount of $53,000 is calculated from the PSI deductions amount of $50,000 plus $3,000 of the entity maintenance deductions.
In her individual tax return, Sandi would declare:
- $13,000 net PSI loss and offset this against other income
- $30,000 salary or wages.
