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PSI Company with legitimate deductions and PAYG employee - how much to pay

Newbie

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I've just started a new company that provides IT services, with myself being the PAYG employee of that company.

All revenue will be PSI.

 

As I understand, the rules around PSI and companies is that the PSI revenue has to be paid and attributed to the PAYG employee who generated that revenue. How does that factor in legitimate deductions?

example:

- Company earns $200k in PSI income

- Legitimate deductions incurred are $5k, but these are not known in advance

 

Given this scenario, I pay $195k in remuneration to the PAYG employee over the year.

But what happens if deductions at the end of the year does not equal $5k.

If its under, I have excess cash in the company and have not paid/attributed the PAYG employee enough?

If it's over, I have a cash deficit, and have paid/attributed the PAYG employee too much?

 

Is the answer - the PAYG amount paid to the employee varies each pay period depending on what deductions/expenses and revenue comes through?

 

This might be more of a 'mechanics' question than a tax question, but I'm confused.

 

Thanks.

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Most helpful response

Community Manager

Replies 0

Hi @smallcompany 

 

Thanks for your post.

 

To get a more tailored answer we would suggest contacting our Early Engagement area.

 

KylieS

2 REPLIES 2

Most helpful response

Community Manager

Replies 0

Hi @smallcompany 

 

Thanks for your post.

 

To get a more tailored answer we would suggest contacting our Early Engagement area.

 

KylieS

Enthusiast

Replies 0

Hi @smallcompany ,

 

The net profit or loss after the wage and other deductions (these are called entity mainetance deductions and other allowable deductions) is attributed to the individual.

 

If it is a profit it will add to the individuals income. If it is a loss it will be a deduction to the individual.

 

For more information refer to the ATO

 

https://www.ato.gov.au/business/personal-services-income/in-detail/how-to-attribute-psi/