Paying market rate to relatives to split income received
Scenario:
I am a doctor who visits patients at their home. The patients are all supplied by a company that I work for. I am paid by the company based on the number of patients that I engage; and receive a percentage, not on an hourly or daily rate. In order to maximize my earnings, my wife drives me around while I visit the patients. As I am free to make calls, notes and so on while being driven. I want to pay my wife a market rate for the services she provided.
Explanation:
The ATO is not keen on arrangements implements by doctors to overcome the application of the PSI provisions and/or to split income (see income tax ruling IT 2330, IT 2121 and IT 2503). The reality of the arrangement may be that the individual is employed by the medical practice, and the practice provides all of the doctor’s patients. Also, your wife drives you around may not be supported by evidence. You should ensure that there is proof that it is happening and that it is not merely an arrangement to split your income between you and your wife.