Tradies Beware On 28 November 2025, the Australian Taxation Office released Practice Compliance Guideline PCG 2025/5. It is long and complicated, but here is a summary. This guideline sets out a tougher approach to common business structures used by tradies and contractors. The ATO will focus on situations where – · One person does all or most of the work · The income is earned mainly (more than 50%) because of that person’s skill or labour · The income is then split or re-directed to another person or entity (for example, a trust, company or family member) · The outcome is less tax payable The ATO refers to these as income splitting or income-diversion arrangements The ATO focus will be on · tradies operating through a company or trust · Arrangements where profits are paid to a family member with little involvement · Contactors working mainly for one client, but using a company or trust. The ATO has flagged higher risk arrangements where – · One person does most of the work · That person is not paid a reasonable wage for the work · Profits are distributed to someone else · The business has the characteristics of a sole trader operation, but with a company or trust added · There is no significant reason for the structure other than the tax saving The ATO is less concerned where – · The tradie pays employees or contractors to do a significant part of the work · The contractor (not another entity) is paid a commercial, market-rate salary or wage You are less likely to have an issue if – · You operate from business premises · You employ workers to perform part of the work · You engage contractors to perform part of the work · You are paid a contract rate rather than an hourly or daily rate · You are responsible for remedying defects · You advertise and have several customers as a result of advertising. · You operate major equipment such as a grader. None of this is new law. The ATO is simply forewarning that it will be taking a tough new approach to these arrangements. Walsh Accounting can offer an opinion on whether your arrangement is high, medium or low risk.