A recent change will not only increase fees but tell the ATO if a medical professional is not paying the right amount of taxes.
I was recently presenting at a medical conference, and I thought I would educate medical professionals and speak about PSI. What I did not want to do was scare the living daylights out of them. But it seems that is exactly what I did.
The problem is most medical professionals rely on their accountant to do the right thing. Most do not understand PSI. And because most medical professionals pay a crap load of tax, most will usually gravitate to any scheme that gives a hint of reduced taxes.
There is usually one problem. If it is too good to be true…… it probably is.
Under PSI rules, medical professionals cannot split income to their spouses, trusts, or bucket companies. But there are many medical professionals that do. And they do that because their accountants are either ignoring the rules or don’t know about the rules.
It gets worse. That’s because the ATO know it is happening. And now they are beginning to do something about it.
They have bought out various guidance notes, done online information sessions and sent so much information to my inbox that I was scared my PC might explode. But recently they have changed regulations that alert them if a medical professional is using a bucket company.
That is because, from 30 June 2024, any company (usually a bucket company) that receives a distribution from a trust will now need to complete a New Trust Income Schedule together with its income tax return, giving details of the distribution.
Why have they done this? Well, the ATO has openly stated that the reason they are doing this is because they believe (in their own words) ‘a substantial amount of tax is being avoided’ via the use of bucket companies – especially in the medical professional space. This tax is being reduced by distributing to ‘tax preferred’ beneficiaries (in other words spouses and companies) who usually pay a reduced rate of taxes.
If you are receiving PSI income and that income is distributed to a spouse or a company, it is likely you will have to pay more fees (because accountants will love to charge you for the completing a NEW Trust Income Schedule) and you could end with an ATO audit and pay more taxes too. Not nice.
Do you want to know why attendees at the medical conference I was presenting to had the living daylights scared out of them? It was because I showed them a live example of a medical professional who will probably end up paying about $500,000 to the ATO because they failed to follow the PSI rules. Not nice either.
Paying the least amount but the correct amount of taxes is step 2 of our 9 steps to working less, earning more and creating wealth. If you would like to know more contact Hitesh at hitesh@medisuccess.com.au or call 07 3172 0819.
