The ATO published Practical Compliance Guideline PCG 2025/5 on 1 December 2025. It consolidates the Commissioner's view on Personal Services Income and Part IVA anti-avoidance. Passing a PSB test does not shield GPs from Part IVA action. Income splitting, profit retention and distributions to non-working beneficiaries are flagged as higher-risk. Transitional arrangements run to 30 June 2027.
The ATO published Practical Compliance Guideline PCG 2025/5 on 1 December 2025. It sets out the Commissioner's approach to Personal Services Income (PSI) and how the general anti-avoidance rule under Part IVA of the Income Tax Assessment Act 1936 applies to PSI structures.
The PSI rules are not new. What PCG 2025/5 does is organise the ATO's position into a single compliance document that clarifies which arrangements are low risk and which are likely to draw attention. If you are a Tenant or Contractor GP and run your business through a company or family trust, this applies to you.
How PSI structures work
Personal services income is income earned primarily from your personal skills or labour, rather than from a broader business enterprise. Many professionals use corporations, trusts or partnerships (known as Personal Services Entities or PSEs) to conduct business. If the entity passes one of the Personal Services Business (PSB) tests, such as the Results Test, the Unrelated Clients Test, the Employment Test or the Business Premises Test, then PSI is not attributed back to you personally. The entity can retain profits or distribute income between beneficiaries or shareholders.
Passing a PSB test does not, however, protect you from the ATO's wider anti-avoidance powers under Part IVA. That is the point PCG 2025/5 makes clear.
What the guideline targets
The ATO's concern is structures that deliver a tax benefit without reflecting the commercial substance of who actually performed the work. Even if a PSE technically meets a PSB test, Part IVA can still apply where the arrangement exists primarily for tax purposes.
The guideline identifies the following as higher-risk arrangements:
- Net PSI held in a company or trust indefinitely at a level the parties cannot justify commercially, allowing income to be deferred or sheltered from tax.
- Income distributed to relatives or beneficiaries who had no significant role in earning it, reducing the total tax paid.
- Remuneration or distributions to associates that are not commensurate with the value of services rendered.
- Income is diverted to entities with tax losses or a lower tax profile to reduce the overall tax position.
These are the characteristics of structures some advisers have encouraged for years, suggesting (for example) that GPs pay themselves small wages and move profits to related trusts or companies to obtain tax benefits. PCG 2025/5 makes clear that the ATO treats these as high risk where they do not reflect the commercial substance of the business.
No new law, but a clearer compliance position
PCG 2025/5 does not introduce new legislation. Both the PSI provisions and Part IVA have been in place for years. The guideline consolidates and clarifies the ATO's compliance view, provides detailed examples of low- and high-risk scenarios, and describes how the ATO will deploy compliance resources.
Where the ATO identifies higher-risk arrangements, it has indicated it will apply Part IVA to deny the tax benefits and attribute income back to the person who performed the services.
Transition period runs to 30 June 2027
The ATO has provided transitional arrangements until 30 June 2027. During this period, if you have a PSI structure, you should compare your current arrangements against the low- and high-risk indicators in the guideline. You should document the commercial purpose of your structure, including how you retain profits or distribute income. If your arrangements sit in the higher-risk category, you have time to restructure or adjust distribution practices before the ATO applies the risk framework more broadly.
If your structure is complex or sits on the boundary, get specialist advice now rather than later.
Implications for GPs
If you operate through a company or a family trust, PCG 2025/5 sets out four things:
- Passing a PSB test does not give you immunity from anti-avoidance action.
- Income splitting, profit retention and distributions to non-working beneficiaries are now clear risk signals.
- Structures that cannot demonstrate a commercial justification beyond tax will attract ATO attention.
- All structural and remuneration decisions need to be supported by contemporaneous commercial documentation.
The transition period is not a grace period. It is time to get your documentation in order and ensure your structure reflects what the ATO now considers low risk.
The final warning is this: ensure you actively interrogate your accountant's advice and seek clear justification regarding your exposure to risk.