The ATO's new guidance on income splitting isn't just a list of things to avoid. It also confirms a number of arrangements that professionals and tradespeople operating through a Personal Services Business (PSB) can use with confidence, provided they're structured correctly. Here's a rundown of the main opportunities the ATO has explicitly given the green light to.

Remunerating a spouse or family member

Where a family member is a genuine employee of your PSB entity, you can pay them a market-value salary for the work they do — including administrative or non-principal work, not just the core"professional" tasks. The deduction is available provided the pay genuinely reflects the value of what they contribute.

Superannuation contributions for both you and your associate

Your PSB can claim a deduction for super contributions madefor you, up to your concessional contributions cap (including any unused prior-year cap amounts you're eligible to use). The same applies for agenuinely employed associate, and notably, those contributions can exceed the market value of the work the associate does, up to their own cap, without attracting Part IVA concerns, provided the underlying employment arrangement is genuine and commercially justified.

Interest on related-party borrowings

If your business has borrowed from a related party, a family member, for example, to fund working capital, the interest is deductible against your PSI provided it's benchmarked to a genuine commercialrate and properly documented with a loan agreement and repayment schedule. What tips this into high-risk territory is charging an above-market rate, having no real commercial purpose for the loan, or using it as a way to shift income to a lower-taxed associate instead of paying yourself a proper market salary.

Home occupancy and running costs

If you work from a dedicated area of your home as an employee of your PSB entity, there may be scope to claim occupancy costs (rent, mortgage interest, rates) or running costs (electricity, heating). The key test for occupancy costs is whether part of your home genuinely functions as your "sole base of operations". for a tradesperson, this might be a workshop where all admin, bookings, and materials ordering happens; for a professional, a home office that the business has contractually designated as the primary place of work. Running cost deductions are more accessible, since they don't require your home to meet that "sole base of operations"test.

One important trade-off to flag: claiming occupancy expenses can affect your eligibility for the CGT main residence exemption when you eventually sell. An alternative worth considering is having the PSB entity reimburse you for these costs directly (with FBT implications to work through) rather than claiming a personal deduction.

Retaining profits for working capital

Your PSB company can retain after-tax profits, generally taxed at 25% as a base rate entity, for genuine working capital purposes, such as covering anticipated expenses or funding a specific asset purchase, without attracting Part IVA concern. The two things that matter are having a real commercial intention behind the retention, and actually following through on it (including promptly paying out any excess once the purpose is met).

Exempt and concessional fringe benefits

The ATO accepts that a PSB can provide exempt orconcessionally taxed benefits to you or your associate, even where this produces a better tax outcome than paying the equivalent amount as salary. A common example is an electric vehicle that qualifies for the FBT exemption. The main caution here is not to overreach: the ATO's guidance suggests exempt benefits should generally be limited to things that are genuinely unavoidable or naturally arise from running the business, rather than being engineered purely for tax effect.

A worked example

Consider a business adviser who operates through his own company, which derives $300,000 in gross PSI for the year and qualifies as a PSB. Over the course of the year, the company:

• Pays the adviser a $175,000 salary
• Pays his wife a $24,000 market-value salary for genuine administrative work she performs
• Pays market rent of $12,000 to his wife for the exclusive use of a purpose-built consulting room at their home
• Makes $30,000 in super contributions for each of them
• Pays $1,150 interest on a properly documented, market-rate loan from a family member used for working capital
• Provides an FBT-exempt electric vehicle for business and private use
• Retains roughly $6,800 in profit specifically earmarked to buy new computer equipment the following year

None of these elements individually reduces the overall tax paid in a way that concerns the ATO, because each is backed by a genuine commercial rationale and proper documentation. Compared to the adviser simply taking all the income personally, the arrangement results in materially less combined tax being paid across the family group and the company, but because every element aligns with the ATO's low-risk indicators, the arrangement sits comfortably outside Part IVA's reach.

The takeaway

The line the ATO is drawing isn't "no tax planning." It's the difference between planning that reflects real commercial substance;l genuine work, genuine loans, genuine business purposes, properly documented — and arrangements built mainly to shift income to a lower-taxed party with little behind them. If your PSB structure already reflects the former, PCG 2025/5 is largely a confirmation of what you're doing. If it leans toward the latter, it's worth reviewing before the ATO does.