For many Australian doctors, the question of whether it is legal to share income with family members or retain it in a company as a means to reduce their tax burden has been a perplexing issue.

As far as the Australian Taxation Office (ATO) is concerned, the process of income splitting is commonly regarded as tax avoidance.

Largely, that is because the income being channelled into the company or trust before being distributed to family members (who may be taxed at lower rates) was generated as a direct result of the doctor’s individual effort.

The ATO recently published a detailed Practical Compliance Guideline, focusing on circumstances where personal income is: